Proposed changes to Capital Gains Tax (CGT) discounts and negative gearing are already unsettling Australian property investors – and could reshape conversations mortgage brokers have with landlord clients in the lead-up to the 2026–27 Federal Budget.
A new Money.com.au survey of investors found that 39% would step back from the market or sell if the 50% CGT discount on investment property sales were reduced, while a further 22% said capping negative gearing concessions to one property would lead them to take similar action – a combined 61% signalling they might pull back under the proposed reforms.
The Australian government is weighing reforms to investment property tax settings ahead of the 2026–27 federal budget on May 12, with ‘grandfathering’ provisions proposed to protect existing investors so that any changes would apply only to new property purchases. Even so, brokers may face more cautious investor sentiment, tighter borrowing capacity planning, and questions about whether to refinance, hold, or divest.
Separate economic modelling by Qaive and Tulipwood Economics suggests that restricting negative gearing to just one existing rental per investor could significantly dampen new housing supply, potentially cutting dwelling starts by more than 45,000 over five years and leaving rents up to 2.4% higher in real terms by 2029–30.
Money.com.au Mortgage Expert Nick Burgess (pictured) warned that tax settings cannot be changed in isolation from rental market pressures.
“If property investors pull back or consider selling, that has real implications for rental prices, as fewer investment properties means fewer homes available to rent, which can push rents higher,” Burgess said.
He noted that some investors may respond by lifting rents or delaying sales to protect their after-tax returns.
Burgess added: “It also raises questions about whether these changes will genuinely improve housing affordability.”
For first-home buyers, any easing in competition from investors could be offset by lending serviceability requirements and the rising costs of homeownership.
Industry groups behind the modelling also caution that tighter tax rules could make it harder to meet the National Housing Accord goal of 1.2 million new homes over five years, given investors help fund a large share of new construction.
Investor reactions are not uniform across Australia, with the survey showing South Australia and Queensland have the highest sensitivity to CGT changes, while Western Australia investors appear most reactive to negative gearing caps.
“The research suggests some investors may scale back or shift away from property towards other asset classes, but it remains to be seen how material the impact would be in practice,” Burgess said.
Get the hottest and freshest property and mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
