Generally, personal investment portfolios use negative gearing on borrowings and losses to offset income and capital gains tax. However, SMSFs are only taxed at 15 per cent, much lower than most income tax rates, so as the investment strategy is to make a profit, negative gearing is not relevant to SMSFs.

“Negative gearing is not as prevalent in the SMSF sector, and it is not a strategy that many funds would use,” Dunn said.

“That’s not to say there may be some people who may look at it purely in an investment context but the contributions coming in cover what any shortfall would be. Using negative gearing for growth may make sense, but 15 per cent tax in super versus 45 per cent in negative gearing as a rule means the majority of funds aren’t doing it.”

David Busoli, principal with SMSF Alliance, said the concept of negative gearing in SMSF is difficult to achieve even if a trustee wanted to.

“Banks won’t do more than a 70 per cent Loan to Value Ratio and if you do have that ,or 50 per cent on shares, you are then not going to be negatively geared,” Busoli explained.

“That is why the limit is set at 70 per cent under safe harbour provisions so in most cases SMSFs will be neutral or positively geared.”

Busoli continued that negative gearing is only effective if there is a decent tax rate and as SMSFs have a maximum of a 15 per cent tax rate, it’s not really an effective strategy in the SMSF environment.

“It’s hard to do. If you’re dealing with a bank it won’t do it and private loans have to satisfy safe harbour provisions at 70 per cent so you wouldn’t be able to achieve a negatively geared situation even if you wanted to,” he said.