It is being labelled the budget no one wanted. The 2026–27 Federal Budget changed the rules for property investors. For many, it made buying established homes significantly less attractive. But for one group, it changed nothing at all. Specifically, it is investors who buy through a self-managed superannuation fund (SMSF).
SMSFs are explicitly excluded from the Budget's negative gearing changes. If you purchase an established residential property through an SMSF, the new rules will not apply. For Melbourne investors who have been weighing up the SMSF property route, that exemption can make SMSF investment more compelling.
This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant and solicitor before making any decisions.
What the Budget actually changed
From 1 July 2027, investors who purchase established residential properties after 12 May 2026 will no longer be able to use rental losses to offset wages or other income. Those losses can still be carried forward and offset against residential property income, but the immediate tax benefit against your personal salary is broadly gone.
The capital gains tax (CGT) discount is also being overhauled. The existing 50% discount will be replaced by a CPI indexation model with a 30% minimum tax rate on real capital gains, applying to gains accrued after 1 July 2027.
Neither of these changes applies to SMSFs. The Budget papers are clear: superannuation funds are excluded from the negative gearing restrictions. And inside an SMSF, the existing tax treatment – 15% on income, 10% on capital gains for assets held longer than 12 months, and zero in pension phase – remains intact.
Why the SMSF environment is now more compelling
The tax environment inside an SMSF has always been attractive for property investment. At a 15% tax rate on rental income and 10% on capital gains, an SMSF already outperforms personal ownership for many investors on higher marginal rates. The Budget has widened that gap further.
For a Melbourne professional looking at an established investment property, the comparison now looks like this:
- If you buy in your personal name after 12th May 2026, you lose the ability to offset rental losses against your income from 1 July 2027
- If you buy inside an SMSF, you retain a tax environment that the Budget has deliberately left alone.
How SMSF property borrowing works
Purchasing property inside an SMSF requires a specific borrowing structure known as a limited recourse borrowing arrangement (LRBA). Under an LRBA, the SMSF borrows money to purchase a single asset – in this case, an established residential property. The property is held in a separate bare trust until the loan is fully repaid, at which point ownership transfers to the SMSF.
The "limited recourse" element is important: if the SMSF defaults, the lender's recourse is limited to the asset itself. The other assets held inside the fund are protected.
There are some important rules to understand. The property must meet the Australian Taxation Office’s sole purpose test, meaning it must be held for the purpose of providing retirement benefits to fund members. It cannot be lived in or rented by fund members or their related parties.
The property must also be a single acquirable asset, which means you cannot use an LRBA to purchase a property and then subdivide it.
Lenders who offer SMSF loans assess both the fund's financial position and the borrower's personal circumstances. Loan-to-value ratios are typically lower than standard investment loans – commonly around 70% for residential property – and interest rates can be slightly higher to reflect the additional complexity of the structure.
The AXTON Finance role
At AXTON Finance, our role in an SMSF property purchase is the lending. We work with a panel of more than 30 lenders, many of whom offer SMSF loan products, and we identify the structure and rate that suits your fund's position and the property you are looking to acquire.
What we do not do – and what you will need before you speak to us – is the SMSF setup itself. Establishing or restructuring an SMSF, creating the bare trust, reviewing your trust deed and ensuring the investment strategy is documented correctly all require a qualified accountant and, in most cases, a financial adviser.
These are not optional steps. Getting the structure right before any money moves is essential, and the consequences of getting it wrong inside superannuation can be significant.
We recommend following these steps in order:
1. Speak to your accountant and financial adviser
2. Get the SMSF structure and bare trust established correctly
3. Come to us for the lending.
Getting the sequence right matters as the lending cannot be arranged until the structure is in place, and the structure cannot be put in place without the right professional advice.
Is SMSF property investing right for you?
Buying an investment property in your SMSF is not the right move for everyone, and the Budget changes do not necessarily make it so.
There are some advantages:
1. A potentially lower tax environment
2. Exclusion from the new negative gearing restrictions
3. Long-term compounding effect of holding a quality geared asset inside a superannuation fund.
For investors with sufficient super balances, a genuine long-term horizon and the right professional team around them, the case is strong.
But there are also limitations:
1. SMSF loans carry stricter lending criteria and possibly higher rates than standard investment loans
2. Less flexibility – you cannot access equity easily, and the property cannot serve any purpose other than a retirement benefit
3. Setup and ongoing compliance costs are meaningful.
The Budget has made SMSF property more attractive relative to personal ownership of established homes. Whether it is the right structure for your situation is a conversation that starts with your accountant and adviser, and continues with us on the lending side.
This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant, licensed financial adviser and solicitor before making any decisions regarding SMSF property investment.
Thinking about buying an established property through your SMSF? Speak to the team at AXTON Finance today on 03 9939 7576, email getabetterrate@axtonfinance.com.au or get in touch.
