July2026
Dear Client
SMSF Property After the 2026 Federal Budget: What Investors Need to Know
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.
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.
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
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.
If you’re thinking, should I buy property through SMSF?
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.
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.
SMSF Property After the 2026 Federal Budget: What Investors Need to Know
Strong rebound to follow on from market slowdown
With the property market in decline, recent data suggest the downturn could be shorter than many expect, and the ensuing rebound would likely bring values to a new high.
As the market enters its ninth downturn, Domain’s FY2027 Forecast Report found that since the mid-1990’s, the nation has experienced eight significant drops in the property market, with each one followed by a significant rebound shortly afterwards.
The data showed that the average decline in property values across the eight downturns was 2.9 per cent over a nine month period.
Conversely, market upswings averaged 32.3 per cent growth and lasted around 2.8 years, or approximately 11 quarters of consecutive growth.
As the market slowed, McGrath Estate Agents CEO John McGrath said homeowners and potential buyers needed to look beyond the short-term changes in property values.
“Wherever you are in a property cycle, you should know one thing: real estate changes invariably occur. Median values in different areas, including rental yields and vacancies, will move up and down,” McGrath said.
“In short: if you own or plan to buy property, expect adjustments and corrections.”
The report said that for the housing market to reach its previous trough of March 2023, values would need to decline by more than 20 per cent, far beyond current predictions and anything seen in three decades of housing cycles.
While a decline in the property market could push some homeowners into negative equity, particularly those who used the government’s first home buyer scheme, McGrath said there was still some good news for the demographic.
“Generally speaking, they won’t sell again for another seven years – the typical period of our property cycle rebounds – and by that time, values will have doubled again,” he said.
Sydney and Melbourne were tipped to suffer the largest decline in 2027, falling by 7 per cent and 8 per cent respectively.
The booming markets of Perth and Brisbane were not forecast to see their values fall, although they would slow significantly compared to their previous growth, recording a rise of 9 per cent and 7 per cent, respectively.
McGrath said that while it was important for homeowners to understand the state of the market, they had to accept that it would constantly fluctuate.
“Most importantly, expect the property market to regularly change. After all, what goes up can – and will – go down as part of the cycle. But while I encourage home buyers and owners to keep a close eye on the market at such times, I’d also advise them not to panic.”
“Instead, keep the ups and downs in context and remember that home ownership is a long-term concern.” Strong rebound to follow on from market slowdown – Smart Property Investment
Thank you for your ongoing support!
Regards David, Benjamin & the Team at DB Philpott Real Estate
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