11 hours ago
The anticipation of major tax reform for property investors is expected to drive a "mad rush" of landlords trying to get into the market before the new financial year. The upcoming federal budget is tipped to rewrite the rules for the capital gains tax (CGT) discount – and a major assumption could be about to fuel a buying frenzy.
There is a widespread belief among Australian landlords that any changes to make the CGT discount less generous will be grandfathered in, and only apply to future purchases. If that holds true, there will be a big potential payoff for buying sooner rather than later.
Sydney landlord Rohit Gehlot has 13 properties in his portfolio and is considering adding more before any changes are introduced, he told Yahoo Finance.
He is also the Director of buyers agency InvestorAid and says some clients are bringing purchases forward "before everyone else rushes in".
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Treasury has reportedly modelled various changes to the CGT discount for property investors, including reducing it from 50 per cent to 33 per cent, or even lower. In recent weeks, calls have been growing louder for the federal government to follow through on much-needed reforms.
"If this gets announced, I am very, very confident there is going to be a massive, mad rush to get in before the first of July," Gehlot said.
"People just want to grab an asset, because these assets would still be eligible as per current capital gain discount."
He told Yahoo Finance some landlords weren't waiting for budget night for confirmation of any changes.
"Some smart ones are already bringing their purchases forward," he said. "As we speak, we are buying for a few clients because of this news. They are really wanting to get active before everyone else rushes."
Gehlot admits the changing behaviour rests on the big assumption that recently purchased properties won't be impacted by any reforms, but he is confident that is "most likely to be the case" because otherwise, he said, it would be "unfair" for investors who bought homes years ago based on the expectation of a 50 per cent discount.
However analysis from the parliamentary budget office shows excluding all existing investments would raise very little revenue for the government in the near term. It has also reportedly looked at applying a less generous discount to already held properties.
