If you've been following the news lately, you've probably heard the words "negative gearing" and "capital gains tax" more than usual. That's because Treasurer Jim Chalmers has flagged what he calls an "ambitious" budget — and changes to these two long-standing property tax settings are firmly on the table.
As your mortgage broker, we want to cut through the noise. No political spin. No fear-mongering. Just a clear, balanced breakdown of what's being proposed, how it could affect you, and what smart moves you can make right now.
📚 First, a Quick Refresher
Before we dive into the proposed changes, let's make sure we're speaking the same language.
Negative Gearing
When your investment property costs more to own (mortgage interest, maintenance, council rates, insurance) than the rent it earns, you're "negatively geared." Under current rules, you can deduct that loss from your salary income — which lowers your overall tax bill.
Think of it like this: the government is sharing the cost of holding your investment property today, in exchange for you providing rental housing to the market.
The CGT Discount
When you sell an investment property you've held for more than 12 months, only half of the profit (capital gain) gets added to your taxable income. So if you bought for $600,000 and sold for $900,000, only $150,000 of the $300,000 gain is taxed — not the full amount.
Together, these two mechanisms have been the backbone of Australian property investment strategy for over 25 years.
🔍 What's Actually Being Proposed?
Nothing has been legislated yet. But based on Treasury modelling, Senate inquiry findings, and public statements from the Treasurer, here's what's on the table:
1. Reducing the CGT Discount
The most likely change. Treasury is modelling a reduction from the current 50% discount down to 33% — meaning two-thirds of your capital gain would be taxable instead of half.
Key details emerging:
- The change would likely target residential investment property only — shares, managed funds, and other assets may keep the full 50% discount
- Existing properties would likely be grandfathered — meaning if you already own an investment property, the current 50% discount would still apply when you eventually sell
- The new rules would apply to properties purchased after the commencement date (likely 1 July 2026 or budget night itself, May 12)
- Senator David Pocock has proposed a compromise: a 25% discount for new-build homes held for more than three years, to encourage construction
What this means in real numbers:
Let's say you're a medical professional on a $350,000 salary and you sell an investment property with a $400,000 capital gain:
| Current (50% discount) | Proposed (33% discount) | |
|---|---|---|
| Taxable gain | $200,000 | $268,000 |
| Approximate additional tax at top marginal rate (47%) | $94,000 | $125,960 |
| Difference | ~$31,960 more tax |
That's roughly $32,000 extra tax on a single property sale. For professionals with multiple investment properties, the numbers compound quickly.
2. Changes to Negative Gearing
Less imminent than CGT reform, but still in the conversation. Two main models are being discussed:
Option A — Cap it: Limit negative gearing to a maximum of one or two investment properties per person. The ACTU has backed this approach. If you own three investment properties, you could only claim rental losses against your salary on two of them.
Option B — Ring-fence it: Investment losses could only be offset against investment income (rent, dividends), not against your wages. This is the model proposed by independent MP Allegra Spender and is standard practice in most comparable economies. Losses that exceed your investment income would be carried forward to offset future investment gains — not lost, just delayed.
Government sources suggest negative gearing changes are less likely in this budget than a CGT discount cut, but could follow in a future budget. Treasury appears to be taking a staged approach — testing the political waters first.
⚖️ Both Sides of the Argument
We believe you deserve the full picture, not just the headlines.
The Case for Reform
- The CGT discount is estimated to cost the federal budget $23 billion per year in foregone revenue — and is projected to reach $247 billion over the next decade
- Roughly 59% of the benefit flows to the top 1% of taxpayers, while Australians under 35 receive about 4%
- Home ownership among 30–34 year olds has dropped from 57% to 50% since 2019
- Bank lending to investors has grown by over 1,000% since 1994, while lending to first home buyers has grown by 520%
- A Greens-led Senate inquiry concluded that the CGT discount, combined with negative gearing, has "skewed the ownership of housing away from owner-occupiers and towards investors"
- NSW Treasury has publicly backed reform, noting the discount "increases after-tax returns for investors, enabling them to bid more aggressively"
The Case Against Reform
- Four major housing industry bodies (HIA, Master Builders, Property Council, REIA) commissioned modelling showing reforms could reduce dwelling starts by nearly 46,000 homes by 2029
- The Coalition argues the real issue is housing supply, not tax settings — "the supply failure is driving the housing crisis"
- Former Treasury modelling suggests reducing the CGT discount to 33% would lower property prices by only 1.5–2% — a modest impact that may not meaningfully help first home buyers
- The Property Council warns that reduced investor incentives could lead to fewer rental properties and higher rents
- The Property Investment Professionals of Australia (PIPA) found 35% of investors would stop investing if the discount were cut to 25%
- Some economists argue the 50% discount isn't actually as generous as it appears — when adjusted for inflation and quality improvements, real house price growth has been closer to 2% per year
The Bottom Line
Both sides have valid points. What's clear is that supply remains the fundamental issue — and tax changes alone won't solve Australia's housing affordability challenge. But the political and fiscal pressure for reform has reached a level we haven't seen before.
😮💨 Don't Panic — Here's Why
If you're feeling anxious, take a breath. A few important things to keep in mind:
1. Grandfathering is almost certain Any changes would very likely only apply to properties purchased after the new rules take effect. Your existing investments should retain the current 50% CGT discount.
2. Property fundamentals haven't changed Population growth, migration, household formation, and chronic undersupply continue to support property values. Interest rates, employment, and income growth have a far larger effect on property prices than CGT policy.
3. This isn't 2019 Labor lost the 2019 election partly because their proposed changes were sweeping and retrospective. This time, the government is taking a more targeted, grandfathered approach. The reforms being modelled are narrower and more measured.
4. Investment property still works Even with a 33% CGT discount, property remains one of the most tax-effective wealth-building tools available to Australians — particularly when you factor in leverage, rental income, depreciation, and long-term capital growth.
5. For medical professionals, your borrowing power remains strong Regardless of tax changes, lenders still recognise the earning stability of medical professionals. Specialised lending policies — like those available through Wity — continue to offer significant advantages for doctors, dentists, and allied health professionals looking to build wealth through property.
✅ 5 Smart Moves to Make Before May 12
Whether reforms land in this budget or a future one, the direction of travel is clear. Here's how to get on the front foot:
1. Know Your Numbers
Review the cost base of every investment property you own — including stamp duty, legal fees, and capital improvements. If CGT rules change, clean records from day one will save you thousands.
2. Stress-Test Your Portfolio
Model your investment strategy under a 33% CGT discount scenario. How does it affect your after-tax return? Does it change your hold-or-sell timing? A good broker can help you run these numbers.
3. Consider Your Timing
If you've been thinking about selling a property with large unrealised gains, the current 50% CGT discount may represent the best after-tax outcome you'll ever achieve on that asset. But don't rush — selling purely for tax reasons without considering the broader market is rarely wise.
4. Review Your Structure
If you hold property in a family trust or through a company, check how potential CGT changes might affect those structures. Trusts currently qualify for the 50% discount — it's unclear whether any reduction would extend to trusts or apply only to individuals.
5. Talk to Your Broker and Accountant — Together
Tax changes don't happen in isolation. Your mortgage strategy, tax position, superannuation, and investment goals all need to be considered as one integrated picture. Now is the time to have that conversation.
🏥 What This Means for Medical Professionals
If you're a doctor, dentist, or allied health professional, these potential changes are especially relevant.
Many medical professionals are high-income earners in the top tax bracket who have built wealth through negatively geared investment properties — using current-year tax deductions to fund long-term capital growth. If both the CGT discount and negative gearing rules are tightened, the after-tax economics of this strategy shift meaningfully.
But here's the flip side: if investor demand softens, there may be less competition at auctions — which could actually benefit medical professionals looking to buy their first home or upgrade.
Either way, now is the time to review your lending structure and ensure your borrowing capacity is optimised. Through Wity, our medical professional clients have access to exclusive lending policies — including up to 95% LVR with no Lenders Mortgage Insurance for doctors and dentists — that remain unchanged regardless of what happens in the budget.
📞 Book a Pre-Budget Strategy Session
The May 12 budget is six weeks away. Whether you're a first home buyer wondering if this opens a window, or an experienced investor reviewing your portfolio, we're here to help you navigate what comes next.
Book a free strategy session with the Wity team and we'll:
- Review your current lending structure and portfolio
- Model the impact of proposed CGT and negative gearing changes on your specific situation
- Identify opportunities — whether that's refinancing, restructuring, or timing your next purchase
- Make sure your borrowing capacity is maximised under our exclusive medico lending policies
👉 Book Your Free Strategy Session
Disclaimer: This article provides general information only and does not constitute personal financial, tax, or legal advice. The proposed changes discussed are based on publicly available information as at April 2026 and have not been legislated. We recommend consulting with a qualified tax advisor or accountant for advice specific to your circumstances. Wity Pty Ltd holds Australian Credit Licence 531736.
