The sky is falling. Or at least, that's what you'd think reading the latest headlines about Labor's proposed 30% tax on super balances over $3 million. Political opportunists are painting apocalyptic scenarios of SMSF investors fleeing the market, restructuring in panic, and watching their retirement dreams crumble.
As someone who's settled over $359 million in loans and specialises in SMSF property lending, let me share a different perspective: this is the best non-problem you could hope to have.
The Numbers Tell the Real Story
Let's cut through the hysteria with facts. Australia has 646,168 SMSFs managing $1.01 trillion. Impressive? Sure. But here's the kicker: the median SMSF balance sits at just $467,187. That's median, not average – meaning half of all SMSF members have less than this amount.
Even more telling: only 11.3% of SMSFs use borrowing arrangements, and most operate at conservative 70% loan-to-value ratios. This isn't the wild west of property speculation – it's careful, considered wealth building.
Why SMSF Property Investment Is Different
Here's what the doomsayers conveniently ignore: SMSF property investment operates in a fundamentally different environment than personal property investment.
First, the tax dynamics are completely reversed. In a 15% tax environment, negative gearing rarely makes sense compared to the 45% marginal rates many individuals face. This means SMSF properties are typically structured to be neutrally or positively geared from day one.
Second, lenders enforce conservative lending standards with maximum 70% LVRs for residential and commercial property. Combined with the lower tax rate, this naturally pushes SMSF properties toward positive cash flow positions.
In our brokerage, 62% of SMSF lending goes toward commercial property – often business real property where owners secure their trading premises. These aren't speculative plays; they're strategic wealth-building moves that would make sense regardless of any future tax changes.
The Strategic Reality
Smart investors are already implementing strategies like multi-member funds and balanced portfolios to manage potential impacts. But here's the thing: if you're making investment decisions based primarily on avoiding a tax that might apply when you've accumulated $3 million in super, you're missing the forest for the trees.
The proposed tax affects individual member balances, not total fund balances. A $9 million SMSF with three members at $3 million each? No additional tax. A couple with $2.5 million each? Also unaffected.
The Commercial Property Advantage
What really gets overlooked in this debate is how SMSF property investment, particularly in commercial real estate, remains one of the most effective wealth-building strategies available. The ability to purchase business real property through your SMSF creates a powerful synergy between business growth and retirement planning.
When an SMSF reaches pension phase, property income becomes tax-free under the exempt current pension income (ECPI) provisions. This benefit remains unchanged regardless of the proposed new tax on high balances.
My Cheeky Confession
Here's where I might ruffle some feathers: I actively want to be in a position where my wife and I both have over $3 million in our super accounts.
Think about it. Would you rather have $2.9 million and pay no extra tax, or $6 million and pay some additional tax on the amount above $3 million? The math isn't complicated. Even with the higher tax rate, you're still better off with more money.
This obsession with tax minimisation over wealth creation is precisely backwards. It's like refusing a pay rise because it might push you into a higher tax bracket. Sure, you'll pay more tax, but you'll also have more money.
The Bottom Line
Give me the $3 million "problem" all day long. I'm off to buy more property in my super, thank you very much, because nobody else is going to gift me that level of wealth. The government isn't going to hand it to me. The tooth fairy isn't leaving $3 million under my pillow.
If you want to build serious wealth for retirement, you need to focus on acquisition, not attribution. You need to think about accumulation, not just administration. And you certainly shouldn't let the fear of paying tax on wealth you haven't yet built stop you from building it in the first place.
The real question isn't "How do I avoid this tax?" It's "How do I put myself in a position where this tax applies to me?"
Because honestly? Having too much money in super is the kind of problem we should all aspire to have.
Want to start building your SMSF property portfolio? Let's have a real conversation about wealth creation, not tax paranoia. Book a strategy session at https://calendly.com/mab-smsf-experts/smsf-mortgage-strategy-meeting