As Australia approaches the Federal Election on 3 May, property investors are closely watching the policy commitments from the major parties. Both Labor and the Liberal Party have pledged to maintain the current negative gearing and capital gains tax settings if elected, providing a sense of stability for investors. However, with the possibility of a minority government on the horizon, questions remain about the future of these policies. In this market update, we explore what this means for property investors and the rental market.

Understanding Key Tax Policies

Negative gearing allows investors to offset losses from their rental properties against other income, reducing their tax liability. Capital gains tax is levied on the profit made when selling a property for more than its purchase price. These policies have long supported property investment, making it an attractive option for many Australians.

The Vital Role of Investors

In Western Australia, private investors supply approximately 85% of rental properties. According to Australian Taxation Office data, around 71% of these investors own just one property, and 19% own two. These are not corporate giants but everyday individuals providing an essential service to the rental market. Without their participation, the supply of rental homes would fall far short of demand.

How Policy Changes Influence Investors

A recent REIWA housing survey reveals just how sensitive investors are to shifts in policy:

• 83% of current investors would consider selling their investment property if property taxes were altered.
• 74% would be influenced by changes to legislation.
  For potential investors:
• 82% would be deterred by changes to property taxes.
• 62% would hesitate due to legislative changes.
  This data highlights the need for consistent, investment-friendly policies to sustain confidence in the market.

A Lesson from History: The COVID Rental Legislation

The impact of policy on investor behavior was clear during the COVID-19 pandemic. In 2020-21, legislation banned rent increases and imposed an eviction moratorium to support tenants after a prolonged market downturn. While the market showed signs of recovery in early 2020, these measures—though well-meaning—were deeply unpopular with investors. Combined with other factors, they triggered a significant exit of investors, shrinking rental supply and fueling the rental crisis that followed.

Political Landscape and Potential Risks

The commitment from both major parties to preserve current tax settings is reassuring for investors. However, the Greens’ proposal to abolish negative gearing and halve the capital gains tax discount remains a point of contention. While Labor and Liberal have ruled out these changes, REIWA President Suzanne Brown cautions, “If a minority government is formed, there’s a real possibility these policies could be revisited as part of post-election negotiations.” This uncertainty underscores the importance of staying informed as the election unfolds.

The Call for Sensible Reform

With a national rental crisis underway, any changes to tax settings or tenancy laws must be carefully considered. “Until there’s another way to provide enough rental properties to meet demand, we need balanced and stable policy settings that support existing investors and encourage new investment,” says Ms. Brown. Policies that drive investors away risk worsening the current shortage of rental homes.

Our Commitment to You

At Holdsworth Real Estate, we recognize the critical role investors play in the property market. We’re dedicated to advocating for policies that ensure a thriving rental sector. Along with REIWA, we work to ensure national policies reflect the unique needs of Western Australia’s market.

Navigating the Future

As the election nears, our team is here to keep you updated on any developments that could affect your investments. Whether you’re a seasoned investor or exploring opportunities to enter the market, we invite you to reach out to discuss how these policies might impact your strategy.

Conclusion

The Federal Election is a pivotal moment for property investors. The promise from Labor and the Liberal Party to maintain current tax settings offers stability, but the potential for a minority government introduces an element of uncertainty. At Holdsworth Real Estate, we’re committed to keeping you informed and advocating for a market that supports both investors and renters alike. For personalized advice or to learn more, contact our team today—we’re here to help you navigate this evolving landscape.