Reforms to negative gearing and CGT tip the scales further in favour of established investors
Recent changes to negative gearing and capital gains tax (CGT) announced in the Federal Budget are set to widen the gap between older and younger property investors, according to Hot Property Buyers Agency.
Zoran Solano (pictured top), senior buyers agent at the firm, said the reforms, billed by the Albanese Government as measures to improve housing affordability, would instead entrench the position of investors who already hold established portfolios.
“These rules don’t treat all investors equally,” Solano pointed out. “They treat the people who’ve already spent decades building property investment portfolios far more favourably than the young Australians trying to get started.”
Under the revised negative gearing arrangements, rental property losses can only be offset against rental income, rather than against wages or salary. For established investors with profitable portfolios, losses can still be offset against other rental income within the same financial year. New investors without an existing portfolio do not have this option.
“For a first-time investor, that means no immediate tax relief,” Solano said. “Losses simply accumulate in a pool until the property is sold or positively geared, which generally takes up to a decade and is unfeasible for most new investors given the current low yields and high property prices.
“But if you’re a Baby Boomer or Gen X investor with a strong, positively geared portfolio, you can still offset those losses against your existing rental profits in the same financial year, which is a huge financial advantage.”
Solano reiterated that the tax changes reinforce a system that favours investors who entered the market earlier, at the expense of those trying to do so now.
“The people who benefited most from negative gearing for the past 30 years continue to benefit, but the people trying to use it for the first time don’t,” he said. “This is how you create the richest generations in Australian history. Not because they’re investing more, but because the system now rewards those who already hold the assets.”
According to Solano, Baby Boomers and Gen X already hold the majority of property wealth in Australia, along with the highest levels of equity and the strongest cash flow positions. He said younger investors face higher purchase prices, higher holding costs, and now fewer tax concessions than previous generations did at the same stage.
“Gen X and Baby Boomers were already the wealthiest cohorts on record, and these changes will push them even further ahead,” he said. “Meanwhile, first-time investors will take longer to build equity, longer to achieve positive cash flow, and longer to reach the point where property becomes a wealth-building tool rather than a financial burden. Many simply won’t have the cash flow to support a negatively geared property for up to a decade and will be locked out of creating property wealth entirely.”
Solano said the scale of the reforms' impact on different investor groups may not have been fully anticipated.
“This isn’t just a policy tweak,” he said. “It’s a structural shift that will shape who owns Australia’s property wealth for the next 20 to 30 years.
“And unless younger Australians find new pathways into the market, the gap between generations will widen faster than anything we’ve seen before. These reforms are not helping young people, but they will make them poorer than their parents and grandparents ever were.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
