Tax changes on investors are set to push borrowing away from existing properties and towards new builds and specialist ownership structures, reshaping loan demand.
Investor tax reforms in Tuesday’s federal budget are expected to gradually cool demand for highly geared purchases of existing properties and increase appetite for new construction and alternative ownership vehicles.
From 1 July 2027, the 50 per cent CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30 per cent minimum tax on net capital gains.
Transitional arrangements will limit the impact on existing investments by ensuring the changes only apply to gains arising on or after 1 July 2027, with the 50 per cent CGT discount continuing to apply to gains arising before 1 July 2027.
The government will also limit negative gearing for residential property to new builds.
From 1 July 2027, losses from established residential properties will only be deductible against rental income or the capital gains from residential properties.
Excess losses will be carried forward and able to be offset against residential property income in future years, while eligible new builds will be exempt from the changes.
Ownership structures and new builds in focus
Pepper Money CEO of mortgages and commercial lending, Barry Saoud, said the changes would push some investors to rethink how they held property and where they deployed capital.
“For some investors, that will mean looking beyond individual ownership and becoming more comfortable with lending in companies, trusts and self‑managed super funds (SMSFs),” he said.
Saoud noted that SMSF property strategies would likely remain the domain of a smaller, more sophisticated cohort.
“SMSF property investing, in particular, is set to attract interest from a smaller group of sophisticated, longer-term investors. SMSFs continue to benefit from relatively favourable tax treatment, including a one-third capital gains tax discount and potential tax-free outcomes in pension phase,” he said.
“That said, super fund lending remains a specialist strategy. It comes with strict compliance requirements, contribution limits and advice obligations, and it won’t suit every client.”
Saoud said he expected “high‑net‑worth and strategic” investors to examine super funds and non‑personal structures as they reassessed the after‑tax returns on direct property.
“It’s likely some investors will at least explore super funds or alternative ownership structures to manage tax outcomes. That puts more responsibility on brokers to understand how these structures work, and to partner with lenders who can support them with helpful loan options,” Saoud said.
Saoud also pointed to construction as a key beneficiary of the policy mix, noting that the budget combined tax incentives with direct housing spend.
“New builds and construction emerge as a clear opportunity,” he said, highlighting an additional $2 billion over four years to unlock new development and deliver up to 65,000 extra homes.
With negative gearing preserved only for new dwellings, he said “policy settings actively steer investor demand toward construction and off-the-plan purchases.”
For the lending market, Saoud said that these shifts would elevate the importance of construction and development lending.
“For brokers, this is a clear signal to revisit construction finance capability. Clients will increasingly need guidance on building, land-and-build packages and developer-led projects – and confidence that their broker understands the lending nuances involved,” he said.
Saoud also urged brokers to prepare for more complex ownership structures and selective use of specialist strategies.
“Lift capability around ownership structures. Expect more conversations about lending in companies, trusts and super funds. Familiarity with non-personal structures will be a growing differentiator,” he said.
Majors: Meaningful reform, modest macro shift
Westpac described the package as a significant recalibration of longstanding property tax concessions.
“Measures to boost housing supply and level the playing field are meaningful, particularly on tax settings,” the bank said, adding that concessional CGT had long encouraged leveraged investment in rental properties in combination with negative gearing.
However, Westpac stressed that the grandfathering of existing holdings meant the impact on the housing market would “be drawn out.”
The Commonwealth Bank of Australia took a slightly more hawkish stance on the inflation risks, saying that the government could have gone further in restraining demand.
“Overall, the Budget is unlikely to shift the RBA’s near-term view on interest rates, but it does little to help in the fight against inflation,” it said, adding that “more could have been done in 2026–27 to reduce aggregate demand and create some headroom for the RBA with inflation remaining elevated”.
On prices, CBA expects a period of adjustment as investors process the new settings.
“We expect some near-term volatility and house price falls in coming months as investors reassess their positions,” it said, trimming its national house price forecast for 2026 to 3 per cent growth, down from 5 per cent.
National Australia Bank focused strongly on the incentive structure and financial‑stability implications, saying that the reforms would nudge capital away from highly geared, low‑yield property trades.
“These reforms remove the incentive to deploy capital into low yielding/high debt investments in property,” it said, describing this as a benefit for broader financial stability.
“They go a long way to removing some of the incentives that have increased the tax attractiveness of leveraged exposure to investment property and facilitate a slow re-orientation away from investor lending towards owner-occupied lending.”
NAB also emphasised the design principle behind the CGT shift.
“By the principles of optimal tax policy, this change should deliver an efficient, fair and robust regime once fully implemented,” it said, adding that the framework may favour income‑oriented investments.
[Related: Brokers warned to be prepared for onslaught of investor queries]
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