Is rentvesting dead? Tax reform to push people away from popular strategy

Wednesday, 20 May 2026 05:43

Last week's changes to the capital gains tax discount and negative gearing will likely shift people away from rentvesting.

The government's proposed tax reform could kill rentvesting for younger generations, an expert has warned.

Renvesting is a popular strategy typically used by younger people to rent in an area that suits their lifestyle while owning an investment property in a cheaper area.

But last week's changes to the capital gains tax discount and negative gearing will likely shift people away from rentvesting, according to Australian Property Institute chief economist Dr Sherman Chan.

Cars parked in driveway next to For Lease sign

"As with all forms of property investment, people will now think twice before getting into rentvesting," she said.

Chan said the rentvesting strategy will soon end up costing people more as investors lose profit to higher taxes, and the expected decrease in investment properties puts upward pressure on rents.

"Overall, the appeal of the rentvesting strategy will be greatly reduced from a return-on-investment perspective," she said.

Under the proposed new rules, negative gearing will no longer be applied to homes purchased after 7.30pm on May 12.

The capital gains tax discount on properties bought after that same time will also be adjusted to inflation and then subjected to a less generous 30 per cent minimum rate.

While Treasury forecasts these changes will help 75,000 people over 10 years into the housing market, it also expects 35,000 fewer new homes to be built in that time.

Purchases of new builds are exempt from both policies.

Treasurer Jim Chalmers speaks with the media on arrival to Australian Parliament House ahead of handing down the 2026 budget on May 12, 2026 in Canberra, Australia.

A new report has found that Perth is the least affordable capital city to rent in across Australia.

Chan said the changes are to encourage investors towards new builds, boosting supply, and first-home buyers into existing homes.

The government has fielded questions about how its changes, which have not yet passed parliament, will affect rentvestors.

Treasurer Jim Chalmers told the ABC yesterday that rentvestors can continue to access the generous tax benefits on a home they already own or if they purchase a new build.

He added that the changes would only affect a small number of young people who have negatively geared a property.

"The closest we get to an accurate number here is about 5 per cent of people under 35 have got rental income, but that includes owner‑occupiers, it includes people who are positively and negatively geared," he said.

"So, well under 5 per cent of people under 35 are doing this.

"They can continue to do this if they invest in a new build, and they can continue to do it if they already own that home before budget night."

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