Capital gains tax and negative gearing are back in the conversation for Australian property investors.
Following the Federal Budget, many NSW landlords are asking what the announced changes could mean for their current investment property, future purchasing plans and long-term strategy.
The first thing to know is this: a Budget announcement does not automatically mean you need to sell, stop investing or make rushed decisions.
It does mean it is worth reviewing your position properly.
For property investors, tax settings are only one part of the picture. A strong investment property still needs to be the right asset, in the right market, with reliable rental demand, clear records, a practical lease strategy and proactive property management.
If you want a broader breakdown of the Budget changes, complete the form to receive Leah Jay’s Federal Budget Guide for NSW property investors.
This article is general information only. It should not be relied on as financial, legal, investment or tax advice. Always speak with your accountant, financial adviser, solicitor, broker or tax professional before making decisions about buying, selling, holding or restructuring an investment property.
Contents
What Is Capital Gains Tax?
Capital gains tax, commonly known as CGT, may apply when you sell an asset for more than you paid for it.
For property investors, CGT may apply when an investment property is sold and a capital gain is made.
A capital gain is generally the difference between the property’s cost base and the sale price, after relevant adjustments. Your cost base may include more than the original purchase price. Depending on your circumstances, it may include certain acquisition costs, improvement costs and other amounts.
This is why records matter.
If you bought an investment property years ago, renovated it, refinanced it or made major improvements, your accountant may need clear records to understand your position properly.
What Is Changing With CGT?
Under the announced Budget changes, the Government intends to replace the existing 50% CGT discount with a different system based on inflation.
At the moment, individuals who hold an investment asset for more than 12 months may generally be eligible for a 50% CGT discount.
Under the new approach, the 50% discount is expected to be replaced with cost base indexation, which adjusts the cost base for inflation.
The Government has also announced a minimum tax rate on capital gains. The changes are expected to apply from 1 July 2027 and only to gains that accrue after that date.
In simple terms:
- The current 50% CGT discount is expected to be replaced
- Inflation may be taken into account through cost base indexation
- A minimum tax rate on capital gains has been announced
- The changes are expected to apply from 1 July 2027
- The changes are expected to apply only to gains accruing after 1 July 2027
- Investors in new builds may have different options available, depending on the final rules
The practical takeaway is not “sell now”.
It is this: your future exit strategy may need more attention.
What Is Cost Base Indexation?
Cost base indexation means the purchase cost of an asset is adjusted for inflation when calculating the capital gain.
Instead of automatically discounting the gain by 50%, the system adjusts the cost base to recognise that part of the gain may reflect inflation rather than real growth.
For long-term property investors, this may make record keeping and timing more important.
You may need stronger records around:
- Purchase price
- Acquisition costs
- Capital improvements
- Renovation costs
- Major repairs
- Loan records
- Depreciation schedules
- Tax statements
- EOFY owner statements
- Property valuations
- Sale timing
- Ownership structure
- Professional advice received
If you plan to hold an investment property for the long term, do not wait until the year you sell to organise your records.
What Is Negative Gearing?
Negative gearing occurs when the costs of owning an investment property are higher than the income the property produces.
For example, if loan interest, maintenance, rates, insurance and other deductible expenses exceed the rental income, the property may produce a tax loss.
Under current arrangements, many investors have been able to offset those losses against other income, such as salary and wages.
The announced Budget changes limit how this may work for future purchases.
What Is Changing With Negative Gearing?
The negative gearing changes are expected to treat existing investment properties and future purchases differently.
For NSW landlords, the key points to understand are:
- Existing investment properties held before Budget night are expected to be protected from the negative gearing changes
- Future purchases of new builds may still access negative gearing
- Future purchases of established residential properties may be treated differently
- Losses may need to be carried forward rather than offset against salary or wages
- The rules are expected to apply from 1 July 2027, with grandfathering based on Budget night ownership
For existing landlords, the impact may be limited depending on when the property was purchased and how the final rules are implemented.
For future buyers, the type of property purchased may matter more. New builds and established properties may be treated differently under the proposed framework.
This is where professional advice becomes important.
Your accountant, broker or financial adviser can help you understand how the rules may apply to your circumstances, borrowing position and future plans.
What Existing NSW Landlords Should Review
If you already own an investment property, the most important point is not to panic.
The announced changes do not automatically mean your property has become a poor asset. They also do not mean every investor needs to sell.
They do mean landlords should review whether the property still supports their strategy.
Areas to review include:
- Current rental income
- Current market rent
- Lease status
- Vacancy history
- Maintenance needs
- Holding costs
- Loan structure
- Insurance
- Land tax exposure
- Depreciation schedule
- CGT records
- EOFY records
- Property condition
- Property manager performance
- Potential future sale timing
- Long-term plans
A buy-and-hold strategy only works if the asset is worth holding.
That means reviewing both the capital growth potential and the income performance of the property.
With experience across the Hunter property market, Leah Jay’s Investment Services team can help landlords review whether their property is still working as it should, from rental performance and tenancy appeal to maintenance priorities, renovation opportunities and long-term investment fit.
Before spending thousands on upgrades, it is worth understanding which improvements are likely to support stronger rental returns and which may not deliver the outcome you expect. If you are reviewing your current investment property, book an Investment Services consultation to discuss the rental and operational side of your asset.
What Future Property Buyers Should Consider
For investors considering another purchase, the Budget changes may affect the decision-making process.
Future buyers may need to think more carefully about whether they purchase an established property or a new build.
They may also need to review whether the investment still makes sense without the same negative gearing treatment that was previously available for established properties.
Before buying, investors may wish to consider:
- Whether the property is new or established
- Expected rental yield
- Expected capital growth
- Holding costs
- Cash flow without full negative gearing benefits
- Vacancy risk
- Local rental demand
- Land tax position
- Long-term exit strategy
- CGT treatment on future sale
- Advice from an accountant, broker and financial adviser
Buying quickly just to preserve a tax outcome can be risky if the property itself is not right.
Tax should not make a bad property good.
A strong investment decision should still be based on location, demand, yield, growth potential, affordability and long-term strategy.
Should Landlords Sell Before The CGT Changes?
This is one of the biggest questions investors may ask.
The answer depends entirely on personal circumstances.
Selling an investment property can trigger tax consequences, transaction costs and future opportunity costs. It may also remove a long-term asset from your portfolio.
Before making a decision, landlords may wish to consider:
- Original investment strategy
- Current property value
- Unrealised capital gain
- Likely CGT position
- Rental income
- Future growth potential
- Vacancy risk
- Maintenance risk
- Land tax exposure
- Selling costs
- Alternative investment options
- Personal income position
- Professional advice
You should not sell purely because of a headline.
A better first step is to understand the property’s current position, then speak with your accountant or adviser about the potential tax implications.
Should Landlords Buy Before The Changes?
Some investors may consider buying before the new rules fully apply.
Again, this needs professional advice.
Buying quickly to beat a rule change can create more risk than reward if the property itself does not stack up.
Before buying, ask:
- Does the property fit your portfolio?
- Is it established or new?
- Is the property a strong long-term asset?
- What is the expected rental yield?
- What are the likely holding costs?
- Can you afford the property without relying on tax deductions?
- What is the long-term capital growth outlook?
- What is the vacancy risk?
- Is there strong tenant demand?
- Have you spoken with your accountant and broker?
Tax can influence a decision. It should not be the entire decision.
Why Rental Performance Matters More
If tax settings become less generous for some investors, rental performance becomes even more important.
Your investment property needs to work harder as an income-producing asset.
That means landlords should review whether their rent is aligned with the market and whether their property is being managed proactively.
A small weekly rental gap can add up quickly over a year. If holding costs increase and tax benefits become less available in future, landlords may need to be more disciplined about rental income, lease timing and property presentation.
Questions worth asking include:
- Is the current rent still aligned with the local market?
- When was the last rental appraisal completed?
- Has the property been under-rented?
- Is the tenant on a fixed-term lease or periodic agreement?
- When can rent next be reviewed?
- Is the property competitive against similar rentals?
- Are there improvements that could support a stronger rental return?
- Is the property experiencing avoidable vacancy?
- Is the property manager reviewing rent proactively?
If you are unsure where your property sits, requesting an updated rental appraisal can help you understand current market conditions.
Why Property Management Matters More
When tax settings change, operational performance becomes more important.
A property manager should not simply collect rent. They should help you protect the asset, improve visibility and make better decisions over time.
Good property management can help with:
- Reviewing rent
- Reducing vacancy
- Managing lease renewals
- Screening tenants
- Handling arrears
- Coordinating maintenance
- Protecting property condition
- Managing compliance
- Supporting long-term tenant retention
- Providing EOFY documentation
- Keeping records organised
- Advising on practical improvements
If CGT and negative gearing changes have made you rethink your investment property, Leah Jay’s property management team can help you review the rental and operational side of your asset.
Questions To Ask Your Accountant
Because the Budget changes are tax-related, your accountant should be part of the conversation.
Questions may include:
- How could the CGT changes affect my property?
- How will gains before and after 1 July 2027 be treated?
- Does my ownership structure still make sense?
- What records should I keep?
- How do the negative gearing changes affect me?
- Am I grandfathered under the existing negative gearing rules?
- Do I need a property valuation?
- Could land tax be relevant to my position?
- Should I review my depreciation schedule?
- How would the rules apply if I buy a new build?
- How would the rules apply if I buy another property?
- What should I prepare before EOFY?
A general Budget update cannot tell you what to do. Your accountant can help you understand the tax implications based on your specific circumstances.
Questions To Ask Your Property Manager
Your accountant can help with tax.
Your property manager can help with the performance of the asset.
You need both perspectives.
Questions to ask your property manager may include:
- Is my current rent aligned with the market?
- When should my rent next be reviewed?
- Is my property competitive against similar rentals?
- Is there strong tenant demand in my suburb?
- Are there improvements that could support better rent or tenant retention?
- Is my lease strategy appropriate?
- Has the tenant indicated whether they want to renew?
- Are there maintenance issues I should plan for?
- Have routine inspections identified any concerns?
- How many days was the property vacant this year?
- How quickly are comparable properties leasing?
- What should I be planning for over the next 6 to 12 months?
These questions can help you understand the rental performance, lease strategy and practical management of your investment property.
Avoid Reacting To Headlines
After a major Budget announcement, it can be tempting to make quick decisions.
But property decisions should not be made out of panic.
Avoid:
- Selling purely because of headlines
- Buying quickly just to beat rule changes
- Assuming every property is affected in the same way
- Treating tax benefits as the whole investment case
- Ignoring rental performance
- Letting leases roll without strategy
- Failing to review current rent
- Treating property management as just rent collection
The stronger approach is to review your property, gather your records and speak with the right professionals before making decisions.
Key Takeaways
- CGT and negative gearing changes should be treated as a reason to review, not react. NSW landlords do not necessarily need to sell, stop investing or rush into a new purchase because of Budget headlines.
- Long-term investors should keep stronger records. Purchase details, improvements, renovations, valuations, depreciation schedules, EOFY statements and selling costs may all help your accountant assess your position later.
- Existing landlords should review whether their property is still worth holding. That means looking at rental income, market rent, lease status, vacancy history, property condition, maintenance needs and long-term investment fit.
- Renovation and improvement decisions should be made carefully. Before spending thousands on upgrades, landlords should understand which changes may support stronger rental return, better tenant appeal and a clearer return on investment.
- Tax settings should not be the whole investment strategy. Rental performance, tenant demand, lease strategy, property management and professional advice all play a role in deciding whether to hold, improve, buy or sell.
Review Before You React
CGT and negative gearing changes may affect how some property investors think about buying, holding and selling property.
But they do not remove the fundamentals of good property investment.
Quality assets still matter.
Rental performance still matters.
Strong records still matter.
Professional advice still matters.
So does proactive property management.
If you own an investment property in NSW, now is a sensible time to review where things stand.
Understand your rent.
Understand your lease.
Understand your property condition.
Understand your management strategy.
Then speak with your accountant about the tax implications.
For a practical starting point, complete the form to receive Leah Jay’s free Federal Budget Guide for NSW property investors.
This guide is general information only and should not be relied on as financial, legal, investment or tax advice.
Get Leah Jay’s Free Federal Budget Guide
Complete the form to receive Leah Jay’s free guide and review the key areas NSW landlords may wish to consider, including CGT, negative gearing, rental performance, lease strategy and property management.