Tax changes to “decimate” rental supply and shut down rentvesting pathway
For immediate release
Changes to the Capital Gains Tax (CGT) discount and the removal of negative gearing for existing properties from July next year will decimate future rental supply and push rents even higher, according to the Property Investment Professionals of Australia (PIPA).
PIPA Chair Cate Bakos said that while existing investors were spared from changes to negative gearing, the reforms would torpedo future investor activity at the very moment Australia needs more rental housing, not less.
“The real issue is that these changes are being dropped into a system that already can’t deliver homes at the speed or scale that Australia needs,” Ms Bakos said.
“Productivity has stalled, labour is stretched, approvals are painfully slow, and every level of government has added significant costs to each new dwelling.
“When you add these CGT and negative-gearing changes on top, you don’t just slow investment – you tighten an already constrained supply pipeline to breaking point, which is the opposite of what the housing market needed right now.”
Ms Bakos said the CGT changes were particularly concerning for rentvesters who planned to sell their investment property to purchase a home.
“For many young people, the long-term plan is to sell their investment and use the equity to buy their first home,” she said.
“With the CGT discount reduced, the tax bill they face becomes significantly larger, which is a direct penalty on the very cohort the government claims to be helping into home ownership.”
She said policymakers needed to recognise that rentvesting had become one of the only viable entry points for many younger Australians priced out of buying where they live.
“Undermining the financial viability of rentvesting doesn’t just affect investors – it affects future homeowners,” Ms Bakos said.
“The CGT tax increase will shut down one of the few remaining pathways young
Australians had to get a foothold in the market via rentvesting.
“Serviceability will also be significantly impacted given younger investors will not be able to offset losses until the asset is sold or it is positively geared, which generally takes up to a decade of ownership.”
Ms Bakos also questioned the Prime Minister’s justification for breaking a key election promise.
“The Prime Minister said he broke his promise because young people were ‘giving up’ on home ownership, but the official data tells a very different story,” she said.
“According to the latest Lending Indicators from the Australian Bureau of Statistics, new first-home buyer loan commitments increased 9.1 per cent in the year to December.
“In fact, the number of new first-home buyer loan commitments in the December quarter was the highest in more than a decade – outside of the HomeBuilder-driven spike during the pandemic.
“This is the opposite of young people giving up on home ownership and shows that the Prime Minister has been untruthful with voters to push through these policies at the worst possible time for renters.”
The 2025 PIPA Annual Investor Sentiment Survey highlights the scale of the risk:
- Nearly one in five investors who sold last year did so because of concerns about potential Federal Government tax changes.
- More than half of current investors said tax-policy uncertainty was a key reason they may sell in the next 12 to 24 months.
- Around one-third would stop investing if CGT concessions were reduced, and a similar proportion would sell if negative gearing were removed.
- More than half of those who sold last year had owned their property for over a decade — the long-term investors Australia needs most.
ENDS
Bricks & Mortar Media | media@bricksandmortarmedia.com.au | 0405 801 979
About PIPA
Property Investment Professionals of Australia (PIPA) is a not-for-profit association established by industry practitioners with the objective of representing and raising the professional standards of all operators involved within property investment.
For more information visit www.pipa.asn.au
Federal Budget Commentary FOR IMMEDIATE RELEASE
The following can be attributed to Cameron Kusher, Chief Economist of Australia’s
largest property valuation and advisory firm, Herron Todd White.
Capital Gains Tax (CGT) Discount
“Changes to the CGT discount are expected to reduce after-tax returns on capital assets, including property, and will mostly influence investor behaviour over time by reshaping relative investment attractiveness across asset classes.”
“While framed in terms of generational equity, the CGT discount, introduced in 1999, has been applied broadly to capital gains for more than two decades, benefiting existing asset holders over that period.”
“Under the announced changes, existing assets are expected to remain subject to transitional arrangements, while the taxation treatment of future gains is being significantly restructured.”
Negative Gearing (NG)
“Changes to negative gearing arrangements will influence future investor demand for residential property, particularly when it comes to established housing, which represents the largest share of the market.”
“If investor demand falls away, there is a significant risk that fewer rental properties are added to the system, which could place additional pressure on already tight rental markets.”
“The policy intent is to encourage new housing supply, although investor preferences have historically favoured established dwellings due to pricing, yield and liquidity considerations, meaning behavioural outcomes may differ from policy expectations.”
Investor behaviour / housing demand shift
“A potential unintended consequence of the broader tax changes could be a gradual shift in capital allocation away from investment property and toward owner-occupied housing, including renovations and upgrades.”
“When investment becomes less tax-effective, property owners may redirect surplus capital into principal residences, rather than investment properties, which in the long run will contribute to upward pressure on dwelling prices.”
Supply-side measures
“Investment in infrastructure and measures aimed at improving planning efficiency are the types of supply-side interventions that can support improved housing delivery and long-term affordability outcomes.”
“Accelerating approvals and improving infrastructure capacity represent areas where government policy can have a meaningful impact on enabling additional housing supply over time, subject to implementation and construction capacity.”
What it means investors?
“Investing in property has just become a lot more challenging. Investors purchasing properties from tonight onwards can no longer negatively gear unless the purchase a new property which in most instances is more expensive than an existing one.”
“Those that already have an investment property can continue to negatively gear
until they sell.”
“Investors will also now be faced with a minimum capital gains tax of 30 per cent with the 50 per cent discount on capital gains for individuals, partnerships and trusts to be scrapped from July 1 2027 and replaced with an inflation indexation model thereafter.”
“The removal of negative gearing and the changes to the capital gains tax discount will make investing in property, and other asset classes, much less attractive going forward.”
“If investors are looking for low tax capital gains in property, they are probably going to be focusing now on major renovations to principal places of residence or upgrading their principal place of residence to those in more sought-after locations.”
What it means for first home buyers?
“The federal government claims that changes to negative gearing and the capital gains tax discount should help an extra 75,000 first home buyers enter the property market over the next decade.”
“Over the past decade, an average of 115,014 first home buyers have entered the market each year so the increase is really 7,500 more first home buyers a year or
6.5 per cent more first home buyers each year.”
“With investment in real estate becoming less attractive and negative gearing no longer available on established properties, it is likely that first home buyers will face reduced competition to purchase from investors.”
“This budget is very much being pitched at helping younger Australians and in particular helping first home buyers enter the housing market, whether that happens remains to be seen.”
Negative Gearing Changes Could Lock Out Lower-Income Investors
“Investors who buy established housing after Budget night will still be able to deduct losses against residential property income. They will be able to carry forward unused losses to future years but won’t be able to deduct them against other income like wages.”
“Residential property investment in established properties may still be attractive to wealthier individuals who can afford to carry-forward those losses. For individuals on lower incomes that would like to invest in residential property it’s probably further out of reach unless they can find a positively-geared asset because they may not be able to afford these losses (even though they can be carried-forward).”
ENDS
Notes to Editor
- Cameron Kusher is available for interviews on Australian budget and what it means for the property market.
- Australian Federal Budget 2026-27, Herron Todd White Analysis Report
- Bio + Profile:
- Cameron Kusher, Chief Economist, Herron Todd White
- Images:
- Peter Maloney, Chief Executive Officer, Herron Todd White
- Cameron Kusher, Chief Economist, Herron Todd White
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