Can SMSFs still borrow to buy property? Under the new 2026 laws, self-managed super funds can no longer take on new borrowing to buy residential property. Existing arrangements are grandfathered, and SMSFs can still buy property using existing fund cash.
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Yesterday, the federal government confirmed a deal with the Greens to ban self-managed super funds from using limited recourse borrowing arrangements to purchase residential property.
On top of the negative gearing and CGT changes this is one of the most significant shifts to property investment strategy we have seen in decades.
Here is what has changed and what it means for investors using or considering an SMSF as part of their property strategy.
The legislation covers three significant changes:
Negative gearing on established residential properties purchased after 12 May 2026 no longer offsets wages or salary income in the year the loss occurs. Losses carry forward and offset future property income only. New builds retain full negative gearing.
Capital gains tax changes from 1 July 2027. The existing 50% CGT discount for individuals, trusts, and partnerships is replaced with cost base indexation and a 30% minimum tax rate on real capital gains. Gains accrued before 1 July 2027 remain taxed under the existing 50% discount.
SMSF borrowing to purchase residential property is ending. This was the concession extracted by the Greens as part of the deal to secure Senate passage.
Since 2011, self-managed super funds have been permitted to borrow money to purchase single assets including residential property through a structure called a Limited Recourse Borrowing Arrangement (LRBA). That exemption is now being removed.
The key details:
What is ending: SMSFs will no longer be able to take on new borrowings to purchase residential property.
What is protected: Contracts signed before the date of commencement are grandfathered. There is also a 45-day window after the amendments are signed into law for arrangements already in train to be completed.
What is not changing: Australians can still invest in property through their SMSF using existing fund cash and contributions. The restriction is specifically on borrowing to do so. Tax arrangements for superannuation broadly are unchanged.
What the Treasurer said: Jim Chalmers noted that SMSFs account for less than 1% of total residential property borrowing and less than half a percent of new residential borrowing each year. The practical impact on the broader market is limited.
Not affected:
Affected:
Protected with the 45-day window:
Following consultation, the government also made several adjustments to the CGT legislation that are worth noting:
Small business CGT concessions have been expanded. The threshold for businesses able to access concessions including an additional 50% CGT discount has been lifted from $2 million to $10 million in annual turnover.
Startup founders and early investors in innovative companies with very low or zero cost bases, along with employees paid with shares, will be able to retain the existing 50% CGT discount rather than moving to the new indexation model.
Testamentary trusts used to manage income paid to beneficiaries of a deceased estate are exempt from the proposed 30% minimum tax rate on discretionary trusts. This is a meaningful protection for estate planning arrangements.
The passing of this legislation clarifies the environment investors will be operating in for the foreseeable future. Here is how to think about each element:
On negative gearing: For properties already held or exchanged before 12 May 2026, nothing changes. For new established property purchases, the immediate tax benefit is delayed rather than eliminated. Losses carry forward and offset future property income, effectively banking the tax saving for later.
On CGT: Gains accrued before 1 July 2027 are still taxed under the 50% discount. Investors holding quality assets in growing markets should model both sides of the 2027 transition date before making any decision to sell.
On SMSF property: Investing in property through an SMSF using fund cash and contributions remains fully available. The change is specifically to borrowing. For investors with significant super balances and a long-term investment horizon, SMSF property without borrowing remains a viable strategy worth assessing with a specialist accountant.
On structure: The budget changes make ownership structure more consequential than ever. Bucket companies were not touched by any of the legislation. Testamentary trusts are now exempt from the minimum trust distribution tax. If you have not reviewed your structure since the budget, now is the time to do it.
Can SMSFs still buy property after the new laws pass?
Yes. SMSFs can still purchase property using existing fund cash and contributions. The change specifically ends the ability to borrow money through a Limited Recourse Borrowing Arrangement (LRBA) to purchase residential property. Investing in property through an SMSF without borrowing remains available.
Are existing SMSF property loans affected?
No. Existing SMSF borrowing arrangements already in place are not affected. The change is prospective, meaning only new borrowing arrangements are impacted. Contracts signed before the date of commencement are also grandfathered, with a 45-day window for arrangements already in progress to be completed.
Does negative gearing still apply to properties inside an SMSF?
The negative gearing changes announced in the 2026 budget apply to individuals, trusts, and partnerships. The tax arrangements for superannuation funds including SMSFs are unchanged by the negative gearing legislation.
I was planning to set up an SMSF to buy property. What should I do now?
If contracts have not yet been signed, the SMSF borrowing option for residential property will no longer be available once the legislation commences. However, purchasing property through an SMSF using fund cash and contributions without borrowing remains an option worth assessing with a specialist accountant and SMSF-experienced mortgage broker if you have sufficient fund balance to do so.
How long do I have to complete an SMSF property purchase already in progress?
There is a 45-day transition period from the date the amendments receive royal assent for borrowing arrangements already in progress to be completed. If you have a contract signed or an arrangement already underway, speak to your SMSF adviser immediately to confirm whether your transaction falls within the protected window.
Since the start of this parliamentary term, the investment landscape has shifted significantly. Negative gearing changes, CGT discount changes, division 296 superannuation taxes on balances above $3 million, now the LRBA ban. Every one of these changes has been framed as targeting the wealthy. Every one of them has had real impacts on ordinary Australians who were simply following the rules that existed when they made their investment decisions.
That is not a reason to stop investing in property. It is a reason to build strategies that are resilient to policy change rather than dependent on any single tax concession remaining intact.
The passing of this legislation does not change the fundamental case for property as a long-term wealth-building asset in Australia.
The housing shortage is not a tax problem and no tax change resolves it. Australia commenced construction of just 196,000 homes last year against demand of more than 250,000 according to the Housing Industry Association. The National Housing Supply and Affordability Council forecasts undersupply will continue through to at least 2030. Rents rose 5.7% annually to March 2026.
The structural forces that drive Australian property values over long time horizons operate independently of the tax settings. What it does is change the strategy required to navigate them effectively. Investors with the right structures, the right assets, and the right professional guidance are well positioned to continue building wealth through property in the new environment.
Those making decisions without understanding the full picture of what has changed and what has not are the ones most exposed to getting it wrong.
At Search Property, we help Australians cut through the noise and build data-driven investment strategies aligned with long-term wealth goals. Our buyers agents have helped thousands of clients build wealth through property because we focus on fundamentals, not headlines.
Book a FREE investment assessment call with Search Property. We'll discuss your goals and position, and help you build a clear plan to move forward with confidence.
Disclaimer: Search Property Pty Ltd (SP) does not provide financial or investment advice and does not hold a financial services license as defined in the Corporations Act 2001 (Cth). Any advice given by SP is general in nature and does not take into account your personal circumstances or objectives, financial situation or needs.
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