“Current superannuation laws do not allow rental properties being bought under a loan through self-managed superannuation funds to make capital improvements on these properties,” the petition said.

“This means that they are not allowed to install solar power systems or other energy efficiency improvements on these properties. These should be allowed under the superannuation laws, which would help attain government targets on carbon emission reduction and also reduce electricity costs for renters.”

Treasurer Jim Chalmers responded via a letter in Parliament on Monday (19 August), clarifying that only accumulated funds held by an SMSF can be used to finance capital improvements to assets acquired under a limited recourse borrowing arrangement (LRBA).

“Money borrowed by a self-managed superannuation fund under a limited recourse borrowing arrangement for the acquisition of an asset cannot be used to improve the value of the asset,” the letter said.

“As energy efficiency capital improvements are an improvement to the value of a rental property, this is not allowable under a limited recourse borrowing arrangement.”

The letter continued that borrowing within a superannuation fund inherently adds risk to the safety of retirement savings.

“Since superannuation receives substantial tax concessions designed to encourage people to save for retirement, it is important that there are safeguards in place to ensure that superannuation is preserved for its intended purpose of supporting income in retirement,” it said.

“Therefore, limited recourse borrowing arrangements applied for the acquisition of an asset cannot be used to improve the asset, as this could fundamentally change the nature of the asset used as security by the lender, potentially increasing the risk to the fund.”

The Treasurer noted, however, that accumulated funds held by an SMSF “can be used to finance capital improvements to assets acquired under a limited recourse borrowing arrangement, including energy efficiency improvements to rental properties. This is provided that the improvements do not fundamentally change the nature of the asset”.

He concluded that the government considers that the current settings “strike the right balance between allowing trustee(s) to maximise the returns in the superannuation funds and preserving superannuation for its purpose of providing retirement income”.