Key takeaway: Removing negative gearing hits beginners hardest because the tax benefit matters most in an investment’s early, cash-flow-negative years, says Munzurul Khan, Chairman at KHI Partners. His first investment property, bought in 1999 on a $36,000 salary, needed negative gearing then, but with rent rising from $180 to about $670 it is now strongly cash-flow positive.
In this episode of Geared for Growth, Mike Mortlock is joined by Munzurul Khan, Chairman at KHI Partners and a seasoned advisor to investors and business owners with decades of experience navigating tax policy and market cycles.
With major proposed changes to negative gearing and capital gains tax, the conversation explores what these shifts really mean, not just in theory, but in practice for everyday investors. Munzurul brings a rare long-term perspective, having witnessed similar policy movements dating back to the 1980s, and explains why this moment feels fundamentally different.
As uncertainty builds and legislation evolves, investors are left trying to interpret what’s next. But beneath the noise lies a deeper issue, confidence. Confidence in the system, in the rules, and in the ability to plan long-term wealth creation strategies.
This episode unpacks the real implications of these changes, from serviceability constraints and investor behaviour shifts to the widening divide between new and established investors. It also challenges the narrative around property investors and their role in the broader housing ecosystem.
Munzurul expects it to be overwhelmingly harder for beginning investors to buy. By the end of May 2026, many banks had already stopped counting negative gearing in serviceability, even though the rules don’t start until 1 July 2027. Mortgage brokers he spoke to put the average reduction at about 15% of borrowing capacity for investors with one or two properties, which he calls a massive impact.
Munzurul believes sophisticated investors, who are further along in life with more liquidity, lower leverage and higher incomes, may see the changes as a moment of opportunity. He expects their buying activity to increase substantially while beginning investors lose the option, and asks whether the wealthy are becoming wealthier while those aspiring to build wealth face more challenges. Mike agrees the wealth gap seems to be getting wider.
Munzurul explains that under the proposal the 50% CGT discount gives way to indexation from 1 July 2027, so you are taxed on the real return above inflation. Assuming 3% inflation and 12% annual growth, you would pay tax on 9% under indexation versus 6% under the old discount. At lower, more realistic growth rates the gap may not be as bad, though Australia’s 47% top marginal rate keeps the tax high.
Munzurul’s advice is not to panic, not to make rushed decisions and not to change everything you’ve been doing. Wait until the legislation is documented and understood, then sit down with your accountant, financial planner or other adviser. Your long-term goals haven’t changed, he says, and the right decision will differ by age, closeness to retirement, wealth, risk profile and liquidity.
This is general information from the podcast, not financial advice.
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