To our valued tenants,
Last night, the Federal Government announced some of the most significant changes to Australia’s property tax environment in decades.
This will mean different things for different people, including our tenants, who will naturally be curious about how the changes may affect the place that they choose to call home.
So what has changed?
Negative gearing (the ability to offset losses on a rental property against other income – i.e. salary) for residential property will be limited to new builds, with existing arrangements grandfathered for properties held prior to Budget night. The Government has also announced changes to Capital Gains Tax (CGT) calculations from 1 July 2027.
First up, across Australia we know that only 48% of rental properties are negatively geared, so there’s a 52% chance this change will have no impact on your landlord at all.
Perhaps the other key thing for you to know as a tenant, is that existing rental properties retain their previous taxation status. If they are currently negatively gearing your rental property, they can continue to do so
Noting that every landlord’s position is different, the impact of the Capital Gains Tax legislation is difficult to forecast, however, what we do know is that the existing regime will apply up until 1 July 2027, and there is an indexation from that point forward. Importantly the changes to CGT apply to all asset classes (ie including shares), so an investor will still need to invest their money somewhere. We believe this will limit the number of investors who choose to sell their investment property, and offer ongoing security of tenure for the vast majority of our tenants.
So why the change?
These changes have come about because the government is looking to benefit home buyers at the expense of investors. This is not new. First Home Buyers already benefit from the incentives the government has in place, and indeed most of the competition for property for sale below $1million in Canberra is from First Home Buyers, not investors.
However, what this legislation will do is make it less appealing for new landlords to enter the investment market. Ultimately this could reduce the amount of available rental property for tenants. Given we currently have a very low vacancy rate of ~1% in the ACT, there is already high demand from tenants for property, so it may become more expensive to rent property in the future. Ray White continues to advocate for tenants in our feedback to the government on this matter in particular.
We know that many, not all, of our tenants aspire to own their own home, and that these changes may bring some of those conversations forward for you. I want you to know that we are here to support you with your decision making. We will be working to increase our communication to you as and when new facts become available.
We also have a large mortgage broking team available to talk to you about your options. Loanmarket works hand in glove with our sales and rentals team, and at any time we can introduce you to one of the brokers for an obligation free discussion about your options. If you prefer to contact them directly, you can do so here
You will find attached the analysis from our Chief Economist Nerida Conisbee if you want to dive deeper, but I wanted to write to you to let you know that these changes have the potential to impact everyone in the property ecosystem, and that we see our job to support you to make educated decisions in the times ahead.
Please feel free to reach out if you have any questions.