There has been growing discussion about the Australian Government potentially halving the Capital Gains Tax (CGT) discount on investment properties from 50% to 25%.

If introduced, this would mark one of the most significant tax changes affecting property investors in decades.

So what could it mean for investors, renters, and the Bundaberg and broader Queensland property markets?

First, What Is Changing?

Currently, investors who hold a property for more than 12 months receive a 50% discount on the capital gain when they sell.

Under the proposal:

• The discount would reduce to 25%.

• Investors would pay more tax on future capital gains.

• Owner-occupiers would not be affected.

This is aimed at improving housing affordability and increasing government revenue - but the ripple effects could be wide-reaching.

Impact on Property Investors

Short-Term Effects

If the CGT discount is halved, we would likely see:

• Investors reassessing future purchases

• Some landlords selling before changes take effect

• A pause in investor activity while the market digests the news

Industry surveys already show investor hesitation when tax reform is discussed. In Queensland, this has translated into more cautious buying behaviour.

For Bundaberg - where yields remain attractive compared to metro markets - investors may hold rather than exit, particularly if properties are positively geared. However, new investment activity could slow.

Long-Term Effects

Economic modelling from the Grattan Institute suggests property prices may fall by 1–4% compared to where they otherwise would have been.

In other words:

• This is not a crash scenario.

• It is more likely a moderation of growth.

Over time, the market may rebalance:

• Fewer speculative investors

• More owner-occupiers competing for homes

Large-scale investors would absorb higher tax bills, while smaller “mum and dad” investors could feel the squeeze more sharply.

Impact on Renters

This is where the debate becomes more complex.

The Immediate Risk

Queensland’s rental vacancy rate is sitting around 1%, with many regional areas even tighter. The REIQ has repeatedly described the rental market as critically undersupplied.

Bundaberg’s vacancy rate has also been extremely low.

If investors:

• Sell rental properties, or

• Stop purchasing new ones

The rental pool shrinks further.

And when supply shrinks in a market already this tight, rents tend to rise.

Longer-Term Possibilities

Supporters argue that:

• Reduced investor competition could help first-home buyers.

• Government revenue from higher CGT could be redirected into social housing or rent assistance.

However, without strong supply measures, the rental pressure may intensify before any benefits flow through.

Impact on the Bundaberg and Queensland Property Market

Property Prices

Most economic forecasts suggest modest downward pressure, not dramatic declines.

For Bundaberg specifically:

• The market has been supported by affordability compared to Brisbane.

• Interstate migration and lifestyle appeal remain strong.

• Limited housing supply continues to underpin values.

Even if growth moderates slightly, the fundamentals remain solid.

Construction and Development

Some analysts warn that investor-driven developments - particularly off-the-plan apartments in larger cities - could slow.

The Property Council of Australia has suggested that a smaller reduction (for example to 40%) may avoid shocking the system while still addressing tax reform goals.

For regional areas like Bundaberg:

• New supply is already constrained by land release and infrastructure timing.

• Any reduction in investor appetite could make it harder to increase rental stock quickly.

Who Benefits?

Potential winners:

• Some first-home buyers (less investor competition)

• The federal budget (increased tax revenue)

• Owner-occupiers in the long term if supply increases

Potential losers:

• Small-scale investors relying on capital growth

• Renters in the short term if supply tightens further

• Regional markets already struggling with low vacancy

What Could Happen Next?

Policy alternatives often discussed include:

• Phasing changes in over several years

• Exempting newly built housing

• Introducing partial reductions rather than a full halving

Many economists argue that improving affordability requires increasing supply, not just adjusting tax settings.

What This Means for Bundaberg

Bundaberg’s market is driven by:

• Relative affordability

• Strong rental demand

• Lifestyle migration

• Limited stock

Even if the CGT discount is reduced, these underlying drivers do not disappear.

What we may see instead is:

• Slower investor growth

• Continued rental pressure

• Gradual rebalancing toward owner-occupiers

The key variable will be supply. Without meaningful increases in housing construction, rental pressure is unlikely to ease.

Final Thoughts

Halving the CGT discount would reshape investor calculations, but it is unlikely to dramatically reset property values in Bundaberg or Queensland.

The bigger question remains:

Will tax reform be matched by meaningful housing supply reform?

Because without more homes, changing tax settings alone won’t solve affordability.