Australia’s Housing Crisis: Proposed CGT Reforms
Australia’s housing crisis has prompted calls for tax reform to encourage more building. Recent commentary suggests that the federal government is considering changes to the capital-gains-tax (CGT) rules that would reward property developers and investors who add new homes to the market. Under the proposal, tax obligations on newly built dwellings would be reduced, while concessions on existing detached homes could be trimmed. The goal is to incentivise construction and increase supply rather than simply curb demand.
What is being proposed?
The McKell Institute has suggested a targeted CGT reform that would:
- Increase the CGT discount on new attached builds to 70 percent (up from the current 50%), providing a greater incentive to invest in medium-density housing.
- Decrease the CGT discount on existing detached dwellings to 35 percent, discouraging speculative purchases of older homes.
- Maintain the current 50 percent discount on new detached houses and grandfather all existing investments so current owners aren’t adversely affected.
Supporters estimate that the changes could deliver up to 130,000 additional homes by 2030, helping Australia meet its National Housing Accord target. By directing incentives toward the supply side, the reforms aim to ease upward pressure on prices and rents.
Potential benefits for investors
- Stronger incentives for new builds: A larger CGT discount on new attached dwellings would improve after-tax returns for investors who fund townhouses and apartments. This could make development more attractive relative to purchasing existing stock.
- Balanced portfolio opportunities: Investors may benefit from diversifying into medium-density developments that attract higher CGT discounts, while still retaining existing properties under current rules.
- Long-term market stability: By expanding housing supply, the reforms could moderate price growth and reduce volatility, creating a more sustainable investment environment.
Things to consider
- Legislative uncertainty: The proposal is still under consideration and may change during consultations. Investors should follow official announcements for final details.
- Project timelines: Building new homes takes time, and investors should factor in planning approvals, construction costs and market demand.
- Broader tax planning: Any CGT changes will interact with other tax settings, such as negative gearing and state duties. Understanding the combined effect is essential.
How Sanford Finance can help
If CGT incentives for new developments are introduced, investors will need flexible funding options to seize opportunities. Sanford Finance works with a panel of lenders that specialise in construction finance, investment loans and property development funding. We can help you assess project feasibility, structure lending to maximise after-tax returns and navigate changing tax rules.
Speak with one of our advisers to explore how potential CGT reforms could fit into your investment strategy.
Disclaimer: This information is general in nature and should not be considered tax advice. Consult a qualified tax professional for personalised guidance.
