Here’s what the federal budget will mean for Murraylands property owners
Raine and Horne Murraylands’ Michael Cox and Casey DeMichele explain.
This sponsored story is brought to you by Raine and Horne Murraylands.
Don’t panic – that’s the advice from your local real estate experts in the wake of last month’s federal budget.
Yes, Treasurer Jim Chalmers has promised to shake up Australia’s property market with changes to the capital gains tax discount and negative gearing.
But there has been a lot of confusion in the community about what those changes will mean.
In reality, most property owners will not be affected at all.
Here to explain are Raine and Horne Murraylands’ Michael Cox and Casey DeMichele.
What is happening with the capital gains tax discount?
When you make a profit by selling something, that profit would normally be taxed at the same rate as your ordinary income.
However, if the thing you sell is an investment property, and you’ve owned it for at least 12 months, you’re entitled to a 50% discount on that tax bill – that’s the capital gains tax discount.
If you sell an investment property for a $250,000 profit, only $125,000 of that income is taxable.
That’s the current rule, and – importantly – that’s the way your tax bill will continue to be calculated for any profits made up until July 1, 2027.
You will not lose access to the tax discount you have already banked, whether you sell next year or 20 years from now.
It’s important to remember, too, that the changes only apply to investment properties, not to the family home.
“Out of the whole pool of people that already own real estate, there’s only a percentage of them that this is going to impact,” Michael says.
“For people who own the family home, or who have already got an investment property, this is not anything – it’s only (changing) for people who plan to go into that investment in future.”
The new tax rules will apply to any profits you make after July 1 next year, as a share of your total investment profit.
From that date on, only “real” capital gains – that is, the profit you make over and above the rate of inflation – will be taxable.
But a minimum tax rate of 30% will apply to those gains, even if you’re in the lowest income bracket, unless you happen to be a government pensioner or payment recipient.
What’s happening with negative gearing?
When the cost of owning an investment property is greater than the income you receive from it, you can claim the difference as a tax deduction – that’s called negative gearing.
For example, if you rent an investment property out for $20,000 per year, but your mortgage repayments, insurance and so on cost $30,000 per year, you can reduce your taxable income by $10,000 that year.
That’s the current rule, and it will continue to apply for all investment properties purchased on or before May 12, 2026.
If you owned an investment property prior to that date, nothing will change for you.
And again, if you only own the family home, this won’t affect you, either.
But going forward, investors will only be able to claim that negative gearing tax deduction on newly built homes, not established homes.
The incentive is intended to encourage investors to support housing construction, while freeing up more established homes for first home buyers.
“There will still be competition for properties, but (owner-occupiers) will be competing against buyers similar to themselves instead of interstate buyers,” Michael says.
“(The changes) will give more opportunity to those people.”
Murraylands real estate is still a solid investment
Ultimately, Michael and Casey say, you shouldn’t believe any of the doom and gloom you might have heard about the property market over the past few weeks.
“People will still invest in this area because there is still a good return – values are still increasing over time,” Casey says.
“(Increases) may not be as dramatic and fast, but the point of purchasing an investment property is to see its value increase over a longer period.”
For investors, several upcoming developments in the Murraylands are still sure to be highly desirable.
The real estate market is not entering a downturn, Michael says – but it may return to something closer to its “normal”, pre-COVID state.
“It has been exceptionally good for such a long period, but this transition will take it back to where it probably should be,” he says.
“The market was getting to a price point where it had to start to slow a little.”
Properties might sell in weeks, instead of days, but they will still sell.
As the market evolves, it will be more important than ever to rely on real estate agents who have been in the game for long enough to know how to handle it.
With more than 20 years’ experience between them, Michael and Casey have seen slower periods before, and know how to make sure you get the best possible outcome even when prices aren’t rising at a record pace.
So don’t panic – get your advice from the real estate experts you can trust.
- More information: Visit www.raineandhorne.com.au/murraylands, call 8532 3833 or drop into Raine and Horne Murraylands’ office at 4 Seventh Street, Murray Bridge. For the tax changes, visit www.ato.gov.au.
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Peri Strathearn
