Rentvesting in Melbourne: does it still work under the new rules?
Rent where you want to live, own where the numbers work. The strategy still makes sense for some people — but the arithmetic changed in May.
Published
For a decade, rentvesting has been the default strategy for young professionals priced out of the suburbs they want to live in. Rent in South Yarra, Fitzroy or Elwood; buy a unit or townhouse in a growth corridor; let the tenant and the tax system help pay it down. Two of those three pillars moved in 2026.
How the numbers used to work
A rentvestor typically buys an established property that runs at a loss after interest and costs. Before the reforms, that loss reduced their taxable salary — at a 37% or 45% marginal rate, a large share of the shortfall came back at tax time. Growth did the rest, and on sale the 50% CGT discount applied.
What changed
- Negative gearing: for established residential property acquired after 7:30pm AEST on 12 May 2026, losses can only be used against residential property income and gains from 1 July 2027. The tax refund that used to subsidise the shortfall is deferred until the property makes money or is sold. Full explanation here.
- Capital gains: from 1 July 2027, the 50% discount is replaced by cost base indexation for individuals and trusts, with a 30% minimum tax on capital gains. Our note on the CGT changes.
- New builds: eligible newly built dwellings are exempt from the negative gearing limit, and the 50% CGT discount continues for eligible new residential dwellings.
What you give up by investing first
This is the part most rentvesting articles leave out. Many first home buyer benefits require you to live in the property:
| Benefit | Requires owner-occupation? |
|---|---|
| Victorian first home buyer duty exemption (to $600,000) and concession (to $750,000) | Yes |
| 5% Deposit Scheme (no lenders mortgage insurance) | Yes — you must move in within six months |
| Principal place of residence CGT exemption | Only while you live there (with limited exceptions) |
On a $700,000 first home in Victoria, the duty saving alone is substantial — our stamp duty calculator shows the difference.
When rentvesting still makes sense
- Your income is high and secure enough to carry a cashflow-negative property without the annual tax refund.
- The property you can afford to buy is in a location with genuine long-term demand — or is an eligible new build.
- You value living close to work, family or lifestyle more than owning the home you live in for now.
- You have modelled the alternative: buying a smaller first home to live in, keeping the duty and deposit benefits, and converting it to an investment later.
Our view
The best rentvesting decisions we see are made on a spreadsheet, not a social media post. Model both paths — buy-to-live and rentvest — over ten years after tax, including duty, deposit schemes and the new rules, before you sign anything.
Common questions
No. The scheme is for owner-occupiers, who must move in within six months of settlement.
Eligible newly built dwellings are exempt from the negative gearing limit and keep the 50% CGT discount, so the tax position is closer to the old rules. Build quality, completion risk and resale demand then matter more.
Yes, and it is a common path. The tax treatment on conversion depends on timing and use, so get advice before you move out.
Sources
- Holding Redlich — status of Budget 2026–27 tax measures (July 2026)
- State Revenue Office Victoria — first home buyer duty exemption and concession
- Housing Australia — 5% Deposit Scheme eligibility (rules from 1 October 2025)
General information
This article is general information only, current as at October 2026. It is not tax, legal or financial product advice and does not take into account your objectives, financial situation or needs. Obtain advice specific to your circumstances before acting.
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