The Federal Government’s changes to negative gearing and Capital Gains Tax (CGT) mark one of the most significant shifts to the Australian property investment landscape in years. With the legislation now passed, investors around the country are re-examining their strategies, cash flow expectations and long-term goals — and Perth is no exception.
While some implementation details are still being finalised, the reforms are already shaping investor sentiment nationwide. If you’re weighing up an investment property purchase, here’s what you need to know and how it could affect your next move.
What Has Changed?
The reforms, announced in the Federal Budget on 12 May, bring significant amendments to how negative gearing and CGT apply to residential property investors.
From 1 July 2027:
- Negative gearing on residential investment properties will be limited to new builds only.
- The current 50% CGT discount will be replaced with cost base indexation and a 30% minimum tax rate on capital gains.
Properties purchased before 7:30pm AEST on 12 May 2026 will be grandfathered under the existing negative gearing rules, while the CGT changes will only apply to gains accrued after 1 July 2027.
Full details of the Federal Budget measures are available here.
How Has the Market Responded?
These reforms have landed during an already challenging period for the property market. Rising interest rates, affordability pressures, geopolitical uncertainty and cost-of-living strain had already begun cooling buyer activity well before the Budget.
Since the announcement, investor confidence has softened further, with auction clearance rates declining in several markets.
A survey of more than 1,400 Australian investors found that over 80% now consider residential property investment less attractive following the reforms. Notably, more than half indicated they plan to hold their existing investments and wait to see how the legislative landscape unfolds rather than sell.
What Strategies Are Investors Considering?
It’s still early days, but clear patterns are already emerging in how investors are adapting.
Increased Interest in New Builds
Since negative gearing benefits will only apply to new construction from July 2027, many investors are shifting their focus toward newly built houses and apartments to preserve access to these tax benefits.
Data from Oliver Hume shows investor demand for new-build properties is on the rise, particularly in Victoria.
Industry commentators suggest this shift could eventually tighten the supply of established rental properties in some middle-ring suburbs, adding further upward pressure on rents.
Holding Existing Investment Properties
Many investors who bought before the reforms took effect are choosing to hold rather than sell.
That’s because grandfathered properties retain access to the current negative gearing arrangements.
For these investors, established assets may become increasingly valuable simply because of the tax treatment they continue to enjoy under the grandfathering provisions — a meaningful point of difference compared with new purchases made after the cut-off.
Greater Focus on Cash Flow
Historically, many investors have leaned on negative gearing to offset short-term losses against their taxable income.
Under the new rules, buyers of established properties will no longer have access to the same immediate tax advantages.
As a result, rental yield and cash flow are becoming far more central to how investors assess a property’s suitability.
Investors are now placing greater weight on:
- Strong rental returns
- Sustainable long-term growth
- Properties with a realistic path to positive cash flow over time
- Borrowing structures that align with their broader financial objectives
What About SMSF Property Investors?
The reforms also bring important changes for Self-Managed Super Funds (SMSFs).
From 10 August 2026, SMSFs can no longer use Limited Recourse Borrowing Arrangements (LRBAs) to purchase residential property.
Existing LRBAs remain grandfathered under the current rules.
SMSFs can still purchase residential property using available cash, and borrowing arrangements remain available for eligible commercial property purchases.
Some industry experts believe this shift may drive renewed interest in commercial property within SMSF portfolios.
As always, specialist financial, legal and taxation advice should be sought before making any SMSF investment decisions.
What Does This Mean for Perth Investors?
For Perth investors, the fundamentals haven’t changed even if the tax settings have. Successful property investing still comes down to selecting the right asset, understanding cash flow, structuring your loan appropriately, and making sure the investment supports your long-term goals.
At Fox Mortgage Services, we’re already helping investors across Perth and Western Australia understand how these reforms may affect their borrowing capacity and future investment plans.
While we don’t provide tax advice, we can help you:
- Review your borrowing capacity
- Compare investment loan options across 30+ lenders
- Structure your lending to support your investment goals
- Understand repayment scenarios under different property strategies
- Assess opportunities for future portfolio growth
Looking at Your Next Investment?
The property investment landscape is changing, but opportunities still exist for investors who make informed, well-structured decisions.
If you’re considering your next investment property and want clarity on your finance options, contact Fox Mortgage Services today. We’ll help you navigate the lending side of the equation so you can move forward with confidence.
Disclaimer: The information provided is general in nature and does not take into account your personal objectives, financial situation or needs. Fox Mortgage Services recommends obtaining professional tax, legal and financial advice before making any investment decisions.