These changes affect negative gearing provisions and capital gains tax treatment, while a new AUD 2.0 billion infrastructure investment aims to unlock up to 65,000 new homes.
From the budget date forward, the ability to offset rental property losses against other income will be removed for new investments in existing properties, with a grace period to July 2027. However, the critical carve-out for new-build dwellings allows investors purchasing newly constructed properties to continue accessing existing tax settings, including negative gearing and the 50% CGT discount option.
These reforms will drive substantial shifts in investor behavior. A significant proportion of new investor activity will likely target the new-build sector, particularly off-plan investment options. This pivot from existing stock to new-build properties may increase the supply of established dwellings entering the market, potentially reducing competitive pressure for first home buyers.
For developers, understanding and responding to the investor segment motivated by new-build tax advantages will be essential. The infrastructure funding unlocking constrained sites presents additional opportunities to bring supply to market where investor demand may be strongest.
