Self-Managed Super Funds and Property: What the 2026 Tax Reforms Actually Change

Self Managed Super Funds and Property: What the 2026 Changes Mean for Property Investors

There has been a lot of discussion about the 2026 property tax reforms, particularly around negative gearing, Capital Gains Tax and Self Managed Super Funds.

But what do the changes actually mean if you already own property through an SMSF, or you are considering buying property through your super?

The important thing to understand is that SMSFs have not been treated the same way as individual property investors and trusts. Some of the existing tax benefits for SMSFs remain, but the rules around borrowing to purchase residential property have changed.

The new legislation received Royal Assent on 26 June 2026, with the major property tax changes due to commence from 1 July 2027.

For individuals and trusts, negative gearing on residential investment property will generally be limited to new builds. The existing 50% Capital Gains Tax discount will also change. Properties acquired before 12 May 2026 are grandfathered under the previous rules.

For SMSFs, however, some of the existing rules remain.

SMSFs will continue to receive their existing one third Capital Gains Tax discount on eligible capital gains and will continue to operate within the concessional superannuation tax environment.

Negative gearing also works differently inside an SMSF. If an SMSF property makes a loss, that loss stays within the fund. It cannot be used to reduce the personal taxable income of the members of the fund.

This means an SMSF that already owns residential investment property may continue to have some tax advantages compared with owning the same type of investment property personally or through a trust.

However, there is an important change when it comes to borrowing.

In the past, an SMSF could borrow money to purchase property using what is known as a Limited Recourse Borrowing Arrangement, or LRBA. Put simply, this allowed an SMSF to use some of the fund’s money as a deposit and borrow the remaining amount to purchase a property, subject to strict superannuation rules.

Under the new rules, SMSFs can no longer enter into new LRBAs to purchase residential property.

This is one of the biggest changes for anyone who was considering setting up or using an SMSF to borrow money to purchase a residential investment property.

Without the ability to enter into a new residential LRBA, an SMSF wanting to purchase residential property may need to have enough money within the fund to purchase the property without borrowing.

For people who already have an SMSF property loan in place, the situation may be different.

Existing borrowing arrangements may be able to continue depending on when they were established and whether they meet the relevant grandfathering or transitional requirements.

This means anyone who already has residential property with borrowing inside their SMSF should have their arrangement checked before refinancing, restructuring or making significant changes.

Commercial property is another important area to understand.

The new borrowing restriction relates to residential property. Eligible business real property, including certain commercial properties, is not affected in the same way. This means SMSFs may still be able to use an LRBA to purchase eligible commercial property, provided all of the relevant superannuation rules are met.

So, what does all of this mean for property investors?

If your SMSF already owns residential property, particularly if there is no debt or your existing borrowing arrangement is protected under the transitional rules, your fund may continue to benefit from the existing SMSF tax environment.

If you were planning to establish an SMSF or use an existing SMSF to borrow money to purchase residential investment property, the situation has changed considerably.

The key point is that SMSFs have not simply been left untouched by the reforms.

Some of their existing tax advantages remain, but the ability to borrow for new residential property purchases has changed. For existing SMSF property owners, the timing and structure of any current borrowing arrangement could also be very important.

Before buying, selling, refinancing or restructuring property within an SMSF, speak with a qualified SMSF adviser, accountant or financial professional who can review your individual circumstances.

This information is general in nature and does not constitute financial, taxation or legal advice. Always seek professional advice appropriate to your individual circumstances.