Even with global events currently impacting consumer confidence, there is still significant discussion around proposed changes to Australia’s Capital Gains Tax (CGT) discount for property investors.

If you’re not aware, the federal government recently tasked budget committees with investigating the impacts of reducing (or even removing) the current capital gains discount applied to the sale of investment properties.

To simplify the current landscape, discussions are centred on whether to reduce the existing 50% discount to either 33% or 25%, or remove it altogether. These conversations appear to be gaining momentum, in part because there has been little, if any, opposition or community pushback, potentially indicating broader political support for change.

There is strong evidence that since its introduction in the late 1990s, the CGT discount has contributed to a significant increase in property investment across Australia. However, many would argue that this has now contributed to a point where the barriers to home ownership have become too high for many Australians.

While it’s true that home ownership has always presented challenges, most commentators now agree it is more difficult than ever and for many, increasingly out of reach. So, what impact could changes to the capital gains discount have?

In simple terms, the goal would be to reduce the appeal of property as an investment vehicle.

While housing supply remains the largest factor contributing to affordability issues, local and state governments have struggled to adequately address these constraints. As a result, attention has turned to the demand side of the equation.

The theory is that by reducing investor incentives, fewer people will choose to invest in property. This, in turn, should ease demand, thereby placing downward pressure on prices.

Put simply: when fewer investors are competing in the market, there will be greater opportunity for owner-occupiers – particularly first-home buyers – to enter the market.

How will this impact you?

That depends on your position.

If you haven’t purchased your first property, this could be a positive development. At a time when many buyers feel locked out of the market, these changes could help restore accessibility and renew the possibility of achieving the “Great Australian Dream.”

If you’re an owner-occupier planning to buy and sell, the Capital Gains Tax changes will not apply. Additionally, the market variations driven by the tax changes will likely have minimal impact. Historically, those transacting within the same market are more focused on their “changeover cost”: the difference between their sale and purchase. Because both sides of the transaction are influenced by the same market conditions, the net impact is often relatively neutral.

For property investors, however, the implications could be more significant.

If legislative changes to the CGT discount are introduced, the key question will revolve around “grandfathering.” That is, whether the changes apply only to future purchases or also to existing investments.

If the changes are grandfathered, the impact will be limited to future investments, with current investments unaffected.

However, if the changes are applied to existing investment properties, this could trigger a short-term increase in listings as investors reassess their positions. In this scenario, we could see a temporary shift in both supply and demand, potentially placing immediate downward pressure on prices.

At this stage, it’s important to remember that all of the above remains hypothetical. The current conversation is driven by commentary and speculation rather than confirmed policy.

We hope this article has helped you understand what may lie ahead. Here at Johnson Real Estate, we take our role as property professionals seriously, monitoring market influences to provide information that helps with making confident, well-informed decisions.

Whether you’re considering buying or selling in the future, we’re always here to discuss your plans and help develop the most appropriate strategy to achieve your goals.

As always, feel free to reach out to us at any time.