There’s a growing narrative that the proposed tax changes signal the end of negative gearing as we know it. That may be true in a technical sense. But in practice, it misses a much more important point.
Tax systems rarely eliminate behaviour. They reshape it.
What we’re seeing play out now isn’t the disappearance of tax efficiency, but a shift in where it lives. And increasingly, that shift is pointing investors back toward super, not just as a retirement vehicle, but as an active structuring tool.
The proposed changes to negative gearing are well understood by now. For future purchases of established residential property, the ability to offset losses against personal income is expected to be removed. Instead, those losses will be contained, carried forward and only applied against future residential property income or capital gains.
That’s a fundamental change in how property investors have traditionally managed cash flow and tax. For decades, the logic was simple: absorb a short-term loss in exchange for a long-term gain, with the tax system helping smooth the journey. Without that immediate offset against salary, the strategy becomes more capital intensive, less forgiving, and for some, less attractive.
But here’s where the conversation often stops too early.
While these reforms narrow one pathway, they leave another largely untouched.
Superannuation continues to operate in a concessionally taxed environment, with contributions and investment earnings generally taxed at 15% rather than personal marginal rates. For higher-income earners, that differential alone has always mattered. What’s changing now is how powerful that difference becomes when viewed alongside the broader tightening of tax settings outside super.
And it’s within that gap that a more subtle, and in some ways more strategic, version of negative gearing begins to re-emerge.
Consider the mechanics, not in isolation, but as part of a broader system. Salary sacrifice reduces personal taxable income, just as traditional negative gearing once did. At the same time, within an SMSF, losses generated from an investment property don’t disappear. They sit at the fund level, waiting to offset taxable income, which includes concessional contributions flowing into the fund.
Individually, neither of these truths is new. But together, they create an interesting interaction.
If an investor redirects income into super via salary sacrifice, they lower their personal tax exposure at marginal rates. If their SMSF is concurrently running a property loss, that loss can absorb the additional taxable income created by those contributions. In effect, the contribution that would normally attract tax inside the fund is offset by the loss.
The result is not a perfect replica of negative gearing. But economically, it starts to make sense.
The tax benefit is now split across two environments rather than sitting purely in the individual’s tax return. The personal income is reduced. The fund’s tax position is neutralised. And the combined outcome begins to resemble the intent, if not the letter, of the old strategy.
What’s particularly interesting is that this approach doesn’t rely on pushing boundaries or exploiting loopholes. It arises from the interaction of existing, well-understood rules. Concessional contributions are assessable income within a fund. Losses can offset that income. Salary sacrifice reduces personal taxable income. None of this is new. What is new is the context in which these pieces are being assembled.
It also reflects a broader philosophical shift in the tax system itself.
The direction of policy is increasingly clear. Tax concessions tied to personal ownership structures, particularly those linked to capital growth and housing, are being wound back or refined. At the same time, the super system, despite ongoing scrutiny at higher balance levels, remains comparatively stable. It continues to offer concessional tax treatment, long-term focus, and, importantly, flexibility in how income, gains and losses are managed within the fund, so it’s not surprising that SMSFs are becoming more central to strategic conversations.
Not because they offer a workaround, but because they remain one of the few environments where tax efficiency can still be actively managed.
Of course, this isn’t a one-size-fits-all solution. The optics can be appealing, but the outcomes will depend heavily on the fund’s overall position. Other income within the SMSF, carried forward losses, franking credits, and whether the fund is in accumulation or pension phase can all materially influence the result. Contribution caps also place hard limits on how far this strategy can be pushed.
Most importantly, these reforms are still proposals, not yet law, but even at this stage, the broader takeaway feels clear.
The conversation is no longer simply about whether negative gearing will survive. It’s about how investors adapt to a system where tax benefits are more deliberate, more contained, and increasingly tied to structure rather than individual transactions.
For many, that means thinking beyond the standalone property purchase and toward the interaction between personal income, superannuation, and investment strategy as a whole.
NOTES:
This is most relevant for clients who:
- Have a meaningful super balance,
- Have a long investment horizon (often late 30s+), and
- Have stable cashflow and capacity to contribute (or salary sacrifice) within caps.
You must seek your own personal advice.
This article is general information only and does not constitute tax, legal or financial advice. You should obtain advice specific to your circumstances before acting, particularly for SMSF borrowing and contribution strategies.
