There’s a growing conversation right now around capital gains tax, and whether the rules that have shaped property investing for the last decade are about to change.
Nothing has been confirmed. The current 50% capital gains tax discount still stands. But the discussion around reducing it, potentially to 33% or lower, is already enough to change behaviour.
Because for a long time, the strategy has been clear. Buy well, hold, then sell and walk away with a significant amount of money in your pocket.
That strategy has worked. But it has worked for a reason.
And that’s the part most people don’t stop to think about.
Why has this strategy worked so well in Australia
Property in Australia has delivered consistent long-term growth. Across most capital cities, values have historically grown at around 6–7% per year over the long term, despite periods of volatility.
That growth, combined with leverage, is what has made property so powerful.
You control a $1,000,000 asset with a fraction of that in equity. If that asset grows at 6%, that’s $60,000 per year in value, regardless of whether you’ve contributed anything additional.
Over time, that compounds.
That’s why the traditional strategy of buying, holding, and eventually selling has been so effective. You build equity, you realise the gain, and you move forward with a large amount of capital.
But there are two assumptions built into that model.
That growth will continue at a similar pace.
And that selling remains efficient from a tax perspective.
Both of those are now being questioned.
Why capital gains tax matters more than people think
Under the current system, investors receive a 50% discount on capital gains if they hold an asset for more than 12 months.
That discount has quietly underpinned the entire “buy, hold, sell” strategy. It has made selling viable, even attractive, despite large gains.
But if that discount is reduced or removed entirely, the numbers change quickly.
Take a simple example.
- Purchase price: $600,000
- Current value: $1,000,000
- Gain: $400,000
With a 50% discount, only $200,000 is added to your taxable income.
If the discount drops to 33%, that number increases to roughly $268,000.
If the discount is removed entirely, the full $400,000 becomes taxable.
Depending on your marginal tax rate, that difference can mean tens or even hundreds of thousands of dollars more paid in tax.
The asset hasn’t changed.
The gain hasn’t changed.
Only the efficiency of selling has changed.
And what happens if growth slows?
At the same time, we’re in a different environment to the one that fuelled strong growth over the past decade.
Interest rates are higher.
Inflation has been elevated.
Borrowing capacity has been reduced across the board.
That doesn’t mean property won’t grow. But it does suggest that growth may be slower and more uneven than what investors have become used to.
This creates a squeeze on the traditional strategy.
If:
- growth is slower
- and tax on sale is higher
Then:
The benefit of selling becomes less compelling.
And that’s where a different approach starts to make more sense.
The alternative: using equity instead of selling
Instead of selling the asset to access the value, you keep it and borrow against it.
Let’s use a clean example.
- Property value: $1,000,000
- Existing loan: $200,000
At an 80% loan-to-value ratio, you could potentially access up to $800,000 in total lending. After accounting for your existing loan, that leaves $600,000 in accessible equity.
You haven’t sold.
You haven’t triggered capital gains tax.
And you now have access to capital.
That capital can be used for further investment, or importantly, to support income.
What about the cost of borrowing? (this is where the real comparison sits)
Let’s say you structure this properly using interest-only lending.
- You access $600,000
- Interest rate: ~6%
- Annual interest cost: ~$36,000
Now compare that to selling.
If selling triggers, for example, a $200,000–$300,000 tax bill, that is a one-off cost you never recover.
With interest-only lending:
- You only pay interest
- You control how much you draw
- The underlying asset remains intact
More importantly, if that $1,000,000 property continues to grow at even 4–6% per year, that’s $40,000–$60,000 in annual value growth, which can offset or exceed the cost of holding the debt.
So the real comparison becomes:
Pay a large, immediate tax bill and lose the asset
OR
Pay a controlled, ongoing cost while keeping the asset and its growth
That’s a very different decision when you see it laid out properly.
This is where it becomes an income strategy
This isn’t just about avoiding tax. It’s about how you generate income.
Instead of selling assets to create a lump sum, you can draw income from equity over time.
For example:
- Access $300,000 in equity
- Draw $50,000 per year to support lifestyle
- Pay interest only on what is used
At 6%, $50,000 drawn costs around $3,000 per year in interest.
Meanwhile, the underlying property continues to grow.
This is conceptually similar to how reverse mortgages operate later in life, but done earlier, with more control and flexibility.
It turns property from something you eventually sell into something you actively use.
What this means for the market
If more investors shift toward holding and leveraging instead of selling, there are broader implications.
Fewer properties come to market.
Supply tightens.
Competition increases.
At the same time, rental supply remains supported because those properties are still held as investments.
This is why policy matters.
Even the discussion of tax changes can influence behaviour before anything is formally introduced.
So what’s the right approach?
Selling still has a place.
There will always be situations where it makes sense to exit, simplify, or reallocate capital.
But what is changing is the assumption that selling is the goal.
For many investors, particularly those thinking long term, the more powerful question is:
How do I use what I’ve built, rather than cash it out?
The strategic takeaway
The combination of potential tax changes, a higher rate environment, and more moderate growth is forcing a rethink of what good strategy looks like.
The old model of buying, holding, and selling isn’t broken.
But it may no longer be the most efficient.
Because once you understand how equity can be used to fund income, maintain growth exposure, and manage tax more effectively, the conversation changes.
Not when to sell.
But whether you need to sell at all.
If you want to see how this would actually look with your numbers, book a free 30-minute finance strategy session, no pressure, no waffle, just straight-up advice.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).