SMSFs and the 2027 Negative Gearing Changes: Are You Affected?

Self-managed super funds (SMSFs) are explicitly excluded from the 2027 negative-gearing reforms. The Government's policy materials clarify that complying superannuation funds including SMSFs operate under a distinct tax framework that the reform is not intended to affect. For the more than one million Australians with SMSF interests, this is a significant carve-out: existing direct-property SMSF strategies remain viable, and the broader CGT reform's 30% minimum tax does not apply to fund-held assets. This article walks SMSF trustees through what changes, what doesn't, and what to focus on instead.

Why SMSFs are excluded

Complying superannuation funds operate under a flat 15% tax on contributions and earnings in accumulation phase, and 0% in retirement (pension) phase up to the $1.9 million Transfer Balance Cap (2026-27 indexation). Capital gains on assets held 12+ months are taxed at 10% in accumulation (15% × two-thirds) and 0% in pension phase. Because SMSFs have their own tax regime, the reforms targeted at individual marginal-rate investors do not transfer.

Treasury's explanatory material lists SMSFs alongside "widely held trusts" and "complying super funds" in the carve-out from the negative-gearing changes. The same exclusion applies to the 30% minimum effective tax SMSFs have their own (lower) capital gains rates.

LRBAs continue unchanged

Limited Recourse Borrowing Arrangements (LRBAs) the legal mechanism allowing SMSFs to borrow to acquire single-acquirable-asset property continue unchanged. The fund's net loss on a property (interest plus expenses minus rent) reduces the fund's overall taxable income at the 15% rate. This is structurally different from personal negative gearing but has been a popular strategy for SMSF trustees seeking property exposure.

Important nuance: SMSF negative gearing was never as tax-effective as personal negative gearing for high-income earners. A 15% deduction in the fund is worth less than a 45% deduction personally. Post-2027, that gap closes personal residential acquisitions lose wage-offset entirely, while SMSFs retain their (modest) deduction. The relative attractiveness of SMSF property has improved.

How CGT works inside SMSFs

SMSF capital gains are taxed under the existing super CGT framework, which is unaffected by the 1 July 2027 CGT reform:

• Accumulation phase, held <12 months: 15% on full gain
• Accumulation phase, held 12+ months: 10% effective rate (one-third discount applied)
• Pension phase, asset wholly supporting pension liability: 0%
• Mixed accumulation/pension: apportioned based on actuarial certificate

The one-third CGT discount in super (which delivers the 10% effective rate) is preserved. It is structurally different from the 50% personal CGT discount and was not subject to the post-2027 reform. This is now a clear advantage for SMSF property versus personal property.

Why the 30% minimum tax doesn't apply

The 30% minimum effective tax rate on capital gains targets individuals whose marginal rate would otherwise produce a low effective rate on large gains (e.g., a retiree with low income but a large gain). SMSFs are not subject to marginal rates they have flat rates. The 30% floor is therefore structurally irrelevant to fund-level CGT.

For SMSF trustees in pension phase considering large property disposals, this is particularly significant. A personal investor would face the 30% floor if their personal marginal rate would otherwise produce a lower effective rate. An SMSF in pension phase simply pays 0% on the gain (subject to TBC limits and pension/accumulation apportionment).

What SMSF property trustees should focus on instead

With the negative-gearing reforms not biting, SMSF trustees should focus on the elements that continue to matter:

• Sole purpose test: ensure property acquisitions are made for retirement income, not personal benefit
• Business real property leases: commercial property leased to a member's business remains a powerful structure
• LRBA repayments: contributing additional fund cash to accelerate LRBA payoff
• Pension-phase asset allocation: position high-growth assets to be in pension phase for 0% CGT on sale
• Trustee succession: ensure clear documentation for fund continuity
• Diversification: SMSFs concentrated in one property carry liquidity and concentration risk

Comparing SMSF vs personal ownership post-2027

For investors with capital trapped inside super and an investment thesis focused on property, SMSF ownership is now structurally more attractive than personal ownership of established residential property. The trade-off remains flexibility SMSF assets cannot be lived in, used personally, or accessed before preservation age. For more on commercial alternatives, see our analysis on commercial property after 2027.