Pre-Budget Checklist: What Property Investors Should Review Before May

When a Treasurer uses phrases like “difficult but responsible decisions” and “sometimes hard decisions are warranted” in a pre-budget speech, property investors should pay attention.

On 24 March 2026, Treasurer Jim Chalmers delivered exactly that message, confirming what the Senate inquiry recommended just weeks earlier: changes to capital gains tax and negative gearing settings are likely coming in the May budget.

This isn’t speculation anymore. This is positioning time.

What Chalmers Actually Said

In his pre-budget speech, the Treasurer didn’t mince words. The government is “prepared to take difficult but responsible decisions to make the tax arrangements more sustainable and fairer in an effort to try and rebalance things a little bit so that people aren’t getting such a raw deal in intergenerational terms.”

Translation: expect changes that redistribute tax benefits away from property investors and towards younger Australians locked out of homeownership.

The justification is explicitly intergenerational fairness. Whether you agree with that framing or not, the direction of travel is clear.

The Industry Response: Modelling the Impact

The property and construction sector responded swiftly with commissioned modelling from Qaive and Tulipwood Economics, projecting what these changes could mean for housing supply.

According to their scenarios:

• Reducing the CGT discount from 50% to 25% (with grandfathering for existing investments) could see 12,000 fewer new homes built by 2030
• Limiting negative gearing to two properties could reduce new housing starts by 4,355 over the same period

The Housing Industry Association, Master Builders Australia, Property Council and Real Estate Institute of Australia issued a joint statement: “Investors finance up to two in every five new homes built — private rental investment is part of the solution to our housing crisis, not part of the problem.”

Their concern is legitimate. Tightening investment incentives during a supply crisis creates competing policy objectives: intergenerational fairness versus housing construction volumes.

But as an investor, the macro policy debate matters less than what you do with your portfolio in the next six weeks.

The Inflation Argument Nobody’s Discussing

Here’s something most coverage missed: Adam Creighton, chief economist at the Institute of Public Affairs, made a crucial point about why reducing the CGT discount in a high-inflation environment is economically problematic.

“Much of the debate around capital gains tax is based on the mistaken belief that the 50% discount represents a concession to investors. In reality, under even moderate inflation, the current system taxes both real and inflationary gains.”

Consider this: you bought an investment property in 2016 for $600,000. You sell it in 2026 for $900,000. On paper, you’ve made $300,000.

But if inflation averaged 3.5% over that decade, the property would need to be worth roughly $845,000 just to maintain its real purchasing power. Your actual real gain is closer to $55,000, not $300,000.

Yet under current rules, you’re taxed on the full nominal gain. The 50% CGT discount partially compensates for this inflation effect.

Creighton argues that for the discount to “accurately account for the effects of inflation”, asset sale prices need to grow at twice the inflation rate. In the high-inflation environment we’ve experienced from 2022 to 2026, reducing the discount further would mean taxing gains that don’t exist in real terms.

This matters because it reframes the debate from “tax concession for the wealthy” to “inflation adjustment mechanism.” Whether Chalmers accepts this argument is another question entirely.

What This Means For Your Portfolio Structure

Let’s move from theory to practice. If you’re a property investor, here’s what different portfolio structures should be thinking about.

If You Hold 1-2 Properties

You’re likely safe under any grandfathering provisions. Most policy proposals include protection for existing investments, particularly owner-occupiers who’ve held investment properties for extended periods.

Your strategic question: is there opportunity to add a third property before the budget, particularly if negative gearing gets limited to two properties?

This isn’t a recommendation to rush into poor investments. But if you’ve been considering expansion and have the serviceability, bringing forward that decision to before May could preserve access to current tax treatment.

If You Hold 3+ Properties

Time for a comprehensive portfolio performance review.

Not because you’re forced to sell, but because this policy environment creates a natural checkpoint to ask: which properties are actually performing, and which are you holding out of inertia?

Calculate return on equity for each property. Factor in opportunity cost. If you’re sitting on significant unrealised gains in underperforming assets, selling before potential CGT discount reductions might make sense even without policy pressure.

If You’re Planning to Buy

The timing calculus gets complex here. Do you buy now under current rules, or wait to see the final budget position?

Consider these factors:

• Pre-budget purchases lock in current tax treatment under most grandfathering scenarios
• Market sentiment could shift post-budget depending on final settings
• Vendor behaviour might change if mass exits materialise (unlikely, but possible)
• Your individual circumstances matter more than macro policy speculation

Don’t let tax tail wag investment dog. A good property investment under modified tax settings beats a poor investment under current settings.

The Foreign Investment Red Herring

One interesting data point from the article: between 2016 and 2024, foreign investors purchased 40,177 residential properties out of 7.9 million total sales.
That’s 0.5% of the market.

China accounted for the largest share with 23,550 purchases, followed by Hong Kong with 3,486. Victoria saw the most foreign purchases at 17,000, then NSW with 8,862.

This data matters because it deflates the “foreign buyers are pricing out locals” narrative that often accompanies these debates. The housing affordability challenge is primarily a domestic supply and demand issue, not a foreign investment issue.

For investors, this means policy changes are unlikely to include major foreign investment restrictions beyond current settings. The focus remains on domestic investor tax treatment.

Beyond Speculation: What You Actually Control

Here’s the reality: we won’t know the final budget position until May. The Treasurer’s speech confirms intent, but the details — discount percentage, grandfathering provisions, negative gearing thresholds, implementation timing — remain uncertain.

What you do control:

Portfolio performance analysis: Review each property’s return on equity, capital growth trajectory, and net yield. Do this exercise regardless of policy changes. Underperformers should be identified and decisions made based on merit, not speculation.

Debt serviceability stress testing: The APRA DTI caps that took effect in February already limit high-leverage expansion. Model your capacity to withstand rate changes or rental vacancies. Policy changes compound existing constraints.

Diversification assessment: If your wealth is concentrated in residential property, this policy environment reinforces the case for asset class diversification. Super contributions, commercial property, equities, private credit all deserve consideration.

Entity structure review: Properties held in personal names versus discretionary trusts have different CGT implications and asset protection characteristics. This might be the time to review optimal structure while current rules apply.

Estate planning integration: CGT events on death, succession planning for property portfolios, and generational wealth transfer strategies all intersect with these policy discussions. Consider this in holistic planning.

The Grandfathering Question

Most speculation assumes grandfathering provisions will protect existing investments. Historical precedent supports this.

When the CGT discount was introduced in 1999, transitional arrangements protected investments held under previous rules. When negative gearing was briefly removed in the 1980s (then quickly reinstated), existing arrangements were grandfathered.

But “most likely” isn’t “guaranteed.” The Senate inquiry specifically discussed whether grandfathering creates fairness issues of its own, as it perpetuates dual systems for extended periods.

If you’re making decisions based on grandfathering assumptions, model both scenarios: full protection versus no protection. Understand your exposure either way.

May Budget Timeline: What Happens Next

The budget will be delivered in May 2026. Between now and then:

• Industry lobbying will intensify
• More economic modelling will emerge
• Political positioning will sharpen
• Market speculation will build

For investors, the next six weeks are about informed positioning, not panic reactions.

Meet with your financial adviser. Run portfolio scenarios. Identify properties you’d consider selling anyway. Calculate CGT exposure under different discount rates.

Model cashflow impact if negative gearing gets limited.

Make these assessments based on your individual circumstances, not headlines.

The Bigger Picture: Policy Stability Matters

One final thought that often gets lost in these debates: policy stability has value.
Frequent changes to investment tax settings — regardless of direction — create uncertainty that reduces long-term capital formation. Investors make 20-30 year decisions based on stable policy frameworks.

Whether you support or oppose the proposed changes, the pattern of significant tax reforms every few years creates planning complexity that affects investment decisions beyond just the tax impact itself.

From a purely investment perspective, clarity matters. Once the May budget delivers final settings, whatever they are, investors can recalibrate and plan accordingly.

The unknown is harder to navigate than the known, even when the known is less favourable.

What To Do This Week

Don’t wait until May. Use the next six weeks productively:

1. Schedule a portfolio review with your financial adviser or accountant before the budget
2. Calculate current CGT exposure across all investment properties at both 50% and 33% discount rates
3. Model cashflow impact if negative gearing gets limited, particularly if you hold 3+ properties
4. Identify disposal candidates based on performance, not speculation
5. Review debt structures in light of both DTI caps and potential tax changes
6. Consider diversification opportunities if property concentration creates risk

The May budget will deliver clarity. Your job between now and then is informed preparation, not reactive decision-making.

Ready to review your property portfolio before the May budget?

Book a clarity call to discuss your strategic options and ensure you’re positioned for whatever policy changes emerge.

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Sources & Further Reading:

• The Senior: “Treasurer flags ‘hard decisions’ coming for retirees, property investors” (24-25 March 2026)
• Senate Economics References Committee: Report on Capital Gains Tax Discount (March 2026)
• ATO: Register of Foreign Ownership of Australian Assets 2023-24 Report
• Qaive and Tulipwood Economics: Housing Supply Impact Modelling (March 2026)

Related Obsidian Articles:

• The Intergenerational Tax Debate: What Ambitious Professionals Need to Know About CGT and Negative Gearing Changes 
• The New DTI Reality: Strategic Debt Structure for Multi-Property Investors