Mr Shorten said some of the $59 billion in estimated savings over a decade could be used to fund tax cuts to low-and-middle-income earners, the same voters who will be targeted by the government.

He made the comments about property when discussing the impact of the changes and dismissing "apocalyptic scenarios" about a flight to higher risk assets in a bid to offset any income loss.

But SMSF Association chief executive John Maroney said investors were likely to consider real estate and other high yielding assets as an alternative to shares, which were likely to lose cash refunds.

Mr Maroney said proposed changes would cut about $5000 of income from the median SMSF retiree earning about $50,000 a year in pension income.

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"To be saying these people will not be paying any more tax is just semantics," he said.

It could potentially impact about one million investors, he said.

Property is a small – but fast growing – asset class for SMSF investors, particularly self-employed buying their offices, warehouses, surgeries, or other workplaces.


SMSF borrowings grew 50 times, from about $497 million in 2009 to $25.4 billion in 2016, with more than 90 per cent of it related to property.

Property a "good bet" to offset super income loss, says Labor leader Bill Shorten Alex Ellinghausen

Limited recourse borrowing, which means the creditor has limited claims on a defaulting borrower, is only 4 per cent of total SMSF assets, with the bulk in listed shares.

Problems can arise when investors leverage their funds to buy single assets, such as inner-city off-the-plan apartments, which are failing to provide any income growth, or are falling in value.

David Morrell, a Melbourne buyers' agent and director of Morrell and Koren, said investors were also more likely to invest in their tax-free homes by expanding, renovating, or adding pools and landscaping.

Australians spend more than $7 billion a year on renovations. Upgrades to kitchens, bathrooms and ground-floor extensions that integrate interior and exterior spaces are among the most popular, according to market research firm IBISWorld.

David Rowe

Mr Shorten's property tip comes as the Real Estate Institute of Australia said the median price of eight capital cities rose by 1 per cent last year, rental vacancy rates increased in Sydney and Brisbane, where there are concerns about over-supply of apartments.

For example, median national rent for houses rent rose by about 1.8 per cent, which is less than the rate of inflation, ranging from 20 per cent rise in Melbourne to 12 per cent loss in Sydney, according to SQM Research, which monitors national rental and dwelling price movements.

Jarrod McCabe, director, Wakelin Property Advisory, said: "These changes would appear to benefit the property market at the expense of the stock market. It is reasonable to expect that some SMSF investors would shift a portion of their portfolio out of high-dividend yielding shares into other asset types. Inevitably some would consider residential real estate. Of course, it is impossible to know how big this switch would be."