Why some investors are looking at their super after the Budget
The Federal Budget's proposed changes to negative gearing and Capital Gains Tax (CGT) have prompted many property investors to reconsider how they structure future investments. While the reforms target individuals, superannuation operates under a separate tax framework – and that distinction is worth understanding.
From 1 July 2027, negative gearing for residential property is expected to be limited to new builds, while the 50% CGT discount for individuals is proposed to be replaced with cost-base indexation and a 30% minimum tax rate. Importantly, the Budget’s CGT changes do not apply to superannuation funds – the existing one-third CGT discount for superannuation funds remains unchanged.
How SMSF property investment works
Self-managed super funds (SMSFs) can invest directly in residential or commercial property, and their tax treatment differs significantly from that of individual investors.
Rental income inside an SMSF is taxed at just 15% in the accumulation phase, with a one-third CGT discount on assets held longer than 12 months. Once the fund moves into pension phase, tax on income and capital gains can potentially reduce to 0%, depending on the fund's circumstances. For long-term investors, that's a meaningful structural advantage.
Understanding LRBAs and compliance rules
Some SMSFs use limited recourse borrowing arrangements (LRBAs) to purchase property. Under an LRBA, the fund borrows to acquire a single asset – and critically, if the loan defaults, the lender's recourse is limited to that asset alone, protecting the rest of the fund.
Strict compliance rules also apply. Every SMSF investment must satisfy the sole purpose test – it must exist solely to provide retirement benefits. Residential property cannot be leased to related parties, while commercial property may be leased to a related business on arm's length terms. The fund also needs sufficient capital to cover the deposit, acquisition costs and ongoing liquidity needs. This strategy is not appropriate for everyone and professional advice is essential before proceeding.
Why specialist lending support matters
SMSF lending is more specialised than standard residential lending, and fewer lenders currently offer SMSF loans. Policies, borrowing limits and documentation requirements can vary significantly between lenders – which is why broker access to a broad lending panel makes a real difference.
Eventus Financial can help investors explore whether purchasing residential or commercial property through an SMSF aligns with their financial goals and retirement plans. Eventus Financial is an award-winning Sydney mortgage broker with over 400 five-star Google reviews. Schedule a no-obligation consultation with Alex to see whether an SMSF property strategy could work for you.