Budget Put the Kibosh on Your Investment Plans? Here's Why It's Not Game Over
- Property Planning Australia
- 3 hours ago
- 3 min read
If the negative gearing and capital gains tax changes have thrown a spanner in the works of your investment plans, you're not alone.
A lot of our clients have felt the same thing over the past few months.
Some big assumptions about what property investing looks like have shifted, and it's completely understandable to feel like the goal posts have moved.
Here's the good news.
Property investing is still absolutely possible.
It just requires a bit more thought and strategy than it used to.
Three things matter more than ever right now
1. Risk management and a solid cash buffer
Under the new rules, you can no longer claim rental losses against your PAYG income the way you once could.
That means your ability to comfortably absorb a shortfall between rent and expenses matters more than it ever has.
A healthy cash buffer isn't a nice to have anymore, it's essential.
2. Genuine clarity on your cash flow
Before taking the next step, you need to be very clear on what your current surplus cash flow actually looks like, and what you can genuinely afford to put towards holding an investment property each month.
We'd also encourage you to factor in an interest rate buffer above where rates sit today, in case of further increases, so you're planning for a realistic worst case rather than best case scenario.
The great news is that our purpose-built software works this out for you as a client, so you can throw away the spreadsheets.
3. Asset selection
With the old playbook no longer applying the same way, the type of property you buy deserves a fresh look.
Newer builds offer an immediate negative gearing benefit, but may not deliver the same capital growth as an established property in a strong location unless it is genuinely bespoke and not replicable, for example a property with views that can never be built out.
Units and apartments can offer higher rental yields, which helps with cash flow, but historically haven't always delivered the same capital growth as houses.
Established properties now come with a deferred negative gearing benefit rather than an immediate one, meaning losses are carried forward rather than offsetting your income each year. However, both rental growth and capital growth are likely to have more upside, because you're not paying a premium for either at the point of purchase.
Established property has often been the stronger performer for long-term capital growth, and if investor demand for established property cools off as a result of these changes, there may be a genuine opportunity to buy better quality established assets, and in particular units, with less competition than before.
The negative gearing opportunity most homeowners aren’t aware of!
One more thing worth knowing.
If you already owned your own home before the cut off date, you can convert it into an investment property later and still access traditional negative gearing on it.
But this only works if the right mortgage strategy is in place now, well before you make that move, so it's worth having that conversation sooner rather than later.
For more information on this opportunity, read our blog: The Negative Gearing Loophole And What Savvy Homeowners Should Do Now
Where to from here
None of this means the door has closed on property investing.
It means the path looks a little different, and getting the right strategy and structure in place now matters more than ever.
This is exactly why we built our industry-leading software, a one-of-a-kind tool that lets you model different scenarios and see the real numbers behind your next move before you commit to anything.
If you'd like to talk through what's possible for your situation, reach out to us.
We're here to help you find the way forward.
Disclaimer - General information only. This blog is based on Budget announcements as currently released and is not financial, tax or legal advice. Final legislation may differ from the proposals outlined here. Please seek licensed credit and tax advice before acting on any of the information in this article.
