Last week, I ran an online masterclass and one thing became obvious very quickly: There is still a huge amount of confusion about the recent tax changes affecting Australia’s property investors.
Many people are of the belief that negative gearing has been scrapped altogether, while others think it has been removed for all future property purchases.
Some believe the Capital Gains Tax (CGT) discount no longer exists, while others are convinced these changes will cause the housing market to crash.
None of these are true.
In fact, the current reaction reminds me a lot of what happened at the onset of COVID-19.
Back then, many people confidently predicted a housing market collapse. Investors sold quality assets, buyers sat on the sidelines waiting for cheaper prices, and countless decisions were made based on fear rather than facts.
A lot of people carry regret with them about the actions (or inactions) they made during this time.
As we now know, those predictions proved spectacularly wrong. Property values eventually surged, and many of the people who acted on panic ended up worse off than those who simply focused on the fundamentals.
Ironically, those same people who made those wrong predictions are the ones making the bold predictions you are seeing in the media today!
Negative gearing has not been abolished
Negative gearing allows investors to offset a property loss against their taxable income.
For example, if a property generates $50,000 in rent but costs $60,000 a year to hold, the $10,000 loss can be deducted from the investor’s income, reducing their tax bill.
For any property owned or purchased before 12 May 2026, negative gearing continues exactly as it always has.
For properties purchased after 12 May 2026, negative gearing remains available for newly built properties or where investors add an additional dwelling to an existing property.
In simple terms, existing investment properties retain their current treatment, while future access to negative gearing is directed towards creating new housing supply.
The key point is that negative gearing has not been removed. It has simply been redirected.
Capital Gains Tax (CGT) discounts still apply
The second major misconception relates to CGT.
For properties purchased before 12 May 2026, investors continue to receive the existing CGT discount of up to 50% on gains accrued up to 30 June 2027.
After 1 July 2027, investors will still receive a concession, but it will be linked to inflation rather than being a flat 50% discount.
For properties purchased after 12 May 2026, the same transitional arrangements apply until 30 June 2027.
After that, inflation indexation becomes available, while newly built properties will have the option of using either the traditional 50% discount or the inflation-based method, depending on which produces the better outcome.
The important point is that CGT concessions have not disappeared. The rules have changed, but the fundamental principle of providing investors with a discount on long-term gains remains.
Will property become less attractive?
This is where I believe history provides an important lesson.
During COVID, people became focused on headlines and short-term uncertainty while overlooking the bigger picture.
The fundamentals eventually won. Population growth resumed, housing demand remained strong, supply remained constrained, and property prices reflected those realities.
The same principle applies today.
Property prices and rents are ultimately driven by supply and demand. Demand comes largely from population growth, while supply depends on the number of homes being built. These tax changes do not reduce population growth, nor do they suddenly create an abundance of housing.
If anything, directing incentives toward newly built properties highlights just how important additional housing supply has become.
What to do?
We’ve seen this movie before. Whenever major policy changes or economic shocks occur, misinformation spreads quickly and predictions become increasingly dramatic.
COVID taught us that acting on fear can be expensive! Many people sat on the sidelines waiting for a property crash that never came, while others sold assets, they would have been better off keeping.
Today, I see a similar level of confusion surrounding negative gearing and CGT.
The reality is that negative gearing has not been abolished, CGT discounts have not disappeared, and there is no compelling reason to believe these changes alone will fundamentally alter the attractiveness of property investment.
Just as we saw during COVID, those who can separate reality from emotion will be the ones that live without regret.
