Labor Flags Negative Gearing Tax Changes as 50 per cent CGT Cut Ends
Negative gearing tax changes are rattling property investors as the 50 per cent capital gains tax discount is set to be scrapped. The immediate effect is not just on after-tax returns: it is already changing how buyers and advisers talk about established homes, borrowing capacity and risk.
For a property purchased today for $650,000 and rented at about $500 a week, the proposed rules leave an established-property investor roughly $14,000 worse off than under current settings. Even so, that same investor is still about $283,000 better off overall after tax under the new rules, which is why the short answer on whether property remains worth investing in is still yes.
Labour’s tax shift and the numbers
Under the example used, the investor is assumed to hold the property for 10 years, with average annual capital growth of 6 per cent, inflation at 3 per cent and a 37 per cent marginal tax rate. Those assumptions produce a wider gap of roughly $90,000 in net after-tax profit between the established-property case and the new-build case, which is the clearest sign that the tax change changes the shape of the outcome rather than wiping it out.
The proposed changes centre on negative gearing, capital gains tax concessions, borrowing capacity pressures and broader economic uncertainty. That combination is what has unsettled the market: it is forcing investors to compare the headline yield on a purchase with the after-tax result many months later, instead of focusing only on the weekly rent.
Property market uncertainty and competition
Uncertainty tends to reduce competition in property markets, and the article says quality assets that would ordinarily attract multiple competing offers become more accessible when fear rises. During Covid, buyers feared collapse and activity was temporarily paralysed; when rapid interest rate rises hit sentiment, many buyers retreated; after the banking royal commission tightened lending conditions, many investors stepped back entirely.
That pattern leaves one friction point in place for anyone weighing a purchase now: the tax change may make established property marginally less attractive, but the bigger wealth driver remains capital growth. A well-located asset in a fundamentally undersupplied market will outperform, while poor-quality assets, emotional overpaying and sitting out of the market entirely are the ways investors lose money.
What investors should watch
The policy question is now practical rather than theoretical for buyers, landlords and advisers: if the 50 per cent discount goes, established property still works in the example provided, but the after-tax gap narrows. For anyone deciding whether to buy, sell or hold, the relevant test is not whether property becomes unusable; it is whether the purchase still stacks up after tax, growth and financing are all counted together.
