Budget tax shake-up divides industry as brokers brace for investor retreat

Australia's mortgage brokers are preparing for a wave of client questions after the federal government handed down one of the most consequential budgets in a generation – one that fundamentally reshapes the tax treatment of property investment, capital gains and family trust structures.

The 2026–27 Budget introduces changes to negative gearing, capital gains tax (CGT) concessions and discretionary trusts, taking effect from 1 July 2027.

The existing 50% CGT discount for individuals, trusts and partnerships will be replaced with cost-base indexation, combined with a 30% minimum tax on net capital gains.

Negative gearing benefits will be preserved only for new construction, while discretionary trusts will face a 30% minimum tax rate on taxable income.

Brokers at the front line of client uncertainty

Mortgage & Finance Association of Australia (MFAA) chief executive Anja Pannek (pictured, centre left) said the scale of the budget meant Australians will be seeking clear, practical guidance – and that brokers were well-positioned to provide it.

"This is a significant Budget with major changes across housing, tax, cost of living and small business," Pannek said. "While we are still working through the detail, there is no doubt many Australians will be asking what these changes mean for their household budget, borrowing capacity, investment decisions, refinancing options and small business plans."

She said the priority was ensuring clients received personalised, circumstances-based advice rather than broad generalisations about policy.

"For many people, the question will not be what the Budget means in theory, but what it means for their home loan, their investment property, their business, their cash flow or their future plans," Pannek said. "Brokers are often one of the first people borrowers, investors and small business owners turn to when policy settings change. They help clients cut through complexity, understand their options and make informed decisions based on their individual circumstances."

The MFAA’s first reactions to the Budget include:

• Housing access and supply are central to the Budget

• Tax settings will require careful explanation and implementation

• Cost-of-living relief remains a major theme

• Small business support remains critical

• Productivity must include practical lending efficiency reforms

• Regulatory simplification and digitisation remain important

“The test for these reforms is whether they improve access to housing in practice without reducing the flow of investment into new supply,” said Pannek. “Any changes to negative gearing and capital gains tax need to be carefully calibrated to avoid unintended consequences for housing supply, rental availability and investor confidence.”

Mixed verdict from leading economist

AMP chief economist Shane Oliver (pictured, right) offered a measured welcome, describing the budget as broadly responsible while flagging significant structural shortcomings.

"It's the first budget under the current government to see all the revenue windfall saved and net budget savings over the forward estimates," Oliver said. "So in this sense, it's more responsible than the last few Budgets."

On the property tax reforms, Oliver forecast a short-term housing price correction of around 5% as investors recalibrate their after-tax return expectations. But he cautioned against reading that as a lasting affordability dividend.

"The changes to negative gearing and the CGT discount could result in a 5% or so fall in home prices in the short term as investors retreat," he said. "But it's doubtful that the moves will boost housing affordability much over the longer term – as the basic driver of this is a shortage of housing relative to underlying population-driven housing demand.

“Policies that reduce investor interest in property overall will likely lead to less housing supply, not more – with even the Budget papers estimating the tax changes will reduce supply by 35,000 homes over a decade."

Oliver also raised concerns about the CGT changes in the context of shares and small businesses, warning of unintended consequences beyond the residential property market.

"The removal of the 50% discount could take the CGT rate for a high-income earner from the low end of comparable countries to the high end," he said. "This in turn could work against growth shares and small businesses and attracting talented workers to such businesses, which could work against the Budget's objective to boost productivity."

A sharper critique from the broking sector

Blake Buchanan (pictured, left) of mortgage aggregator Specialist Finance Group (SFG) was more direct, arguing the government had fundamentally misidentified the cause of the housing affordability crisis.

"Frankly, you can't tax your way to success," Buchanan said. "Taxes should be used to pay for things, not as a punishment to achieve an outcome. The bloated costs of homes and construction are a result of mismanagement, bureaucracy, over-regulation, lack of manufacture and a decimation of productivity in the construction sector over the past 30 years – not the tax settings."

He warned the reforms would hurt everyday investors rather than the wealthy speculators the policy appeared to target.

"A significant portion of so-called 'mum and dad' investors are not wealthy property moguls," Buchanan said. "Many are everyday Australians attempting to enter the property market in whatever way they can. Without the ability to rely on rental income and associated tax offsets to help service the debt, many of these aspiring first-home buyers may find themselves effectively locked out of the market altogether."

Buchanan said reduced investor activity would also tighten rental supply at exactly the wrong time.

"The immediate effect is likely to be reduced appetite from investors who traditionally relied on negative gearing to offset holding costs, combined with investors holding on to properties for longer as the tax benefits are preserved," he said. "We are way under target on construction and missing supply requirements by some distance. You combine this with our ballooning immigration numbers and the property sector will be a disaster for many for some time yet."

Tim Brown, co-founder and CEO of residential mortgage group Recludo, said the federal Budget has fundamentally shifted the calculus for property investors – but failed to address the supply crisis at the heart of Australia's affordability problem.

Brown said the proposed changes to negative gearing and capital gains tax would force investors to look much more closely at cash flow and yield as "the old assumption that capital growth will do all the heavy lifting becomes harder to rely on".

For owner-occupiers, Brown said the near-term impact would likely be more indirect – with softening investor demand potentially easing competition in some segments – but warned affordability would remain stubbornly high without meaningful supply reform.

He was equally pointed on what was missing. "Australia keeps tinkering around the edges instead of dealing with the structure of the tax system," Brown said, adding that greater investment in regional transport infrastructure was needed to open up housing supply beyond major city centres.

For brokers, Brown said the Budget makes their role more critical than ever – urging them to stress-test investor deals properly and help owner-occupier clients understand borrowing capacity and structure, not just chase the lowest rate.

A silver lining for SME and equipment brokers

Not all of the Budget's industry implications were negative. Both Buchanan and the MFAA pointed to the permanent extension of the $20,000 instant asset write-off as a meaningful win for small business clients – and a likely driver of increased activity for asset and equipment finance brokers.

"Outside of residential property, there are positive signs for the SME sector through the continuation or expansion of the $20,000 instant asset write-off," Buchanan said. "This measure is expected to provide a welcome boost for small businesses that may have delayed purchasing vehicles, machinery or equipment amid economic uncertainty. As a result, asset and equipment finance brokers are likely to see increased activity."

The MFAA echoed the point, flagging the measure as directly relevant to both broking businesses and their small business client base.

With the property tax reforms not taking effect until mid-2027, the immediate pressure on brokers is one of communication. Pannek said the MFAA would develop member resources in the coming days to support those conversations.

"The coming days will be important as the detail is tested, understood and explained," she said. "The priority must be clear, practical information so households, investors and small businesses can understand what these changes mean for their own circumstances."

Warnings raised from commercial broking sector

David Bushby (pictured, centre right), chief executive of the Commercial and Asset Finance Brokers Association (CAFBA), welcomed the government's decision to make the instant asset write-off permanent but warned the measure falls well short of what small business needs – and expressed deep concern over the Budget's property tax reforms.

Bushby said the instant asset write-off permanence was a positive step, but the $20,000 threshold and the $10 million annual turnover eligibility cap significantly limited its economic impact.

"In the current uncertain economic environment, businesses need certainty from government and greater tax support to invest in vehicles, equipment and productive assets that drive expansion and employment," Bushby said. "However, if the deductible threshold and turnover limits are not increased, the announced decision will fail to achieve its full economic benefit potential."

CAFBA has previously advocated for a $150,000 threshold alongside higher turnover limits, arguing all three changes would work together to lift economic activity at no net budget cost.

On CGT and negative gearing, Bushby was blunt. "We are deeply concerned that these complex new rules and valuation requirements will adversely impact our members and their commercial clients, leading to unintended consequences and possibly encouraging avoidance behaviour in the market."