SMSF trustees are having to revisit how they include property investments in fund portfolios after the announcements in this year’s federal budget. Joe Christie suggests there is a ready-made investing alternative that can mitigate the new policy measures.
For many SMSF trustees, the past few months have prompted a quiet rethink. The 2026/27 federal budget, handed down in May, delivered some of the most significant changes to property and investment taxation in decades, and for anyone weighing up how to gain exposure to Australian real estate, the calculus has shifted.
Founded in 2013, Capital Property Funds (CPF), offers an alternative way of accessing the property sector: not by owning property, but by lending against property. Investors receive income from the interest paid on loans secured by Australian property, rather than rent from tenants. It’s a model that has quietly attracted a growing number of SMSF investors and the recent budget has only sharpened the appeal.
Here are three reasons the conversation is changing.
1. The tax case for direct ownership has narrowed
The headline measures speak for themselves. From 1 July 2027, the 50 per cent capital gains tax discount for individuals, trusts and partnerships is to be replaced by an inflation-based approach paired with a minimum 30 per cent tax on gains. Negative gearing will be limited to new builds and a 30 per cent minimum tax will apply to discretionary trusts. SMSFs face a further change of their own: a subsequent budget deal is set to ban them from using limited recourse borrowing arrangements to buy residential property, closing off the geared route many members have used to hold property inside super.
Established properties held before budget night are grandfathered, but the direction is clear: the generous settings that underpinned a generation of direct property investment are being wound back.
Tax treatment depends heavily on individual circumstances and structure, and super funds are treated differently again, so personal advice matters here. But for many investors, the budget has reframed a long-held assumption that owning an investment property is simply the obvious way to get property exposure.
That shift is already visible. In the days after the budget, The Australian Financial Review reported renewed investor interest in commercial and industrial property, where negative gearing remains, and in newly built housing, which the changes are designed to favour. Treasury’s own modelling assumes the settings will steer investment toward new supply and major developers say they expect stronger demand for new stock. For a property-backed lender, that is the pipeline it already finances. CPF lends against precisely these sectors, new residential, commercial and industrial developments, funding the kind of construction the policy is built to encourage at a time when banks continue to ration construction credit.
2. Less to manage – and often more income
Even before the budget, direct ownership came with a familiar list: maintenance, vacancies, managing agents, land tax, insurance and the occasional after-hours phone call. Recent years have added rising holding costs and, in some states, land tax bills that have left long-term owners questioning whether the effort is still worth it.
Property-backed lending removes those obligations. The fund assesses each borrower, structures the loan, holds the security and monitors the project through to repayment. Investors receive regular income without becoming a landlord, with no tenants, no tradesmen and no drama. For trustees who value their time as much as their capital, that simplicity is a genuine drawcard.
Often the income compares favourably, too. Residential property in many markets yields only modestly once rates, insurance, management and maintenance are paid, whereas lending against property has typically generated a higher income return. We have had investors sell a rental yielding a modest income and redeploy the proceeds into secured lending for stronger cash flow, comparable or better income, with far less to manage.
3. Income you can plan around
Perhaps the most important shift is in what investors now prioritise. As more SMSF members approach or enter the pension phase, the emphasis tends to move from chasing growth towards protecting capital and generating dependable income.
This is where property-backed lending earns its place. Returns are generally set in advance and income is paid regularly, in our case, quarterly, rather than depending on daily market movements or an eventual sale. Each loan is secured by a registered mortgage over Australian real estate and the value of that security is higher than the amount lent, creating a buffer designed to help protect investor capital if conditions change. It is not a replacement for shares or other assets, but a different source of income that can reduce reliance on any one part of a portfolio.
A word on risk
No investment is without risk. Property markets fluctuate, projects can be delayed and borrowers can encounter difficulties. The strength of a property-backed investment comes down to how those risks are managed, involving careful borrower selection, conservative lending, strong security arrangements and active oversight throughout the life of each loan.
Industry voices also caution buying brand-new property can mean lower yields and higher risk, and that construction costs remain under pressure — a reminder that in development lending it is conservative advance rates, staged drawdowns and independent valuations that protect investor capital.
For SMSF trustees seeking property exposure without the responsibilities of ownership, and without the shifting tax treatment that now applies to direct holdings, property-backed lending is worth a closer look. It offers a way to put real Australian property to work, generating steady income, with people you can actually call.
