No ‘deadline to beat’: Expert cautions against panic-selling investment properties as tax changes loom

Financial experts are urging Australians not to panic as confusion grows over major changes to negative gearing and capital gains tax, with many property investors mistakenly believing they need to sell before the new rules take effect.

Under the proposed reforms, negative gearing will be restricted to newly built investment properties from 2027-2028 in an effort to boost housing supply.

WATCH THE VIDEO ABOVE: Property investors urged not to panic sell over tax changes

Capital gains tax will also get a shake-up with the 50 per cent discount replaced by inflation-adjusted indexation from July 2027.

But despite panic from investors, money expert and investment adviser Rachel Cole told Sunrise the changes generally do not mean an immediate sale is needed.

“A tax change alone isn’t enough to justify a sale because a good investment doesn’t automatically turn into a bad one overnight when tax law changes,” Cole said.

Cole said many investors mistakenly believe they need to sell before the changes take effect.

In reality, gains accrued before July 2027 will continue to receive the current tax treatment, while gains made after that date will be assessed under the new rules.

“Lots of people think there is a deadline upcoming, which is not the case,” she said.

“From that date looking forward, all the capital gains will be calculated under the new method, but there’s not some sort of deadline to beat.”

She described it as more of a split calculation method, rather than a complete change.

“It’s not whether you sell before or after. It’s the gains before or the gains after.”

As consumer confidence becomes increasingly rattled, some homeowners are even considering selling their primary residences to rent instead.

Cole assured owner-occupiers they will always retain the tax exemption with CGT not applying to the family home.

“Your personal decisions should relate to your circumstance. Can you continue to afford to hold onto that mortgage rather than what you think the market is going to do?” she said.

“It’s a bit of a fool’s game to try to predict what’s going to happen because we never know the top and we never know the bottom.”

Cole recommended investors get a property valuation done before July 1, 2027 to simplify future tax calculations.

“The best thing to remember with property is it’s not about whether or not there are short-term fluctuations to the value,” she said.

“It is much more about your ability to hold on and pay that mortgage over the long term because property investment really needs to be a long-term game if you’re going to make some good money there.”