The Albanese government has locked in a trio of tax reforms for next week's budget. For brokers with investor clients, the conversations start now
Next Tuesday's federal Budget will confirm changes to negative gearing, the capital gains tax (CGT) discount, and the taxation of discretionary trusts – the most significant overhaul of investment property tax since the Howard government introduced the 50% CGT discount in 1999.
Multiple government sources have confirmed the package is the centrepiece of a budget pitched squarely at Millennial and Gen Z voters, who now constitute a majority of the electorate.
The political backdrop is stark: investor loans now account for 40% of all new housing finance commitments, while first-home buyer loans have fallen to just 22%.
What's changing
Negative gearing will be fully grandfathered for existing properties, but future acquisitions face tighter rules. A two-property cap is the most widely reported option, though limiting gearing to newly built properties is also on the table.
Industry commentator Tom Panos has flagged one early workaround: most lenders treat a block of units as a single property, so multi-dwelling assets could become a hot ticket if a per-property cap is confirmed.
The CGT discount – currently 50% for assets held more than 12 months — is expected to drop to around 33%. The key design question is grandfathering. The Australian Financial Review reports the government will likely preserve old rules for gains already accrued on existing assets, but apply new rates to future gains – a partial approach that limits the revenue raised but reduces accusations of retrospective lawmaking.
Trusts remain the least-resolved element. Changes are confirmed in principle, but the mechanism is still being debated. Labor's 2019 policy proposed a 30% minimum tax on trust distributions – a similar model is expected, though the complexity of nested trust structures means implementation will be contentious.
What the data says
A Money.com.au survey found that 61 per cent of property investors would reduce their market exposure if both reforms proceed – 39– citing CGT changes and 22% citing negative gearing caps as their trigger.
Industry modelling by Qaive and Tulipwood Economics warns that combining a CGT discount cut with negative gearing restrictions could slash dwelling starts by tens of thousands of homes, pushing rents 2.4% higher by 2029-30.
Outgoing FBAA chief Peter White has cautioned against reforms that hurt the very people they're intended to help.
“While I commend the government for wanting to open up more housing, these changes will disadvantage the very people it seeks to help – younger Australians, as well as many other people on lower incomes,” said White.
“The theory that this will drive down the cost of housing to the extent where someone who can’t currently afford to service a mortgage and enter the property market will suddenly be able to is overly simplistic and ignores the many other factors in loan approval," added White.
What brokers should do this week
With the budget on Tuesday 12 May and a likely 1 July start date for any changes, the window is narrow. Three priorities stand out.
Call your investor clients before they call you. Many will have seen the coverage and have questions – a proactive broker deepens trust and may unlock pre-budget purchase activity from clients sitting on approved finance.
Flag the grandfathering window explicitly. Clients who are mid-process on an investment purchase need to understand the potential deadline and what it means for their position.
Alert any clients holding property through family trusts to speak to their accountant urgently. Any restructuring could have implications for lending entity, loan structure and serviceability – all things that flow back to you.
As MPA has reported, property investor tax hikes now look all but confirmed, with the Greens giving Labor the Senate numbers to get it done. The era of unchanged investment property tax settings is ending. The brokers who brief their clients now will be the ones those clients call first when the dust settles.
The federal budget will be delivered by Treasurer Jim Chalmers on Tuesday 12 May.
