Blog post by Empower Wealth

SMSF Property After the 2026 Federal Budget: What Investors Need to Know

Note: Since this article was first drafted, the proposed changes have progressed significantly. As at 26 June 2026, the negative gearing and CGT reforms have passed Federal Parliament, and the Labor–Greens deal includes a ban on future SMSF borrowing arrangements for residential property.

The Federal Budget has naturally led many investors to compare different ownership structures.

For some, that may include asking whether buying property through an SMSF could be more tax-effective than buying property personally, particularly if the proposed negative gearing changes proceed from 1 July 2027.

But this is where investors need to slow down.

On 23 June 2026, it was announced that Labor and the Greens had struck a deal that would allow the Government’s negative gearing and capital gains tax reforms to progress. As part of that deal, the Government agreed to support a Greens amendment to ban future limited recourse borrowing arrangements, or LRBAs, for residential property by superannuation funds.

In simple terms, this means SMSFs may still be able to invest in residential property, but the ability to borrow to do so through a new LRBA is expected to be removed.

That is a significant update for property investors. And it is exactly why investors need to slow down before making decisions based purely on headlines, tax outcomes or what appears to be a “loophole”.

As we explained in our recent article, Should I Still Invest in Property Without Negative Gearing?, negative gearing was never the strategy. It is simply a tax outcome that may support cash flow at a point in time.

That same principle applies to SMSF property.

An SMSF should not be established purely to chase a perceived tax advantage. It should only be considered where the structure genuinely supports the member’s broader retirement strategy, investment timeframe, risk profile, cash flow position and compliance obligations.

In other words, the Budget may have changed the comparison but it has not changed the fundamentals.

Is SMSF property still worth it?

Following the Federal Budget and the broader discussion around property tax changes, we hosted several webinars to help investors better understand what the proposed changes could mean for their property decisions. One theme kept coming up in the Q&A: SMSF property.

Could buying property through an SMSF be a better option now?
Would it be treated differently under the proposed negative gearing changes?
And should investors be looking at their super as another way to hold property?

And now, after the Labor–Greens deal announced on 23 June, another question has been added to the list:

Can SMSFs still borrow to buy residential property?

These are fair questions. But they are also questions that need to be handled carefully.

Buying property through a self-managed super fund, or SMSF, can offer control, flexibility and access to direct property as part of a broader retirement strategy. However, it also comes with strict rules, added costs, compliance obligations, lending limitations and long-term planning considerations.

It is an investment vehicle. That distinction matters.

So before we look at what has changed, it’s worth making one thing clear: whether an SMSF is right for you is a financial advice question. A tax accountant can help you understand tax outcomes, compliance obligations and annual reporting requirements, but personal advice about whether you should establish an SMSF, roll your super into one, or use it to buy property should come from an experienced & licensed financial planner.

So, with that said, let’s unpack what property investors should be thinking about after the 2026 Federal Budget.

First, what did the 2026 Federal Budget announce?

The 2026 Federal Budget announced proposed changes to negative gearing and capital gains tax, intended to apply from 1 July 2027.

At the time of writing (25 June 2026), broadly speaking, the proposed changes include:

limiting negative gearing for residential property investments to new builds
replacing the 50% CGT discount for individuals, trusts and partnerships with cost-base indexation
introducing a 30% minimum tax rate on certain capital gains

Note: If you’re interested in exploring the numbers behind negative gearing, Moorr recently released a Negative Gearing Analysis Tool that lets you compare properties side by side and model how different assumptions may impact cash flow, tax benefits and long-term outcomes. Learn more here >

Existing investments held before the announcement are expected to be treated differently under transitional rules, and the full detail will depend on final legislation.

One of the points that initially caught the attention of SMSF investors was that superannuation funds, including SMSFs, appeared to sit outside some of the proposed negative gearing changes. At first glance, that may have sounded like a major advantage. But this is where the 23 June announcement becomes very important.

What changed on 23 June 2026?

On 23 June 2026, it was announced that Labor and the Greens had struck a deal in relation to the Government’s proposed tax reforms.

As part of that deal, the Government agreed to support a Greens amendment to ban future limited recourse borrowing arrangements, or LRBAs, for residential property by superannuation funds.

LRBAs are the borrowing arrangements SMSFs have commonly used when purchasing property with debt. Under an LRBA, the SMSF borrows to purchase a single asset, and the lender’s recourse is generally limited to that asset.

If this change proceeds as announced, it means future residential property purchases inside an SMSF are expected to become much more restricted for many investors.

SMSFs may still be able to buy residential property outright, where the fund has sufficient cash or available assets. But for many everyday SMSF investors, borrowing has been the mechanism that allowed them to purchase residential property in the first place.

Without access to new LRBAs for residential property, the SMSF property pathway becomes narrower.

Existing LRBA arrangements are expected to be grandfathered or unaffected, based on current reporting. However, anyone who already has SMSF property debt, or who was planning to use an SMSF loan, should seek personal advice before making decisions.

The details matter. Timing matters. And final legislation matters.

The usual SMSF property rules still apply

The Federal Budget has not changed the core SMSF property rules. If your SMSF buys a residential investment property, the property generally:

must meet the sole purpose test, meaning it must be held to provide retirement benefits to members
cannot be acquired from a related party of a member
cannot be lived in by a fund member or a related party
cannot be rented by a fund member or a related party

There are different considerations for business real property, such as a commercial premises used by a related business, but even then the rules must be followed carefully, including market-rate leasing arrangements.

These rules are not small technicalities. They go to the heart of SMSF compliance. A mistake can create serious tax and regulatory consequences, and in some cases, the structure may be difficult or expensive to unwind.

Division 296 adds another layer for high-balance members

Another important development since many of the older SMSF property conversations is the introduction of Division 296.

From 1 July 2026, Division 296 is intended to reduce superannuation tax concessions for individuals with total super balances above $3 million. Under the revised rules, earnings on the portion of a member’s balance above $3 million and up to $10 million may be subject to an additional 15% tax, while balances above $10 million may be subject to a higher additional rate.

The revised version removed the earlier proposal to tax unrealised gains and moved to a realised-earnings basis, which is an important change. However, high-balance members still need to think carefully about how SMSF assets are structured.

This is particularly relevant for SMSFs that hold property.

Property can be valuable, illiquid and difficult to sell in smaller portions. If a fund becomes heavily concentrated in one or two properties, it may create future planning challenges around tax, liquidity, pensions, death benefits and estate planning.

For high-balance SMSF members, the post-Budget question is not simply whether SMSF property is tax-effective today. It is whether the fund remains flexible enough for the future.

Valuations and record-keeping are becoming even more important

SMSF trustees already need to value fund assets at market value for annual reporting and audit purposes.

For SMSFs that hold property, this means having reliable, supportable valuation evidence. This may include independent valuations, agent appraisals, comparable sales and other documentation depending on the asset and circumstances.

After the Budget and with Division 296 now part of the planning landscape, valuations are likely to become even more important — not just for compliance, but for decision-making. Accurate valuations can help trustees and advisers understand:

the fund’s total asset position
member balances
unrealised gains
future tax exposure
liquidity risk
whether the investment strategy still makes sense

This is another reason SMSF property should be reviewed regularly, not simply set up and forgotten.

What can you do?

If you’re thinking, should I buy property through SMSF?

There is no one-size-fits-all answer.

The 2026 Federal Budget made more Australians curious about buying property through super, especially as the proposed negative gearing and CGT changes reshaped the property investment landscape. But the 23 June Labor–Greens deal has added another layer.

That does not mean every SMSF property strategy is wrong. It does mean investors need to be very careful.

On the other hand, if you already hold property inside your SMSF, this is a good time to review your position.

Again, that does not necessarily mean making a sudden change. In fact, rushed decisions can create their own risks. But it does mean checking whether your current SMSF property strategy still makes sense in light of the proposed changes.

For existing SMSF borrowers, it will also be important to understand how any grandfathering or transitional rules apply once final legislation is confirmed.

Ultimately, when it comes to SMSF, the bigger question is whether the strategy works after considering:

retirement goals
investment timeframe
fund balance
diversification
performance of your existing super fund
borrowing availability
cash flow
contribution levels
insurance needs
estate planning
compliance obligations
tax outcomes inside and outside super

At Empower Wealth, we can help you look at the full picture. From financial advice and tax compliance through to SMSF lending and property strategy, so you can make a more informed decision before moving forward.

If you are still considering SMSF property despite all these changes, or already hold property inside your SMSF, get started with a conversation to determine whether this is still the right investment vehicle for you.

Request a free initial consultation here or via the form below.

Categories: Financial Planning, Property Investment Advice, SMSF Advice, Tax and Personal Accounting

Tags: property advice, Self-Managed Superannuation Fund (SMSF), Setting up an SMSF, SMSF