11 August 2026
For long-term investors, a new capital gains tax regime could tilt the scales towards equities over investment property
It is the most sweeping overhaul of investment taxation in Australia in a generation. Australia has adopted a new capital gains tax (CGT) regime that is set to fundamentally change expectations for long-term investors.
The 50% CGT discount is to be scrapped, in favor of an inflation-based CGT regime with a 30% minimum tax rate. Negative gearing on rental properties, which helped reduce tax bills by offsetting net rental losses after interest costs and expenses, is also going.[1]
The changes will raise the total cost of owning an investment property, and have already prompted predictions of an end to Australia’s 30-year property super cycle.[2]
What will it mean for Australian equities?
Why Australians should own more shares
The removal of the CGT discount applies across all asset classes. Selling a long-held equity holding would also become more expensive. Relative to property, however, equities could fare better.[3]
With negative gearing gone (although it can be used to offset taxes against future income or capital gains) for most residential property purchases, property investors will now have to foot a higher tax bill, which will impact their annual cashflows.
Meanwhile, shareholders may still be able to benefit from franking credits and other deductions, depending on their personal circumstances.
Aside from tax implications, there are some key reasons why shares look more attractive:
- Liquidity. Listed equities, by their nature, can be bought and sold much more quickly than houses or apartments.
- Transaction costs. Entry or exit costs for property investments can be quite substantial at roughly 5% to 10% of the property value (driven by state stamp duty, legal fees, and a 2% to 2.5% real estate agent commission upon sale). Conveyancers and solicitors have also adjusted their fees upward to manage rising business and labor costs.[4]
- Running costs. Investment properties can come with hefty maintenance and management costs that are rising in response to inflation. The new rules will limit investors’ ability to deduct these costs from their tax bill.
- Diversification. Equity portfolios can help diversify risk and gain exposure to global megatrends – artificial intelligence, energy resilience, supply chain diversification, geopolitics and the energy transition – whereas Australian property portfolios depend heavily on the fortunes of the local economy. Higher mortgage rates and cost-of-living pressures are contributing to a poor outlook for Australian residential property.[5]
Property still has its advantages, of course. Mortgage loans can magnify returns, house prices are less volatile than stocks, and the structural supply shortage is supportive over the long term. Owner-occupiers will continue to enjoy tax advantages on their primary residence, too.
Simply put, however, the investor who once bought a two-bedroom apartment as a wealth-building vehicle may find that investing in shares may be just as good, if not better, with better access to liquidity, lower running costs and, potentially, higher returns.
Share-based loans vs home equity loans
For long-term investors in both equities and property, the increased tax bill from a sale under the new CGT regime is likely to raise the appeal of borrowing against their holdings. Home equity loans offer an established route to additional liquidity for property owners. Shares, too, can be used as collateral to raise funds.
By borrowing against a long-term shareholding, Australian investors have an alternative way of accessing the liquidity they need — to fund a business, buy a property, reinvest elsewhere, or simply manage cash flow. Share-based financing can also come with attractive interest rates, including from EquitiesFirst.
A home equity loan, meanwhile, involves high legal and valuation fees, and borrowers may also need to take out insurance. The process is much slower, and the property itself may be at risk of foreclosure if borrowers cannot keep up repayments.
And that doesn’t account for the ongoing maintenance costs involved as well.
Stocks over property?
Long-term investment decisions are, of course, complex, and the best approach for any individual will depend on a variety of factors and personal circumstances. But it is already clear that the changes to Australia’s CGT regime will change the equation for Australian investors.
[1] https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf
[2] https://digitalfinanceanalytics.com/blog/is-the-australian-30-year-property-super-cycle-over/
[3] https://www.livewiremarkets.com/wires/property-or-shares-how-the-new-cgt-and-negative-gearing-changes-have-transformed-the-investing-landscape
[4] https://www.linkedin.com/posts/steven-tropoulos-5822512a_housing-affordability-and-transaction-costs-activity-7326362105308164097-auj_/
[5] https://www.reuters.com/world/asia-pacific/aussie-home-prices-set-weakest-growth-four-years-rates-bite-2026-06-04/
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