If you own an investment property — or you've been thinking about buying one — this year's Federal Budget was a big deal. The government announced major reforms to negative gearing and capital gains tax, aimed at steering investment toward new housing and helping younger Australians into the market.
But buried in the detail was something many people missed: superannuation funds, including SMSFs, are excluded from these changes. That's prompted a lot of questions from our clients about whether super is now a better home for property. Let's walk through it calmly.
What the Budget changed for personal property investors
Two headline measures, both starting from 1 July 2027:
- Negative gearing will be limited to new builds. If you buy an established property after Budget night (12 May 2026), you'll only be able to deduct rental losses against rental income — not against your wages. Unused losses carry forward to future years. Properties already owned on Budget night are exempt, so existing investors aren't affected.
- The 50% CGT discount is being replaced. For gains arising after 1 July 2027, it's replaced by an inflation-linked discount, alongside a new minimum 30% tax rate on capital gains. Investors in new housing can choose between the old discount and the new rules.
In short: for individuals, holding an established investment property in your own name is about to become less tax-friendly than it used to be.
What didn't change: property inside super
Complying super funds — including SMSFs — are excluded from both the negative gearing limits and the CGT reforms. The way property is taxed inside super stays exactly as it was:
- Rental income is taxed at 15% while the fund is in accumulation phase — and can be tax-free to the extent the fund is paying retirement pensions.
- Capital gains on assets held more than 12 months keep the existing one-third discount, giving an effective rate of 10% in accumulation — again, potentially tax-free in pension phase.
The simple takeaway: the Budget didn't make property in super better. It made property outside super less attractive for new investments — which makes super look relatively stronger as a structure for holding property than it did before 12 May.
So should you rush to buy property in your SMSF?
Not so fast. Tax is only one part of the picture, and all the long-standing SMSF property rules still apply:
- The sole purpose test. The property must be there to build retirement savings. You and your relatives can't live in it or holiday in it — full stop.
- Buying rules. Your fund generally can't buy residential property from a member or a relative. (Commercial premises used in a business — like your own business's premises — are an exception.)
- Borrowing is restricted. An SMSF can only borrow through a limited recourse borrowing arrangement (LRBA), which comes with strict conditions, higher costs and fewer lenders.
- Liquidity and diversification. Property is a big, lumpy asset. The fund still needs cash to pay expenses, taxes and pensions — and an investment strategy that doesn't put all the eggs in one basket.
One more thing to weigh up: Division 296
From 1 July 2026, a new extra tax applies to individuals with a total super balance above $3 million. Because property is a large, illiquid asset that can push balances up quickly, anyone near that threshold should think carefully — and get proper advice — before adding more property to their fund.
Our take
For the right person — typically a business owner buying their own commercial premises, or an investor with a healthy fund balance, a long runway to retirement, and good liquidity — property in an SMSF has always had real appeal. The Budget has widened that appeal gap, because the personal alternative is now less generous for new purchases.
But the decision should never be driven by tax alone. Strategy first, structure second, tax third. If property in super is something you're weighing up, talk it through with a licensed financial adviser before you act — and make sure your fund's deed, investment strategy and paperwork are all up to the job.
