Last Updated: October 13, 2026
By Veyron Wealth Group | Updated October 2026
Is an Investment Property Still Worth It?
Property investment has long been a popular way for Australians to build wealth. Leverage, rental income and long-term capital growth have made residential property an important part of many investors’ financial plans.
However, Australia’s new capital gains tax (CGT) and negative gearing rules change the way some investors need to assess an investment property’s potential returns.
The Federal Government has replaced the 50% CGT discount for eligible assets with an inflation-adjusted cost base and introduced a minimum tax rate of 30% on real capital gains accruing from 1 July 2027. It has also restricted negative gearing for certain established residential properties purchased after 7:30 pm AEST on 12 May 2026.
These changes do not affect every property investor in the same way. Existing investments made before the negative gearing cutoff retain their existing treatment while held, and eligible new-build investments have different rules.
For investors considering a property purchase, the question is no longer simply whether property prices will rise. It is whether the expected capital growth, rental income and tax treatment justify the deposit, borrowing costs, ongoing expenses and risks.
This guide explains the new rules, the costs of property ownership and how to compare property with other investment options.
1. Understanding the New Negative Gearing Rules
Negative gearing occurs when the deductible expenses associated with an investment property exceed its rental income. These expenses can include loan interest, property management fees, insurance, rates and eligible repairs.
Previously, an eligible rental loss could generally be deducted against other taxable income, such as salary or business income.
The new rules restrict this treatment for certain residential properties acquired after the government’s announcement.
What has changed?
Existing investments: Residential investment properties acquired before 12 May 2026 retain their existing negative gearing treatment while held.
Established properties acquired after the cutoff: From the 2027–28 income year, rental losses generally cannot be deducted against salary or other unrelated income. They can be offset against eligible residential property income, with unused losses carried forward for future use.
New-build properties: Eligible new residential properties remain able to access negative gearing, allowing qualifying losses to be deducted against other income under the applicable rules.
These distinctions matter when comparing an established property with a newly constructed home or apartment. Eligibility depends on the acquisition date, property status and applicable transitional provisions.
Investors should not assume that purchasing an established property after the cutoff will provide the same immediate tax benefit as purchasing a qualifying new build.
How does this affect cash flow?
Consider an investor earning $150,000 annually who buys an established investment property after the cutoff.
The property generates $30,000 in rent but has $40,000 in deductible expenses, creating a $10,000 rental loss.
Under the previous rules, that loss could generally reduce the investor’s taxable income from other sources. Under the new rules, the investor generally cannot use the loss against salary. Instead, it may be carried forward to offset eligible residential property income in a future year.
The economic loss has not disappeared. The timing and availability of the tax benefit have changed.
This can increase the amount of cash an investor needs to contribute to support the property, particularly during the early years of ownership.
2. Understanding the New Capital Gains Tax Rules
Capital gains tax applies when an investment property is sold for more than its cost base, after accounting for relevant adjustments.
Previously, eligible individuals and trusts that held an asset for at least 12 months could generally access a 50% CGT discount.
Under the new rules, the 50% discount is being replaced for relevant gains accruing from 1 July 2027 by an inflation-adjusted cost base and a minimum tax rate of 30% on real capital gains.
In practical terms, the new system is designed to tax gains above inflation rather than automatically discounting half the capital gain.
What happens to existing properties?
The changes are prospective, but investors need to distinguish between gains accrued before and after the transition date.
- Capital gains accruing up to 30 June 2027 retain access to the existing CGT treatment, including the 50% discount where eligible.
- Gains accruing from 1 July 2027 are generally subject to the new indexation-based rules and minimum tax, subject to applicable exemptions and transitional provisions.
- Eligible new-build investments can choose between the existing 50% discount and the new arrangements when sold, subject to the relevant rules.
The precise calculation will depend on the asset, its acquisition date, its cost base, the timing of the gain and the applicable transition rules. Investors should not assume that the entire gain on a property purchased years earlier will automatically receive one uniform tax treatment.
Does this make property less attractive?
Potentially, particularly for investors who previously relied on the 50% CGT discount to improve their after-tax return.
However, the impact will differ between investors. The outcome depends on the property’s capital growth, inflation, holding period, ownership structure and marginal tax position.
The new rules do not eliminate the possibility of attractive property returns. They make it more important to assess the after-tax result rather than relying on headline capital growth.
3. Investment Property Pros and Cons
The case for property investment
Property offers several potential advantages.
Leverage: Borrowing allows an investor to control an asset worth substantially more than their initial deposit. If a $500,000 property increases in value by 5%, the capital gain is $25,000 before costs and tax. That represents 25% of a $100,000 deposit, ignoring acquisition costs, loan repayments and other capital invested.
Leverage also magnifies losses. If the property’s value falls, the investor remains responsible for the debt.
Rental income: Rent can help fund ownership expenses and loan interest. Over time, rental income may increase, although vacancies and changing market conditions can affect the result.
Potential capital growth: Property prices may appreciate over the long term, but growth is not guaranteed and varies considerably by location and property type.
Tangible ownership: Some investors prefer owning a physical asset that they can inspect, maintain and improve.
The drawbacks and risks
Property also has disadvantages that should not be overlooked.
- Negative cash flow: Rent may not cover interest, rates, insurance, management fees and maintenance.
- Concentration risk: One property can represent a substantial proportion of an investor’s wealth.
- Illiquidity: Selling takes time and involves transaction costs.
- Interest rate risk: Higher borrowing costs can materially reduce cash flow.
- Tenant and vacancy risk: Rental income can stop temporarily while expenses continue.
- Unexpected repairs: Structural issues, plumbing, roofing and other maintenance can be expensive.
- Tax uncertainty: Changes in tax rules can affect after-tax returns and investment decisions.
A property that appears attractive based on its purchase price and expected capital growth may deliver a much lower return once all costs and taxes are included.
4. Capital Growth, Rental Income and Long-Term Returns
The financial outcome from an investment property depends on more than the increase in its market value.
Suppose an investor buys a property for $500,000 and sells it ten years later for $750,000.
The nominal capital gain is $250,000 before selling costs and tax. However, the investor’s overall result also depends on the rental income received, loan interest, maintenance, vacancy periods, purchase costs and the capital required to support the property.
Inflation also affects purchasing power. A $250,000 nominal gain over ten years is not equivalent to a $250,000 gain in today’s dollars.
The new CGT rules make this distinction particularly relevant because the tax calculation for gains accruing from 1 July 2027 is based on an inflation-adjusted cost base, subject to the applicable minimum tax and other provisions.
Investors should model several outcomes rather than assume that historical property growth will continue.
For example:
- What if capital growth averages 2% rather than 5%?
- What if interest rates rise by 1–2 percentage points?
- What if the property is vacant for several weeks?
- What if major repairs are required?
- What if the investor needs to sell earlier than planned?
A sound investment should remain financially manageable under less favourable conditions.
5. Understanding Investment Property Rental Yield
Rental yield measures the annual rent relative to the property’s value.
Gross rental yield is calculated by dividing annual rent by the purchase price or current property value.
For example, a property worth $500,000 that rents for $24,000 annually has a gross rental yield of 4.8%.
However, gross yield does not account for expenses.
Net rental yield considers rental income after relevant operating expenses, such as property management, rates, insurance, maintenance and vacancy losses. The calculation should clearly distinguish operating costs from financing costs and tax.
A property with a 4.8% gross yield may generate a much lower net return once expenses are included. If loan interest is substantial, the property may require ongoing financial support from the owner.
A high rental yield does not automatically make a property a good investment. Location, tenant demand, capital growth prospects, property condition and borrowing costs also matter.
Under the new negative gearing rules, the acquisition of an established property may have a different cash-flow and tax outcome from an eligible new build, even where their rental yields are similar.
6. Investment Property vs Shares
Property is not the only way to build wealth. A diversified share portfolio may provide an alternative, or complement, to direct property ownership.
| Consideration | Investment property | Diversified share portfolio |
|---|---|---|
| Initial capital | Usually substantial | Can start with smaller amounts |
| Leverage | Common, but increases risk | Possible through specialised borrowing (high risk), but not necessary |
| Income | Rental income | Dividends and distributions |
| Liquidity | Generally low | Generally high for listed investments |
| Diversification | Often concentrated in one asset | Can spread investments across companies and markets |
| Ongoing work | Tenants, repairs and administration | Generally less day-to-day management |
| Transaction costs | Often substantial | Usually lower, depending on the investment |
| Tax treatment | Rental income, deductible expenses and CGT rules | Dividends, distributions and CGT rules |
Shares also carry risks. Market values can fall sharply, dividends can be reduced and investment returns are not guaranteed.
The comparison should be based on expected after-tax returns, risk, liquidity, investment timeframe and the amount of capital required.
It is also important to compare like with like. A property purchased with substantial borrowing should not be compared with an unleveraged share portfolio without accounting for the debt, interest and additional cash invested.
For investors considering both options, a diversified investment strategy may reduce reliance on the performance of a single property or local housing market.
7. The Real Cost of Property Ownership
The purchase price is only the beginning.
Upfront costs
These may include:
- Stamp duty or transfer duty, depending on the state or territory.
- Conveyancing and legal costs.
- Building and pest inspections.
- Loan establishment and valuation fees.
- Other acquisition costs.
Ongoing costs
Investors should budget for:
- Loan interest and applicable loan fees.
- Council rates and water charges.
- Building and landlord insurance.
- Property management fees.
- Maintenance and repairs.
- Vacancy periods and tenant turnover.
- Body corporate or strata levies, where applicable.
Some expenses may be tax-deductible, but a deduction does not make an expense free. The investor still bears the underlying cost.
For example, spending $5,000 on repairs is still a $5,000 cash expense, even if the expense qualifies for a tax deduction.
The key question is whether the property’s expected rental income and capital growth justify the total costs and risks.
8. Using an Investment Property Calculator
Before purchasing a property, model the likely outcome under several scenarios.
A useful calculator should include:
- Purchase price and acquisition costs.
- Deposit and loan amount.
- Interest rate and repayment structure.
- Annual rent and vacancy assumptions.
- Rates, insurance, management and maintenance costs.
- Expected capital growth and inflation.
- Tax treatment under the relevant negative gearing rules.
- CGT treatment on disposal.
- Selling costs and the intended holding period.
It should estimate the total cash required to support the property, the value of the investment at sale and the estimated after-tax return.
For an established property purchased after the negative gearing cutoff, the model should not automatically assume that rental losses can be deducted against salary from the 2027–28 income year.
Similarly, the CGT calculation should distinguish gains accrued before and after 1 July 2027 where the transitional rules require it.
Run a conservative scenario as well as a more optimistic one. If the investment only appears attractive under favourable assumptions, consider whether the additional risk is justified.
9. How Should Investors Approach Property Under the New Rules?
The new rules make it more important to consider the investment as a whole rather than focusing on a single tax benefit.
Before committing to an investment property, consider the following questions.
Can you comfortably fund the property? Allow for higher interest rates, vacancies and unexpected expenses without compromising your other financial commitments.
Does the property have sound investment fundamentals? Assess rental demand, location, property condition, potential maintenance and realistic capital growth prospects.
What is the after-tax return? Model rental income, all ownership costs and the applicable CGT rules.
How concentrated is your wealth? Consider whether investing a large amount in one property leaves sufficient liquidity and diversification elsewhere.
What are the alternatives? Compare property with shares, superannuation and other investment options based on your circumstances and objectives.
Does the strategy fit your timeframe? Property is generally a long-term investment, and transaction costs can make short holding periods expensive.
The tax rules are important, but they should not be the sole reason for buying or avoiding an investment.
Conclusion: Is an Investment Property Worth It?
An investment property can still form part of a successful wealth-building strategy in Australia; however, the new CGT and negative gearing rules mean investors need to pay closer attention to acquisition dates, property eligibility, cash flow and after-tax returns.
Existing investments retain their existing negative gearing treatment while held, subject to the applicable rules. For future purchases, the distinction between established properties and eligible new builds can materially affect how rental losses are treated.
The replacement of the 50% CGT discount for relevant gains accruing from 1 July 2027 also changes the way investors should estimate the tax payable when selling.
Ultimately, the right decision depends on the property’s fundamentals, your borrowing capacity, your tolerance for risk and how the investment fits within your broader financial plan.
At Veyron Wealth Group, we help clients consider property alongside other investment strategies, with a focus on cash flow, diversification and long-term financial objectives.
Book a consultation with Veyron Wealth Group to discuss how property investment may fit within your broader wealth strategy.
General Disclaimer
This article is general information only and does not constitute personal financial, investment, legal or tax advice. Tax laws and their application depend on individual circumstances and may change. The discussion of CGT and negative gearing is a general summary and is not a substitute for advice on the legislation and transitional rules relevant to a particular investment.
Before making a property or investment decision, consider whether the information is appropriate for your circumstances and seek advice from a suitably qualified professional where required. Veyron Wealth Group does not provide legal or tax-agent services through this article.
Past performance and historical property growth are not reliable indicators of future performance. Investment returns are not guaranteed.
Frequently Asked Questions
Is it still worth buying an investment property in Australia?
It can be, depending on the purchase price, rental yield, expected capital growth, borrowing costs and your financial position. The new tax rules make it particularly important to model cash flow and after-tax returns. Eligible new builds and existing properties purchased before the negative gearing cutoff have different treatment from established properties acquired after the cutoff.
What are the new negative gearing rules?
From the 2027–28 income year, rental losses on established residential properties acquired after 7:30 pm AEST on 12 May 2026 generally cannot be deducted against salary or unrelated income. Eligible losses can be offset against residential property income, with unused amounts carried forward. Qualifying new builds and existing investments covered by the transitional rules retain different treatment.
Has the 50% CGT discount been removed?
The 50% CGT discount has been replaced for relevant capital gains accruing from 1 July 2027 by an inflation-adjusted cost base and a minimum 30% tax rate on real capital gains. Gains accrued before the transition date retain access to the previous treatment where eligible. Qualifying new-build investments can choose between the old discount and the new arrangements, subject to the rules.
Should I buy an established property or a new build?
There is no universal answer. Established properties may offer different locations, rental demand and purchase prices, while eligible new builds can retain access to the new negative gearing treatment and a choice of CGT arrangements. Compare the property’s total cost, quality, rental prospects, expected growth, financing and tax treatment before deciding.
Is property better than shares?
Neither is automatically better. Property offers potential rental income and leverage but usually involves higher transaction costs, less liquidity and greater concentration risk. Shares offer easier diversification and liquidity but are exposed to market volatility. Compare the investments on an after-tax basis, allowing for risk, debt and the amount of capital required.
Should tax benefits determine whether I buy a property?
No. Tax benefits can improve an investment’s after-tax outcome, but they do not turn an otherwise poor investment into a good one. Assess the underlying property, cash flow, financing costs, potential growth and risks first, then account for the applicable tax treatment.
