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Invest in Property Using Super Funds

March 4, 2026|6:30 PM AEDT|Past event

Legislation tabled in Parliament on 11 February 2026 will from July tax realised earnings on super balances above $3 million at 30 per cent instead of 15 per cent, with 40 per cent above $10 million, confronting SMSF trustees who control more than $160 billion in property holdings.

Key takeaways

  • •The Division 296 tax, revised after public backlash to apply only to realised gains and indexed thresholds in $150,000 steps, takes effect 1 July 2026—just four months after the bill’s introduction—requiring precise 30 June 2026 valuations for illiquid assets.
  • •Around 90,000 Australians, many SMSF owners whose funds hold roughly 15 per cent of the sector’s $1.05 trillion in assets as direct property, face higher tax on rental income and capital gains proportional to the excess balance, with an election available to reset cost bases at mid-2026 market values.
  • •While the changes curb concessions for the wealthiest 0.5 per cent, they coincide with the super guarantee rising to 12 per cent and ASIC moves to ease disclosure barriers, potentially accelerating institutional property allocations even as some high-balance individuals consider shifting assets outside super.

Super Property Recalibrated

Australia’s compulsory superannuation system channels employer contributions—now 12 per cent of wages since July 2025—into retirement savings that can be directed, via self-managed super funds, into real estate through limited recourse borrowing arrangements limited to single assets.

With 653,000 SMSFs holding $1.05 trillion as of June 2025, residential property accounts for about $57 billion and non-residential another $105 billion, together roughly 15 per cent of sector assets; roughly 30 per cent of sampled SMSFs hold direct property.

The new tax, introduced as the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2025 on 11 February 2026, adds 15 percentage points (to 30 per cent total) on the proportion of realised earnings tied to balances above $3 million, rising to 40 per cent above $10 million; thresholds will be indexed to CPI in set increments to limit bracket creep, and the tax is assessed on the individual’s total super balance across all funds, payable from super or personally.

For SMSF trustees, the 30 June 2026 valuation deadline is critical: accurate market valuations of unlisted property are mandatory, and an irrevocable election can reset the cost base of all CGT assets to that day’s value so only subsequent growth is caught under the new regime.

Inaction risks inflated future tax liabilities on gains that accrued before the changes or ATO challenges to valuations; for those already above $10 million, the near-top marginal rate may tip the scales toward withdrawing funds to hold luxury property or trusts directly.

Non-obvious tension lies in the policy’s dual effect: it claws back concessions from high earners yet preserves liquidity advantages for long-term property holdings inside super by dropping the original unrealised-gains proposal, while large industry funds—projected to reach US$7.2 trillion by 2035—are being encouraged by ASIC to increase domestic and global real-estate exposure amid record inflows.

Sources

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