Negative gearing in an SMSF
Negative gearing within a self-managed super fund works differently from negative gearing in your own name. The tax benefits are real but structured differently — and the legislated changes to both negative gearing and SMSF borrowing add further complexity.
How SMSF losses work
If your SMSF holds a rental property and the property runs at a net loss (after interest, depreciation, and expenses), that loss stays inside the fund. It:
- Cannot be distributed to you personally to offset your salary or other income
- Can be used to offset other income inside the SMSF (such as investment income, dividends, or other rental income)
- Can be carried forward to offset future income inside the SMSF
The tax benefit is still real
Even though losses stay in the fund, the benefit is that expenses (including depreciation) reduce the SMSF's taxable income. The SMSF pays 15% tax on income in accumulation phase — so every dollar of loss saved from the SMSF's tax base saves 15 cents. This is lower than most personal marginal rates.
SMSF borrowing changes
The 2026 reform package bans new SMSF borrowing for residential property:
- New Limited Recourse Borrowing Arrangements (LRBAs) for residential property are prohibited after the commencement date
- Existing SMSF residential property loans are grandfathered — they can continue
- Commercial property borrowing in SMSFs remains permitted
What remains available
- Commercial property in SMSFs — borrowing and negative gearing continue
- Residential property purchased with fund's own cash (no LRBA) — always permitted
- Existing residential SMSF loans — grandfathered
Depreciation in an SMSF
Your SMSF can claim depreciation on SMSF-owned property, including Division 43 capital works and Division 40 plant and equipment. The deductions reduce the SMSF's taxable income, saving 15% in accumulation phase. A quantity surveyor depreciation schedule should be prepared for any SMSF property.