Smart ways to approach property investment in Griffith

Property investors in Griffith are choosing investment loan structures that align with both recent tax changes and the suburb's rental performance.

Griffith sits close to Manuka and Kingston, with solid rental demand from professionals working in nearby parliamentary and government precincts. Investors targeting this area need to understand how the 2026 Federal Budget changes to negative gearing and capital gains tax affect loan structuring, particularly if they're buying established properties after May 2026. The most useful insight is that your loan structure should now reflect whether your property will generate a net loss and how you plan to use that loss.

How the negative gearing changes affect Griffith investors

From 1 July 2027, losses from established residential properties bought after 12 May 2026 can only be offset against rental income or capital gains from residential property, not against wage income. Consider an investor who purchases an established apartment in Griffith with a loan structured as interest only. If the property costs more to hold than it earns in rent, those excess costs can be carried forward to offset future rental income or capital gains, but they no longer reduce taxable salary in the year incurred. This changes the cash flow equation for investors who previously relied on a tax refund each year to subsidise holding costs.

Investors who already owned Griffith property before Budget night retain full negative gearing deductions under the grandfathering provisions. The change applies only to established residential property purchased from 13 May 2026 onwards, meaning your loan application date and settlement timing both matter.

Interest only or principal and interest for new acquisitions

Interest only repayments keep monthly costs lower and maximise your deductible interest, which remains fully claimable even under the new rules. Principal and interest repayments build equity faster but reduce the tax deduction because only the interest component is claimable. Under the revised negative gearing rules, the benefit of maximising deductions is less immediate if you cannot offset the loss against wage income. However, if your property generates positive cash flow or you plan to sell within a medium-term horizon, principal and interest can make sense because you are reducing the loan balance and the capital gain will be taxed under the new indexed arrangements from 2027.

In our experience, investors who expect their Griffith property to break even or turn positive within a few years often choose principal and interest from the outset, while those building a larger portfolio with multiple properties prefer interest only to preserve cash flow across the portfolio.

Variable or fixed rates for investment property

Variable rates allow flexibility to make extra repayments, redraw funds, or switch loan features without break costs. Fixed rates provide repayment certainty but lock you into a rate for the fixed period, which can be costly to exit early if your circumstances change. For investment property, variable rates tend to suit investors who want the option to refinance, access equity, or adjust their loan structure as their portfolio grows. Fixed rates suit investors who prefer stable repayments and plan to hold the property without changes for the fixed term.

Because Griffith has consistent rental demand and relatively stable vacancy rates, many investors choose variable rates to retain the flexibility to respond to rate movements or refinance if better loan products become available.

Capital gains tax considerations for Griffith property

From 1 July 2027, gains on properties purchased after 12 May 2026 will be taxed using cost base indexation rather than the 50% CGT discount. This means you pay tax only on the inflation-adjusted gain, with a minimum 30% tax rate applying to the indexed gain. For investors buying new builds in Griffith, you can choose between the 50% discount or the new indexed method, whichever is more favourable at the time of sale. Established properties do not have this choice.

If you are buying an established apartment or townhouse in Griffith with a medium to long-term hold strategy, the indexed CGT treatment may result in a lower tax liability than the previous 50% discount, depending on inflation over the holding period. However, the 30% minimum tax ensures high-income earners will pay at least that rate regardless of indexation. This makes the investment loan structure less about minimising annual tax and more about managing cash flow and equity growth.

Loan to value ratio and deposit strategy

Most lenders cap investment loans at 80% loan to value ratio without Lenders Mortgage Insurance, and at 90% with LMI. A 20% deposit avoids LMI, which can add several thousand dollars to your upfront costs. If you are using equity from your Griffith owner-occupied home to fund the deposit, lenders will assess your borrowing capacity based on both your existing home loan and the new investment loan repayments, plus a rental income calculation that applies a discount to the expected rent.

As an example, an investor using $120,000 in equity from their Griffith home to purchase an investment property will need to demonstrate they can service both loans at assessed rates, which are typically higher than the actual rate you will pay. Lenders also apply a vacancy factor, usually reducing the rental income by 20% to 30% when calculating serviceability. This means your borrowing capacity may be lower than expected, even if the property will generate positive cash flow in practice.

Structuring for portfolio growth

If you plan to acquire multiple investment properties, the loan structure on your first Griffith property sets the foundation for future borrowing. Keeping the loan interest only preserves your cash flow, which improves your ability to service a second loan. Choosing a variable rate with an offset account linked to the investment loan allows you to park surplus funds and reduce interest costs without making non-deductible principal repayments. This keeps the loan balance high, which maximises your deductions, while still reducing the interest you pay.

Investors planning to build a portfolio often structure each property loan separately rather than cross-collateralising, because this makes it simpler to sell or refinance individual properties without affecting the others. A mortgage broker in Griffith can help you set up loan structures that support future acquisitions without limiting your flexibility.

Claimable expenses and loan features

All interest on an investment loan is claimable, along with loan establishment fees, ongoing account fees, and the interest portion of any offset or redraw facility linked to the investment property. Stamp duty, body corporate fees if applicable, council rates, property management fees, and depreciation on the building and fixtures are also claimable. Under the revised rules, these deductions offset rental income first, then residential capital gains, with any excess carried forward.

If your Griffith property includes body corporate fees, which is common for apartments near the parliamentary triangle, those fees are fully deductible and should be factored into your cash flow projections. The loan product you choose should allow for smooth claims and record-keeping, which is why many investors prefer a dedicated offset account linked to the investment loan rather than mixing funds with their owner-occupied loan.

Call one of our team or book an appointment at a time that works for you to discuss how investment loan structuring applies to your Griffith property plans and portfolio goals.

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