{"id":2062,"date":"2026-06-09T09:36:16","date_gmt":"2026-06-08T23:36:16","guid":{"rendered":"https:\/\/www.bantacs.com.au\/Jblog\/?p=2062"},"modified":"2026-06-10T12:29:26","modified_gmt":"2026-06-10T02:29:26","slug":"a-quick-budget-fact-sheet-for-residential-property-investors","status":"publish","type":"post","link":"https:\/\/www.bantacs.com.au\/Jblog\/a-quick-budget-fact-sheet-for-residential-property-investors\/","title":{"rendered":"A Quick Budget Fact Sheet for Residential Property Investors"},"content":{"rendered":"
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Download PDF<\/a><\/p>\n\n\n\n

      The most important message is there is nothing in the proposed legislation that suggests you should off load your existing residential rental property.<\/p>\n\n\n\n

Negative Gearing<\/strong><\/h2>\n\n\n\n

     Residential properties purchased after 12th<\/sup> May, 2026 will not be able to offset their rental losses against other income such as wages after 1st<\/sup> July, 2027, unless it is a new build.   <\/p>\n\n\n\n

      This means you should think twice about selling a property you already own, for two reasons.  Firstly, that there are fewer buyers in the market now, for established properties, so prices are likely to have dropped.  Secondly, the property you now hold can continue to be negatively geared so more beneficial than an established property you might buy in the future.  Not to mention the buying and selling costs. <\/p>\n\n\n\n

       Note that if you have properties in your portfolio that are positively geared you can offset losses from a residential property purchased after 12th<\/sup> May, 2026 against the positive rental income.  Maybe all the more reason to keep your pre 12th<\/sup> May, 2026 property as you can negatively gear it now and when it does become positive you can purchase another established property, maybe at a bargain price and offset the losses.<\/p>\n\n\n\n

      This is just one of the many ways this budget misses its mark.  Well established property investors can continue to negative gear because they will have some positively geared properties to absorb the loss.  It is only punishing new first time landlords.<\/p>\n\n\n\n

       In fact, having a positive for tax purposes residential rental property portfolio may put you in the perfect position to snap up a bargain now because you can absorb those losses.  Note if you are thinking of snapping up a bargain anyway the loss that you can\u2019t offset can be saved up and used when the property becomes profitable or you make a residential capital gain. <\/p>\n\n\n\n

       It should be noted that commercial property and shares can still be negatively geared.  Further, if you purchased your home before 12th<\/sup> May, 2026 and it later becomes a rental it will be entitled to be negatively geared.<\/p>\n\n\n\n

       The following two screenshots show what the removal of negative gearing on residential properties has done to the cost of holding a rental property.  This property purchased before the budget would cost you $80.55 a week to hold.  If purchased after 12th<\/sup> May, 2026 it will cost you $255 per week to hold.   If you would like to do some what ifs with your own figures the calculator is available here https:\/\/www.bantacs.com.au\/shop-2\/property-cash-flow-calculator\/<\/a>  <\/p>\n\n\n\n

Pre Budget<\/strong><\/h3>\n\n\n\n
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Established Residential Property Purchased after Budget<\/strong><\/h3>\n\n\n\n
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New\u00a0 Builds<\/strong><\/h2>\n\n\n\n

      Newly built residential properties are in a unique position, they can be negatively geared and entitled to the 50% CGT discount without the 30% minimum CGT tax rate.  It is expected that demand for new builds will increase, pushing prices up.   Be careful to budget for the lead time on construction.   Also consider new builds are less likely to be located in well established areas.<\/p>\n\n\n\n

      What constitutes a new build has not yet been legally defined.  The following summary is from the Treasury website. <\/p>\n\n\n\n

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     Possibly there is a market opportunity in buying and established home in an established area in the currently depressed market, knocking it down and building a duplex thus qualifying as a new build.   Of course there is a lot to consider in such a project.  For the tax considerations read https:\/\/www.bantacs.com.au\/Jblog\/knockdown-and-rebuild-your-home-or-a-duplex-tips-and-traps\/#more-2007<\/a><\/p>\n\n\n\n

How the Capital Gains Tax will work<\/strong><\/h2>\n\n\n\n

      For all investments other than new residential properties, any capital gains made over and above the market value as at 1st<\/sup> July, 2027 or after purchase date if purchased after 1st<\/sup> July, 2027, will be taxed at a minimum tax rate of 30%.  The gain will be calculated after allowing for indexing of the cost base for inflation but there will be no 50% CGT discount.    Note the 30% minimum tax rate will not apply to recipients of an income tested Centrelink payment and capital gains do not affect age pension entitlement.<\/p>\n\n\n\n

       The government\u2019s intent is to discourage people from waiting until they retire and are only receiving tax free superannuation income before they sell the property thus making the most of the lower income tax brackets.  But let\u2019s look at just how much the minimum 30% tax will cost if you have no other income.  Afterall once income reaches $45,000 it is in the 30% tax bracket anyway.<\/p>\n\n\n\n

$45,000 x 30% = $13,500<\/p>\n\n\n\n

$45,000 – $18,200 = $26,800 x 15% = $4,020<\/p>\n\n\n\n

Difference is $9,480 extra tax due to the 30% minimum tax rate but if it is a big gain giving you a total taxable income of $227,000 then your average tax rate will be 30% anyway so no difference in tax payable whether the minimum tax rate applied or not.  Though of course the 50% CGT discount not applying may make a huge difference, depending on the CPI. <\/p>\n\n\n\n

      The crazy thing about this supposed budget for the workers is that the minimum 30% tax rate is only going to hurt those on a low income.    If they really wanted to even up the tax playing field they would be taxing superannuation income streams over $80,000 as it is at $80,000 that the tax savings on superannuation exceed the cost of the single age pension and taxpayers are subsidising wealthy superannuants more than age pensioners. <\/p>\n\n\n\n

What Now for Property Investors?<\/strong><\/h2>\n\n\n\n

      Not going to predict the future here other than to suggest you consider the following points:<\/p>\n\n\n\n