If you’ve picked up a newspaper or scrolled through a news feed lately, you’ve likely seen the headlines. They’re screaming louder than a smoke alarm with a low battery, and they all point to the same thing: major changes to Negative Gearing and Capital Gains Tax (CGT).

At Holdsworth Real Estate, we believe in looking past the “noise” to find the signal. While nothing is set in stone, the federal budget discussions for May 2026 have put these two pillars of property investment squarely in the crosshairs.

So, what actually happens if these changes go through? Let’s pull back the curtain on the proposed reforms and what they mean for the Perth market and your portfolio.

1. Negative Gearing: The “Two-Property” Proposal

The current buzz in Canberra involves a proposal to limit negative gearing to just two properties. On paper, this is framed as a way to “level the playing field” for first-home buyers. However, history and economic reality tell a different story.

The Lesson from the 1980s

We’ve been here before. In 1985, the Hawke/Keating government famously scrapped negative gearing. The result? A rental crisis so severe that they were forced to reinstate it just two years later in 1987. During that brief window, rents in cities like Sydney and right here in Perth skyrocketed by approximately 25%.

The 2026 Reality

The context today is even more fragile than it was in the ’80s. As of April 2026, we are grappling with:

  • Critically Low Vacancy Rates: Perth is sitting at a staggering 0.5% to 0.6% vacancy rate. Finding a rental right now is already like finding a parking spot at the beach on a 40-degree day.
  • Severe Housing Shortages: We simply aren’t building enough homes to keep up with population growth.

The Equation is Simple: Less investor incentive = Fewer rental properties being bought or built = Even higher rents for tenants.

2. The Capital Gains Tax (CGT) “Lock-In” Effect

There is also serious talk about reducing the CGT discount—currently 50% for assets held over a year—down to 33%.

While some argue this would “cool” the market, the more likely outcome is a “lock-in” effect. If it costs significantly more in tax to sell a property, investors simply… won’t sell. They will hold onto their assets for longer to avoid the tax hit.

For a market like Perth, which is already starving for “stock on market,” this is a major red flag.

  • Less stock on market means more competition for the few homes available.
  • Increased competition inevitably drives prices up, the exact opposite of what “affordability” measures are supposed to achieve.

3. The Elephant in the Room: Supply

Both of these proposed changes point toward the same outcome: Less Supply. Whether it’s discouraging a mum-and-dad investor from buying a third rental or making a long-term owner hesitant to sell, the result is a tighter, more expensive market.

The core issue in Australia hasn’t changed in a decade: We need more houses. Taxing the people who provide 90% of the rental housing in this country doesn’t lay a single brick. In fact, current industry modelling suggests that removing these incentives could lead to a reduction of over 45,000 new homes being built nationwide over the next few years.

What Does This Mean for You?

Whether you’re a long-term Holdsworth client or looking to enter the Perth market, here is our take:

  1. Don’t Panic-Sell: These are proposals, not legislation. Historically, even when changes occur, “grandfathering” clauses usually protect existing investments.
  2. Focus on Fundamentals: In a low-supply environment like Yokine, Mount Hawthorn, and Tuart Hill, the demand for quality housing isn’t going anywhere. Rental yields in Perth have hit record medians of $740/week for houses this month—the underlying demand is real and robust.
  3. Stay Informed: The May 2026 Federal Budget will be the moment of truth. Between now and then, there will be plenty of political posturing.

The Bottom Line: At Holdsworth Real Estate, we’re keeping a close watch on these developments. Our mission remains the same: helping you navigate the market with clarity, whether the tax laws are changing or staying exactly as they are.

Are you wondering how these potential changes might impact the value of your specific property or investment strategy? Contact us today for a free, no-obligations chat!

Please note: This information is general in nature and does not constitute financial or tax advice. We always recommend speaking with a qualified accountant or financial planner regarding your specific circumstances.