Commercial Property Market Set to Benefit Following Federal Budget Reforms

The Commercial property market looks set to surge as a result of the Albanese Government’s abolition of negative gearing for established residential properties.

The 2026-27 Federal Budget has targeted residential property investors, banning negative gearing on established properties purchased after 7:30 pm AEST 12 May 2026[i].

Angus Raine, Executive Chairman of Raine & Horne, said, “It is astonishing that a Federal Budget actively targets investors in one particular asset market, residential property, in the name of levelling the playing field for first home buyers.

“By discouraging investment in residential property, vacancy rates will tighten further, rents will rise, and aspiring home buyers who are currently renting will find it even harder to save for a first home.

“Despite all Jim Chalmers’ rhetoric, it is difficult to see how reforms that make residential property less tax effective for investors will help 75,000 Australians achieve home ownership.”

Commercial property set to benefit

Mr Raine believes one of the few winners of the Budget tax reforms will be the commercial property market.

The ban on negative gearing only applies to residential property. Commercial property is not impacted.

In addition, the Federal Budget has made the $20,000 Instant Asset Write-Off (IAWO) a permanent tax deduction for small businesses.

Mr Raine said residential real estate has long been the preferred investment asset class for Australians. “However, the changes to the taxation of residential property are likely to refocus investors towards commercial properties, particularly at the mid to lower end of the market.”

He added, “Commercial property is already a very cost-effective investment as the tenant, rather than the owner, normally pays many of the ongoing costs associated with the property.

“The certainty of the IAWO will further add to the appeal of commercial property because small business tenants will be able to claim an instant tax break for fit-outs of their premises.”

SMSFs, seem to be exempt from changes to CGT

The Budget’s retrospective changes to capital gains tax are deeply unfair to property investors, many of whom may have held their property since 1999, when the 50% CGT discount was introduced.

“Property investors are often Aussie mums and dads saving for retirement. They may have owned their rental property for several decades, and they now find themselves facing a sizeable tax bill when they sell the place, potentially on the cusp of retirement,” says Mr Raine.

However, this is an area where commercial property investors may also benefit.

The Budget does not mention changes to the capital gains tax arrangements for self-managed super funds (SMSFs).

“Feedback from commercial property experts across the Raine & Horne Group indicates that commercial property is often held in the name of a SMSF,” said Mr Raine. “The Budget reforms could increase the appeal of commercial property among SMSF investors.”