Part 2 – Tax Reform and the Changing Investment Landscape

In Part 1, we explored the proposed changes to the taxation of discretionary trusts and capital gains.

In Part 2, we examine how investors may respond to these changes and some of the investment considerations emerging as a result.

As investors, advisers and accountants assess the potential implications, attention is increasingly turning to how investment returns are generated, taxed and diversified.

How Are Investors Responding?

Direct property investment has long been one of Australia's preferred wealth creation strategies, supported by rental income, capital appreciation and taxation settings such as negative gearing.

However, the investment landscape continues to evolve. Inflation remains above the Reserve Bank of Australia's long-term target range of 2-3%, interest rates remain elevated relative to much of the previous decade, and proposed tax reforms are prompting investors to reassess how future after-tax returns may be generated.

For many investors, the discussion is no longer solely about asset ownership. Increasingly, attention is being placed on the balance between capital growth, income generation and portfolio diversification.

As a result, investors may place greater emphasis on:

• After-tax investment returns

• Income generation

• Portfolio diversification

The Role of Private Credit

Private credit provides exposure to the property sector through loans secured against underlying real estate assets.

Unlike direct property ownership, returns are generally derived from contractual lending income, including interest and lending fees, rather than relying primarily on future property value appreciation.

This distinction may become increasingly relevant for investors seeking more predictable income streams and greater diversification within property-related investments. While it remains unclear how investors will ultimately respond to the proposed reforms, increased focus on income generation and after-tax outcomes may continue to support interest in alternative investment strategies such as private credit.

Development Activity Continues

Regardless of taxation settings or investment structures, the need for development finance remains.

Australia continues to face significant housing supply challenges. The National Housing Accord has established a target of delivering 1.2 million new homes over five years, requiring substantial investment across the residential development sector. At the same time, Australia's population now exceeds 27 million people, supporting ongoing demand for housing, infrastructure and employment-generating developments.

While tax policy may influence how investors allocate capital, it does not alter the underlying requirement for finance from experienced developers delivering projects that support housing supply and economic activity.

At Labassa Capital, we continue to see strong demand for development finance across a broad range of sectors. As investment structures evolve, investors are increasingly looking beyond asset ownership alone and focusing on how returns are generated, how risk is managed and how investments contribute to overall portfolio construction.

Understanding these characteristics may become an increasingly important consideration when assessing long-term investment opportunities.

Disclaimer

General information only. This content does not constitute financial, taxation or investment advice. Investors should seek independent professional advice regarding their individual circumstances.