CHANGES: 2025/26 EOFY HAS CHANGED THE PROPERTY LANDSCAPE (part 2):
FOR PROPERTY INVESTORS:
We are property investors but I’m not gnashing my teeth at the Labor Government for making the changes they did. After all, we did all our property moves 5+ years ago.
The 3 Major Changes and What it Means:
Depreciation - which is the decline in value of eligible assets and building work - was left un-touched. Which makes sense because the Fed is still trying to encourage investors to build new property - we still have a housing issue. So keep referring to your depreciation schedule at tax time…and if you’re a depreciation schedule provider, thank your lucky stars. Or whoever petitioned the government on your behalf.
Negative Gearing - has been axed on new purchases of established homes after May 12th, 2026. New builds after that date can still be negatively geared (see note above - government wants housing crisis resolved). Established properties that were purchased before that date are grandfathered in that scheme, protecting investors that got into property investing based on the rules that were in place. Fair enough. But property is no longer a way for high tax threshold workers to hide their income.
Capital Gains 50% Tax Discount - is being remodeled. The new system is this…the traditional 50% CGT discount is replaced by an inflation-indexation system, plus a 30% minimum tax rate on real capital gains. You follow?
Now, if you sell an existing investments, the portion of the gain accrued before 1 July 2027 retains access to the 50% discount. Gains accruing after that date are dealt with under the new system. Still with me?
You would have needed an accountant to work out the first scenario. You need the Corsican Wizard to work out the second.
What all that means for MY investment portfolio: Not much. Our existing policy of Never Sell is now more entrenched. Partly because working out the capital gains tax gives me the twitches, but also because our kids won’t be able to afford a house and will need to inherit one. From us.
What that might mean for prospective investors: It may seem too hard to buy an already established property as an investment. And the price of new land has skyrocketed to crazy levels - it doesn’t really seem like a deal. Maybe Australian property investment is no longer a thing? We will watch this space - it is early days.
If you were one of those investment advisors that always thought “property is too hard” anyway, you will now feel quite smug.
Those are my honest thoughts on the outlook for property investing in Australia. We went through a period of incredibly “encouraging” tax policy because at the time, the government prioritised Australians investing in property. Now that no one can afford a house, it’s a completely different game.
