10/05/2026
Negative Gearing and CGT reform
What’s Actually Happening, And What It Means For HMO clients and investors
There’s a lot of noise circulating right now about negative gearing being “dead from 12 May.”
I’m not a fan of negative gearing but I want to cut through it with facts……
Here’s the reality as of today:
Nothing has been legislated. The federal budget drops Tuesday 13 May and that’s when we’ll know what’s actually been decided.
Anyone telling you it’s confirmed is guessing.
What Treasury is modelling:
Two proposals are on the table:
1. A cap on negative gearing at 2 investment properties per person
2. A reduction in the CGT discount from 50% down to 33%
And critically, this applies to individuals, trusts, and companies.
Don’t assume a trust structure gets you around it. The detail is still being worked through but the intent is clear.
What does the CGT change actually mean in dollars?
Let’s say you earn $150k a year. You bought a property for $500k and sell it for $850k, a $350k gain.
Under current rules with the 50% CGT discount, you’d pay roughly $82,000 in capital gains tax.
Under the proposed 33% discount, that becomes roughly $110,000.
That’s about $28,000 more tax on that one sale.
Is that the end of the world?
No. You factor it in as a cost of the deal when you’re selling, the same way you factor in agent fees and legal costs.
It doesn’t change whether property is a good investment.
It just changes one number in your exit modelling.
What about HMOs?
HMOs are built for cashflow, not tax deductions.
They’re designed to be positive from day one, so the negative gearing conversation largely doesn’t apply to this strategy.
What this policy shift actually does is push the broader investor market toward new build product at a time when new build HMOs are already the strongest option on the table.
Cashflow positive, strong depreciation, and well positioned regardless of what Canberra decides.
We’ve also recently reopened our buyer’s agency to help investors buy established properties and convert them into HMOs, which remains a solid strategy worth exploring, even though new build is in my opinion, a better option.
My take:
Sit tight until Wednesday.
Once the budget lands Tuesday night I’ll be jumping on a Facebook Live and recording a podcast episode so we can go through exactly what it means for cashflow positive property investors here in WA.
