Post-Budget Property Playbook

In this episode of the Follio Property Podcast, hosts Reece Beddall and Lachlan Delahunty are joined by returning guest, Nathan Hood to discuss the fallout of the latest federal budget changes and what they mean for Australian property investors. Nathan breaks down the shift in negative gearing dynamics, exposing how recent policy shifts unfairly impact everyday mum and dad investors rather than wealthy moguls. The discussion covers strategic tax planning, comparing the growth and gearing mechanics of property versus shares, avoiding market traps like new high-density builds and utilising advanced long-term debt strategies and main residence exemptions to minimise tax exposure safely.

Key Takeaways & Market Insights

• 70% of Negative Gearing Claims: Australian Tax Office (ATO) data shows 70% of negative gearing claims come from individuals with one negatively geared asset, with two-thirds of these investors earning $80,000 or less in taxable income.
• 15 to 19x Borrowing Leverage: Residential property can offer significantly greater leverage than shares, with investors potentially borrowing around 15 to 19 times their deposit, without the daily margin-call risks associated with share market loans.
• Capital Gains Tax (CGT) & Indexation: Proposed changes to the CGT discount and introduction of indexation could significantly affect property investment strategies, particularly for short-term gains.
• Main Residence Strategy: Main residence exemptions could become increasingly important, including subdivide-and-retain strategies that may create tax-free capital gains.
• 10 to 15 Year Debt Structuring: Post-budget tax planning is becoming a longer-term exercise, with investors needing to consider how debt is structured from day one and how deductible debt can be preserved as their portfolios evolve over the next 10 to 15 years.
• 15% to 20% Potential Corporate Tax Advantage: Business owners who can stream profits into a company may benefit from a lower initial tax rate of around 25 to 30%, compared with the 46.5% individual rate.
• Property Portfolio Restructuring: Investors may need to rethink existing portfolios by restructuring debt, refinancing properties and considering how new purchases are funded.

The Reality of Negative Gearing Claims 

Popular perception often assumes negative gearing primarily benefits wealthy property moguls. However, tax data reveals a very different picture of who relies on these provisions:

“The reality is, those with a lot of properties, you can offset the positive gearing with the negative gearing. So they’re going to be fine or they’re not going to have the debt levels… it turns out with some of the ATO data, there’s circa 70% of the negative gearing claims are individuals that have one negatively geared asset.” – Nathan Hood

“And then of that 70%, two thirds of those have taxable income of $80,000 or less… That’s the typical mum and dad. That’s a tradie, that’s someone out there just trying to get ahead in life, not on huge incomes and using property potentially as that vehicle to… set up their retirement.” – Nathan Hood

Borrowing Leverage: Property vs. Shares

When comparing real estate to equity markets, borrowing power and risk management operate under fundamental differences:

“In shares, if the market drops 20%, you get a margin call and you’re forced to sell at the bottom unless you put more cash in… Property doesn’t have a daily mark-to-market margin call. As long as you keep paying the mortgage, the bank leaves you alone, allowing you to hold through the cycle with significantly higher leverage.” – Nathan Hood

“When you look at leverage, you might put down a $50,000 deposit to buy a $500,000 or $1,000,000 property depending on the structure… You can’t get 15 to 19 times leverage in the stock market without extreme risk of total wipeout.” – Nathan Hood

Main Residence Strategy (Subdivide and Retain)

Maximising tax-free capital gains requires proactive strategies, particularly when navigating updated policy rules:

“The main residence exemption is still the holy grail of tax in Australia… It is 100% tax-free capital gains. So if you can move into a property, renovate it, or subdivide it while living there, you’re building equity in a completely tax-free environment.” – Nathan Hood

“What we’re seeing more smart investors do post-budget is the retain-and-subdivide strategy… They live in the main home to capture the tax exemption, cut off the back block or build behind, and then shift that second asset into a rental structure. You’ve essentially manufactured capital growth tax-free.” – Nathan Hood

Key Forward-Looking Priorities:

As tax rules tighten and holding costs rise, property growth is pivoting from passive market appreciation toward active value creation. In this post-budget environment, smart capital is shifting toward strategic, tax-effective development.

• Adopting Long-Term Planning: Tax planning and debt structuring must be viewed over a 10 to 15 year horizon rather than year-to-year to protect deductible debt as portfolios grow.
• Proactive Debt Restructuring: Review existing loan setups, refinance where appropriate and separate deductible investment debt from non-deductible personal debt using multi-bucket strategies.
• Pivoting Strategy: Future growth will rely on active development and corporate or trust entities rather than relying solely on passive market appreciation.

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