Key Takeaways
- The 2026 property investment reforms change parts of the negative gearing and Capital Gains Tax (CGT) framework from 1 July 2027, although their effect depends on factors such as when a property was acquired and the investor’s circumstances.
- Refinancing an investment property is a separate lending decision from determining how the transitional tax rules apply to a particular property.
- A refinance may warrant review where borrowing costs, loan features, equity requirements or future investment plans have changed.
- Switching costs, serviceability, loan structure and longer-term borrowing costs may all be relevant when comparing refinancing options.
The investment property changes introduced through the 2026–27 Federal Budget have altered the tax environment that Australian property investors may need to consider. At the same time, interest rates, lender policies and individual circumstances can change, prompting some investors to review whether their existing loan continues to suit their position.
For investors considering their options, speaking with mortgage brokers in Sydney may help clarify how an existing investment loan compares with available alternatives and how a potential refinance could be assessed. Whether refinancing is appropriate depends on individual circumstances, lender policies, costs and objectives.
Importantly, tax reform and refinancing are separate considerations. Changes to negative gearing or CGT rules may affect the broader investment environment, while refinancing involves replacing or restructuring lending. The reforms should not, by themselves, be treated as a reason to refinance.
What Changed for Property Investors in 2026?
The Australian Government introduced reforms to negative gearing and CGT as part of the 2026–27 Federal Budget. The measures are scheduled to apply from 1 July 2027.
Under the Australian property tax reforms, negative gearing for residential property will be limited to new builds from that date. For established residential properties acquired after 7:30 pm AEST on 12 May 2026, losses may still be deductible against residential property income, including relevant capital gains, with excess losses potentially carried forward, but they will not be deductible against non-residential income such as salary or wages.
The CGT framework is also changing. From 1 July 2027, the existing 50% CGT discount will be replaced by inflation-based cost-base treatment together with a 30% minimum tax rate on relevant capital gains. The new arrangements apply prospectively to gains accruing from 1 July 2027, while additional rules and exceptions can apply, including for eligible new builds.
Transitional arrangements under the 2026 property investment reforms can therefore be relevant. Properties held before the announcement time of 7:30 pm AEST on 12 May 2026 are exempt from the negative gearing changes, although the tax treatment applicable to a particular investor can depend on their circumstances and the relevant legislation. Appropriately qualified tax advice may be useful when determining how these changes apply.
Does Refinancing Affect Transitional Tax Treatment?
Refinancing an associated loan is different from buying or selling the underlying property. However, this distinction should not be interpreted as meaning every refinancing, ownership or restructuring arrangement will necessarily have the same tax outcome.
An investor considering refinancing an investment property may therefore wish to separate two questions: how the proposed refinance could affect their lending arrangements and whether any associated restructuring could have tax consequences.
Changes involving ownership, borrowing purposes or the use of released equity can introduce additional considerations. For Australian tax purposes, the use and purpose of borrowed funds can be relevant when considering interest deductibility. Appropriately qualified tax advice may therefore be useful before relying on a particular tax treatment.
When Might Refinancing Be Worth Reviewing?
Investment property changes do not necessarily mean an existing loan needs to be refinanced. A review may instead be useful where borrowing costs, loan features, available equity or future property plans have changed.
Interest rates or repayments have changed
Changes in interest rates can alter the cost of holding investment debt. Comparing an existing facility with current investment property loans may help an investor understand whether different rates, repayment structures or features are available.
A lower advertised rate does not necessarily mean refinancing will reduce overall borrowing costs. Discharge or settlement fees, application or valuation costs, fixed-rate break costs where applicable, loan terms and features may all affect the comparison.
The existing loan structure no longer fits
A loan established several years earlier may no longer reflect an investor’s repayment preferences, cash-flow requirements or future property plans. Reviewing the structure can involve repayment type, offset facilities, loan splits and security arrangements as well as the interest rate.
Equity or another purchase is being considered
Property values and outstanding balances can change over time, potentially altering the equity available. Investors considering accessing property equity may need to consider that doing so usually involves additional borrowing and remains subject to lender valuation, serviceability and credit requirements.
Plans for another property purchase can also prompt a lending review. However, refinancing does not necessarily increase borrowing capacity. A lender will assess the borrower’s financial position under its applicable serviceability and credit policies before deciding whether to approve additional finance.
How Could Refinancing Affect Borrowing Capacity?
Borrowing capacity for investors can vary between lenders because serviceability models and credit policies can differ. When refinancing investment property debt, a lender may conduct a fresh assessment of income, expenses, existing liabilities, proposed repayments and eligible rental income.
The way these factors are assessed can influence borrowing capacity for investment properties. Rental income may contribute to serviceability, although lenders may recognise less than the full gross amount to allow for factors such as vacancies and property-related expenses.
For authorised deposit-taking institutions (ADIs), APRA currently requires a mortgage serviceability buffer of at least 3 percentage points above the applicable loan interest rate. This means an investment loan can be assessed at a higher rate than the rate the borrower would initially pay. Non-bank lenders are not necessarily subject to the same APRA requirement and may apply their own serviceability methodologies.
As a result, a refinance that appears manageable based on the advertised interest rate may produce a different result under a lender’s serviceability assessment. Existing debts, available credit limits, expenses and other financial commitments may also influence the outcome.
Costs and Trade-Offs to Consider
The interest rate is only one part of a refinancing comparison. Depending on the loans involved, other considerations may include:
- discharge or settlement fees;
- application and valuation costs;
- fixed-rate break costs where applicable;
- ongoing package or account fees;
- changes to offset, redraw or other loan features; and
- the term and repayment structure of the replacement loan.
Extending debt over a new, longer loan term could reduce required repayments in some circumstances while potentially increasing total interest paid over time. Comparing both immediate and longer-term borrowing costs may therefore provide a more complete view of the proposed refinance.
Refinancing and Investment Loan Structure
Refinancing can also provide an opportunity to review how investment debt is structured. Depending on the circumstances, this might include loan splits, repayment types, offset arrangements or the securities supporting different borrowings.
Where private and investment debt are both involved, keeping borrowing purposes clearly identifiable may be relevant for tax and record-keeping purposes. Refinancing should not be assumed to change the tax character of debt, and the use of newly borrowed or released funds can be relevant when considering the tax treatment of associated interest.
For investors with multiple properties or future purchase plans, broader investment loan structuring considerations may include how debt, equity, securities and borrowing capacity interact across the portfolio.
A Practical Refinancing Review
Rather than assuming the reforms create a reason to refinance, investors may find it useful to consider whether their existing lending continues to suit their circumstances. Relevant factors can include:
- the current interest rate, repayments and remaining loan term;
- the potential costs of switching loans;
- loan features currently used or required;
- available equity and future borrowing plans;
- the potential effect of a new serviceability assessment; and
- whether tax advice is appropriate for any proposed restructuring.
The investment property changes may form part of the broader environment in which investors review their plans, but they do not determine whether refinancing is suitable. Potential benefits, costs and consequences depend on the borrower’s circumstances, lender policies and available lending options.
Conclusion
The 2026 investment property changes may prompt some investors to review their property and lending arrangements, but they do not necessarily create a reason to refinance. Refinancing an investment property remains a separate lending decision that can depend on the existing loan, available alternatives, switching costs, borrowing capacity and future plans.
A review may be useful where interest rates, loan features, equity requirements or investment objectives have changed. However, a replacement loan should not be assumed to provide lower overall costs, greater borrowing capacity or a more favourable tax outcome.
This information is general in nature and does not constitute financial, investment, tax or legal advice. Lending eligibility, borrowing capacity, interest rates, loan features, refinancing costs and approval outcomes depend on individual circumstances and lender policies and may change over time. Tax outcomes depend on individual circumstances and applicable legislation. Property investment and borrowing involve risk. Consider obtaining advice from appropriately qualified professionals before making financial, investment, tax or legal decisions.
Frequently Asked Questions (FAQs)
1. Should I refinance my investment property after the 2026 reforms?
The reforms do not necessarily mean an investment property loan should be refinanced. Whether refinancing may warrant consideration can depend on the existing interest rate, loan features, switching costs, borrowing capacity and future property plans.
2. Does refinancing affect the 2026 tax reforms?
Refinancing a loan is different from buying or selling the underlying property. However, tax consequences can depend on the circumstances, particularly where refinancing is accompanied by changes to ownership, borrowing purposes or the use of released funds.
3. Could refinancing increase my borrowing capacity?
Potentially, but an increase should not be assumed. Lenders can use different serviceability models and credit policies, while income, expenses, existing liabilities, rental income and proposed borrowing can influence the assessment.
4. Can I access equity when refinancing?
It may be possible, subject to lender valuation, serviceability and credit requirements. Accessing equity involves additional borrowing, and how the borrowed funds are used may also have tax implications.
5. Is a lower interest rate enough reason to refinance?
Not necessarily. Refinancing costs, loan features, the remaining loan term and the structure of the replacement facility can affect whether a lower rate results in lower overall borrowing costs.
6. Does refinancing change interest deductibility?
Not necessarily. For Australian tax purposes, the use and purpose of borrowed funds can be relevant when determining whether interest is deductible. Additional borrowing, equity release or mixed private and investment purposes may require closer consideration.
7. What should I compare before refinancing?
Relevant factors can include interest rates, repayments, loan terms, fees, features, switching costs, serviceability requirements and future borrowing plans. The appropriate comparison depends on the investor’s circumstances and objectives.