With the Federal Budget approaching this May, the debate surrounding the Capital Gains Tax (CGT) discount has officially reignited. As your local real estate partners, we want to cut through the noise and explain what these potential changes could actually mean for our WA property market.
The Current Landscape
Currently, if you hold an investment property for more than 12 months, you receive a 50% discount on the capital gains tax owed when you sell. This has long been a cornerstone for Australians building wealth through property.
However, there is growing speculation that the government may:
- Reduce the discount from 50% to 25%.
- Apply this change specifically to housing, leaving shares and crypto untouched.
- Grandfather existing properties, meaning the change might only apply to new purchases made after a certain date.
How Will This Affect the Market?
While the debate often centers on housing affordability, the actual impact on the ground—especially here in Western Australia—might not be what you’d expect.
| Key Question | Potential Impact |
| Will prices drop? | Reports suggest a potential drop of only 1%. For most buyers, this is negligible and unlikely to change their ability to enter the market. |
| Will supply increase? | If changes apply to existing properties, we might see a short-term “dash to sell.” However, given the insatiable demand in WA, these homes would likely be snapped up instantly, leaving no lasting increase in stock. |
| Will competition ease? | Investors might become more cautious, but with Western Australia’s current growth trajectory, competition between owner-occupiers remains at record highs. |
The “Renter Ripple Effect”
Perhaps the most concerning aspect of this proposal is the impact on the rental market. If the CGT discount is slashed, property becomes a less attractive vehicle for long-term wealth compared to other assets.
- Decreased Investment: If fewer people buy investment properties, the pool of available rentals shrinks.
- Upward Pressure on Rents: In an already constrained WA market, a drop in supply naturally leads to lower vacancy rates and higher weekly rents.
- The “Winner”: Ultimately, reducing the discount appears to benefit the government’s bottom line through increased tax revenue, rather than providing tangible relief for renters or first-home buyers.
The Silver Lining
The “small positive” in the current discussion is the suggestion that any changes would not be retrospective. If you currently own an investment property, your 50% discount would likely be protected. This should prevent a mass exodus of landlords from the market and provide some stability for existing tenancies.
The Bottom Line: While the headlines are bold, the fundamentals of the WA market—low supply and high demand—remain the primary drivers of value. We will be watching the May Budget closely to see how these proposals evolve.
If you’re interesting in finding out how much your property is worth, contact our team today to have a chat!
