The government’s significant overhaul of property investment taxation has been tightened, with a new amendment aimed at closing what the Greens described as a loophole that would have let wealthy investors use their superannuation to dodge the incoming capital gains tax changes. For anyone watching how the property tax reforms are taking shape, it’s a meaningful development.
What Changed
As part of the deal that secured the Greens’ support for the government’s tax package, an amendment was added to prevent people from purchasing investment residential properties through self-managed superannuation funds (SMSFs) in a way that would sidestep the capital gains tax increase.
The Greens said the change would stop wealthy property investors exploiting a loophole. The government explained that superannuation funds are generally banned from borrowing to invest, with one notable exception: limited recourse borrowing arrangements (LRBAs) used by self-managed super funds. It was this exception that created the potential workaround the amendment is designed to close.
The Bigger Tax Picture
This amendment sits within the broader property investment tax changes announced in the May Budget, which represent the most significant reforms to property investment taxation in nearly three decades. From 1 July 2027, negative gearing on established residential properties bought after Budget night (7:30pm on 12 May 2026) will be limited, with rental losses only able to be offset against property income rather than wages or other income.
The 50 percent capital gains tax discount is also being replaced by a system based on cost base indexation plus a minimum 30 percent tax on capital gains. The government frames this as ensuring investors only pay tax on their real, inflation-adjusted gain, which it says restores the original intent of the CGT arrangements.
What’s Protected
It’s worth being clear about what isn’t affected, as there’s understandable concern among existing investors. Properties held before Budget night, including those under contract awaiting settlement at that time, are grandfathered and can continue to be negatively geared under the current rules until sold. Newly built properties remain fully exempt, with investors still able to access both negative gearing and the existing CGT discount, a deliberate design choice intended to channel investment toward new housing supply. The main residence exemption, which protects the family home, is untouched.
What It Means for Investors
For property investors, the landscape is becoming more complex, with rules that now vary depending on the property type, the purchase date, and the structure used to hold the asset. The SMSF amendment is a reminder that the government is actively closing avenues that might undermine the policy’s intent as the legislation moves through Parliament.
Commonwealth Bank economists have estimated the negative gearing and CGT changes could leave established dwelling prices modestly lower than they otherwise would have been, while providing some relative support for new construction. As always with tax changes still working through Parliament, investors are wise to seek professional advice tailored to their specific circumstances rather than acting on headlines alone.
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