Scan the QR code for Ray White’s detailed analysis What do these changes mean for the market? While the reforms are intended to improve housing affordability and increase investment in new housing supply, there are significant concerns that a number of unintended market consequences will emerge over time, particularly within already undersupplied rental markets. The rental market is also not a static pool. Australia’s rental demand continues to grow through population growth, migration, workforce mobility and changing household circumstances, while many renters are neither in a financial position to purchase property nor seeking to do so in the near future. These pressures mean the reforms are likely to be felt well beyond investors alone. Capital Gains Tax (CGT) The Budget also changes the way capital gains tax is applied to future investment property sales. Previously, investors who held a property for more than 12 months generally received a 50 per cent discount on the taxable capital gain. From 1 July 2027, the 50 per cent capital gains tax discount will be replaced with a discount based on inflation, alongside a 30 per cent minimum tax on gains. This means investors will generally be taxed on inflation-adjusted gains rather than automatically receiving a flat 50 per cent discount. The CGT reforms will only apply to gains arising after 1 July 2027. Investors purchasing eligible new-build residential property will be able to choose between the existing 50 per cent CGT discount or the new arrangements.
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