Impact of potential capital gains tax changes to Australian property investment

There’s a lot of talk that the Government will change tax laws for property investors in the May budget. Nothing has been announced, but given our experience and feedback from contacts we talk to, it seems likely.

Changing the capital gains tax for property investors is a bad move, but it seems like this will happen because it's politically popular at the moment. We’ll set aside our full thoughts until we see what happens.

Changes will impact supply

However, what many investors should know is that if laws do change, they will only apply to future properties being purchased. It's extremely unlikely that property taxes will be changed retrospectively.

If the Government reduces capital gains tax concessions for future purchases, the immediate effect will not be lower prices, it will be lower participation. Investors are a key source of demand for new housing. They buy off the plan, they fund construction through pre sales, and they absorb stock that owner occupiers often cannot. If after tax returns fall, fewer investors will commit capital to new projects.

Developers rely on that forward demand to secure funding and commence builds. When investor appetite drops, projects are delayed or cancelled. Fewer projects today means fewer dwellings completed in two to three years. That is how supply tightens.

There is also a second order effect. A large share of rental stock is owned by private investors. If future tax settings make new acquisitions less attractive, fewer new rental properties enter the market. At the same time, population growth and household formation continue. Demand for rentals does not pause because tax settings change. The result is a squeeze: steady or rising tenant demand meeting slower growth in rental supply. In that environment, rents rise and vacancy rates fall.

Policy aimed at investors can unintentionally restrict the very supply pipeline that keeps the rental market balanced.

Tread with caution

With changes likely to be announced in a couple of months, now might be a good window of opportunity to purchase property before a different tax system applies to future properties purchased.

Once the Government does announce the changes, it's likely that investors will rush in before the changeover date, expected to be from 1 July. We’ll have more to say about this in the coming months. We’re keeping a very close eye.

Moving early, planning wisely

At Flexdoc, we work with self made Australians who want a clear path forward in property. We focus on structure first, strategy second, and execution last. We help you understand what you can afford, where to buy, and how to build with intent, not noise. With policy changes likely and uncertainty building, moments like this reward preparation. If you have been thinking about your next move, now is a sensible time to review your position, stress test your numbers, and act with clarity rather than react with haste.

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