The Block 2026 Properties Highlight New Tax Divide for Property Investors
The five Mount Eliza properties featured on The Block 2026 are a high-profile example of how Australia’s incoming residential property tax changes could affect the way investors compare new and established property.
As newly constructed properties that add to housing supply, they are expected to retain access to negative gearing and the 50 per cent capital gains tax discount option from 1 July 2027.
Impacted established residential properties will face different treatment under the reforms, including restrictions on how rental losses can be used and changes to capital gains tax.
BMT Tax Depreciation CEO Bradley Beer said the reforms added another layer to the investment decision.
"Investors have always had to weigh up price, location, rental return and growth potential, but the tax position of a property is becoming an increasingly important part of that assessment," Mr Beer said.
"The Block properties are a useful example because they sit firmly in the new-build category that is treated differently under the incoming rules."
From 1 July 2027, losses from impacted established residential properties acquired after the Government’s Budget-night cut-off will generally be quarantined and only used to reduce taxable income relating to properties, rather than other income such as wages.
Eligible new housing that adds to supply will retain existing negative gearing treatment and access to the 50 per cent capital gains tax discount option.
Mr Beer said that difference could materially affect an investor’s overall position. Across the five properties featured on The Block 2026, BMT estimates almost $30 million in combined lifetime depreciation deductions, averaging approximately $5.88 million per property.
"Two properties may look similar on purchase price and rental return, but the after-tax outcome will be quite different once the rules applying to each property are taken into account," he said.
"That does not mean new property will always be the better investment. The fundamentals still need to stack up, but investors need to understand the full financial position before making that comparison."
The new-build status of The Block properties can also support strong depreciation deductions.
Eligible investors will be able to claim capital works deductions for the building structure and fixed components, as well as depreciation on qualifying new plant and equipment such as flooring and appliances.
The extensive finishes and inclusions throughout the properties further increase the range of depreciable assets that may be available.
BMT has worked with The Block for two decades, preparing tax depreciation schedules for properties featured on the program.
