Property investors may pay less capital gains tax under Labor’s reforms, analysis suggests
Summary
Research suggests that most property investors may pay less capital gains tax under Labor’s new budget reforms, but some landlords could face higher costs due to changes in negative gearing rules. Despite this, the reforms alone do not fully explain the recent drop in investment demand, which has also been influenced by rising interest rates.Key Facts
- 53% of property investors would have paid more tax with the new system between 2008 and 2025, while 43% would have paid less.
- Negative gearing changes mean about half of landlords would have faced higher costs if the reforms applied in the past.
- Investor loan applications fell 28% in two months after the budget was announced at the Commonwealth Bank.
- The Reserve Bank governor said the reforms have significantly reduced investor activity in the housing market.
- Rising interest rates are also increasing costs for investors this year.
- Median capital gains on investment homes after costs averaged 3.3% annually, close to the inflation rate, making most gains partly taxable under the new system.
- Investors who borrow heavily or rely on rental income alone, such as retirees, may pay more tax under the reforms.
- The government says the reforms create a fairer tax system by correcting previous advantages for some investors.
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