Top Tips to Time Your Investment Property Purchase

The right time to buy an investment property is when your finances are ready and you understand how the new tax rules apply to the property you are buying. Both parts matter, and a mortgage broker can help you line them up.

If you live in or around Charlestown, you may be weighing up an investment purchase while the rules around negative gearing and capital gains tax are changing. This article covers the dates that matter, how lenders assess an investment loan, and one worked example of cash flow.

Does Timing Matter When Buying an Investment Property?

Yes. The date you acquire a property can decide how any rental loss is treated for tax. That is separate from your loan, but it affects how comfortable the numbers feel.

Two dates sit at the centre of the changes: 12 May 2026 and 1 July 2027. Your accountant can tell you how these apply to your situation, and it is worth speaking to them before you sign a contract.

Negative Gearing Changes: What Applies to Properties Bought After 12 May 2026

For established homes bought after 7:30pm AEST on 12 May 2026, net rental losses can only be deducted against other residential property income from the 2027-28 income year. Properties held at that time, including those under contract awaiting settlement, keep full deductibility of losses against other income until the property is sold.

If you buy an established property between that moment and 30 June 2027, the current rules apply until 30 June 2027 only. Eligible new builds acquired after 12 May 2026 can continue to deduct losses against all income. Eligible new builds include dwellings built on previously vacant land, and replacements where the number of dwellings increases.

The change does not alter whether interest is deductible. It changes how a net rental loss can be used. The trade-off is that a new build can come with different holding costs and rental demand, so it needs checking property by property. Please get advice from your accountant before acting on any of this.

Capital Gains Tax From 1 July 2027: What Investors Should Know

From 1 July 2027, the 50 per cent CGT discount is replaced by cost base indexation and a 30 per cent minimum tax rate on real gains accruing from that date. Gains accruing before 1 July 2027 on assets you already own are taxed under the current rules.

For an asset sold after that date, the gain is split between the two periods. You can either get a market valuation as at 1 July 2027 or use an ATO-published apportionment formula. Eligible new builds let you choose between the 50 per cent discount and indexation. How this affects you depends on your income and how long you hold, so your accountant should model it.

Interest Only vs Principal and Interest: A Cash Flow Example

An interest-only period lowers your repayments in the early years, but it does not reduce your loan balance. After the period ends, repayments rise because the same loan must be repaid over a shorter term.

As an illustrative example at 6.75% p.a., consider a Charlestown investor borrowing $500,000. On interest only, repayments are about $2,812 a month. On principal and interest over 30 years at the same rate, they are about $3,243 a month.

Now say the investor chooses a five-year interest-only period, so cash flow stays tight while they settle in a tenant. When it ends, the loan reverts to principal and interest over the remaining 25 years. At the same 6.75% p.a., repayments rise to about $3,454 a month, and the balance is still $500,000.

The outcome is a lower monthly cost for five years and a higher one afterwards, with no progress on the debt in between. The investor can plan for that step up, rather than being surprised by it. Our loan repayment calculator lets you test your own numbers.

Only the interest portion of a repayment is deductible. The principal portion is not. Ask your accountant how this fits your tax position.

How Lenders Assess Your Borrowing Capacity for an Investment Loan

Banks must assess new borrowers at a rate at least 3.0 percentage points above the loan rate. On our illustrative 6.75% p.a., that means testing repayments at 9.75% p.a. This buffer applies to banks, credit unions and building societies, not to non-bank lenders.

On rental income, APRA's view is that prudent lenders count no more than 80 per cent of expected rent. Interest-only loans are assessed on principal and interest repayments over the remaining term, so choosing interest only does not lift how much you can borrow. Your borrowing capacity also depends on your other debts, including credit card limits.

If your numbers are tight, you may want to wait or look at a smaller purchase. If you would like to compare lenders, our investment loans page explains how we approach it.

Using Equity in Your Charlestown Home to Fund a Deposit

You may be able to use equity in a property you already own towards an investment purchase, depending on your lender and valuation. The key risk is that you are borrowing against your home, so a fall in rent or values affects you directly.

For tax, interest is deductible based on how the borrowed funds are used, not on the security. If you borrow against your home to buy a rental property, the borrowing for the purchase is the part that is potentially deductible. Splitting loans cleanly helps keep that clear, and your accountant can confirm the treatment. If your existing loan is not working for you, a refinance review is a sensible first step.

After a day at Charlestown Square, you might not feel like running numbers. We are happy to do the heavy lifting with you, face to face or over the phone.

Call one of our team at New Level Lending or book an appointment at a time that works for you. We will map out your timing, your loan structure and your next move.

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