Negative Gearing Changes Explained for Perth Property Owners

If you own an investment property, or you’re thinking about purchasing one, chances are you’ve seen headlines surrounding the Federal Budget’s proposed changes to negative gearing and Capital Gains Tax.

While the tax reforms are not due to take effect until July 2027, they are already prompting plenty of questions from Perth investors.

At Keevers Group, we’re starting to see investors asking:

• Should I buy before the changes begin?
• Will established homes become less attractive?
• Could rents increase if investor demand slows?
• Will Perth be affected differently to the eastern states?

Here’s a simple breakdown of what’s been proposed, and what it could mean locally.

What Has Actually Been Proposed?

The Federal Budget announced two major Australian property market tax changes:

• Negative gearing would be limited to newly built homes from 1 July 2027
• The current 50% Capital Gains Tax discount for established investment properties would be replaced with an inflation-indexed model

Importantly, existing investment properties would be “grandfathered”, meaning current owners could continue operating under the existing rules.

There is also currently a proposed grace period until 1 July 2027 for investors purchasing before the changes begin.

What Is Negative Gearing, in Simple Terms?

Negative gearing happens when the costs of owning an investment property are higher than the rental income it generates.

For example:

• Mortgage repayments and expenses = $1,000 per week
• Rental income = $800 per week

That $200 shortfall can currently be deducted from an investor’s taxable income.

Historically, this has encouraged investment into the property market, particularly in growth-focused markets where investors are banking on long-term capital growth rather than immediate cash flow.

Why Perth Investors May Be Affected Differently

Perth’s property market operates quite differently to Sydney and Melbourne.

Compared to eastern states, Perth has traditionally offered:

• Higher rental yields
• Lower median purchase prices
• Strong population growth
• Tight rental supply
• Greater focus on cash flow alongside capital growth

That means many WA investors already prioritise rental returns and long-term fundamentals, not just tax benefits.

For some investors, the proposed changes may influence future purchasing decisions. But for others, Perth’s relatively strong rental conditions may continue to make property investment attractive regardless of tax settings.

Established Homes vs New Builds

One of the biggest proposed shifts is likely to be where investor demand goes.

Under the proposed changes:

• New builds would retain negative gearing benefits
• Established homes would lose access to those tax advantages for future investors after July 2027

This could encourage more investors toward:

• House-and-land packages
• Off-the-plan apartments
• Outer growth corridors

However, tax incentives alone don’t guarantee a good investment.

Location, rental demand, quality of construction, ongoing maintenance costs and long-term buyer appeal still matter just as much.

We may also see investors continue favouring established homes in tightly held coastal or lifestyle suburbs where supply remains limited.

Could Rental Supply Become an Issue?

One of the biggest conversations surrounding the proposed changes is rental supply.

According to the Federal Budget overview, around 83% of renters currently rent from private investors.

If fewer investors purchase established properties in future, the long-term concern becomes:

• Where will rental stock come from?
• Will enough new homes actually be built?
• Will rental supply end up concentrated too far from employment hubs and lifestyle areas?

This is especially relevant in Perth, where rental vacancy rates remain extremely tight in many established suburbs.

While grandfathering provisions reduce the likelihood of a sudden investor sell-off, the longer-term effects on rental supply are still uncertain.

Are Investors Already Changing Their Plans?

While the proposed changes are still some time away, we are already seeing Perth investors starting to explore their options.

Some are considering:

• Purchasing before July 2027
• Exploring new build opportunities
• Reviewing long-term portfolio strategy
• Reassessing cash flow versus growth priorities

Others are simply waiting to see how the market responds before making decisions.

As always, every investor’s circumstances are different and tax policy is only one piece of the puzzle.

The Bigger Picture for Perth Property

At the end of the day, strong property markets are still driven by fundamentals:

• Supply and demand
• Population growth
• Employment
• Infrastructure
• Lifestyle appeal
• Rental demand

Tax settings can influence investor behaviour, but they don’t completely override market fundamentals.

Perth’s affordability relative to other capital cities, combined with ongoing rental pressure, continues to keep many investors focused on the WA market.