Australian property investors face new tax rules, look to commercial assets

The Australian Taxation Office is intensifying scrutiny of rental property deductions, highlighting common mistakes such as claiming expenses for privately used properties or failing to make a property genuinely available for rent. Recent data shows many owners overlook proper apportioning of costs, risking compliance issues.

From 1 July 2027, the federal budget will restrict negative gearing for new residential builds and replace the 50 % capital‑gain tax discount with a cost‑base indexation model, inserting a minimum 30 % tax on net capital gains. These reforms remove long‑standing tax offsets for residential investors, prompting a shift in interest toward commercial property, which remains unaffected. Commercial assets offer higher yields (5‑7 % versus 2‑3 % for residential), longer lease terms and tenant‑paid outgoings, but also carry vacancy risks that residential investors may underestimate.