The Budget Didn't Kill Negative Gearing. It Redirected the Capital.

On budget night in May, the Treasurer rewrote the tax maths that has underpinned Australian household wealth for a generation. From 1 July 2027, negative gearing on established residential property purchased after budget night will no longer offset salary or business income, and the 50 per cent capital gains tax discount is being replaced with cost base indexation and a 30 per cent minimum tax rate, according to the Australian Taxation Office. Existing holdings are grandfathered. New builds keep the old treatment. Everything else changes.

Most of the commentary since has focused on what this means for the family home and the rental market. We think that misses the more interesting question for founders, operators and private capital: if established property just became a structurally worse place to park after-tax savings, where does that capital actually go?

A repricing, not a retreat

The scale of the shift is real. Commonwealth Bank now expects dwelling price growth to slow to roughly 3 per cent to December 2026, down from an earlier 5 per cent forecast, once the combined effect of the tax changes and higher borrowing costs is factored in, per the CommBank research team. That is not a collapse. It is a repricing of the risk-adjusted return on the asset class Australians have leaned on hardest for two decades.

One accounting academic interviewed after the budget described the changes as likely to trigger a genuine structural reallocation of household capital, altering the relative attractiveness of property against other assets rather than simply making Australians poorer, as reported by SBS News. That framing matters. Money that would have gone into a second or third investment property over the next eighteen months does not disappear. It gets reallocated, and dividend-paying equities, commercial property and, increasingly, private markets are the natural next stops for investors and family capital looking for an after-tax return that property can no longer guarantee.

This is the moment we think is underappreciated. Every prior tax-driven shakeout in Australian property, from the 2017 foreign buyer surcharges to the 2019 negative gearing election scare, sent a wave of capital looking for a new home. Lower mid-market private equity has historically been too illiquid and too unfamiliar to capture much of that flow. We think this cycle is different, because the sectors best placed to absorb it, healthcare, wellness and beauty, and consumer, are also the sectors with the strongest structural tailwinds right now.

Why resilient sectors, and why now

Healthcare M&A in Australia is being pulled forward by demographics that don't care what the cash rate is doing. An ageing population and rising chronic disease prevalence are driving consolidation in aged care, pathology and specialist medical services, with the new rights-based Aged Care Act adding further pressure on smaller providers to find scale or exit, according to Holding Redlich's latest market review. Globally, healthcare private equity had its strongest year on record in 2025, with disclosed deal value exceeding US$191 billion, as Bain & Company reported, evidence that capital is already voting with its feet on the sector's defensiveness.

Wellness and beauty tells a similar story, only earlier in the cycle. Deal activity in beauty and personal care is expected to build through 2026, with growth increasingly concentrated beyond core aesthetics into the broader wellness category, and private equity add-on activity supported by high levels of dry powder, per Griffin Financial Group's Q1 2026 review. These are categories where founder-led operators built genuine brand equity and operational discipline through a period when capital was scarce and consumers were value-conscious. That is exactly the kind of business lower mid-market buyers exist to back.

None of this is happening in a vacuum. Mid-market dealmaking sentiment in Australia has turned decisively more constructive, with 71 per cent of dealmakers surveyed by Pitcher Partners expecting to increase mid-market investment this year, a sharp change from the caution that defined the 2022 to 2024 downturn, as reported in INTHEBLACK. Capital looking for a new home and operators looking for the right partner are converging at the same moment.

The read for founders and co-investors

We do not think every dollar that leaves the property market lands in a healthcare clinic or a beauty platform. Much of it will simply flow into shares, commercial property or new-build residential, where the old tax treatment still applies. But the marginal reallocation, even a modest share of the trillions held in Australian residential investment property, represents a meaningful pool of capital newly searching for defensible, cash-generative businesses outside the housing market. Founders in healthcare, wellness and beauty who have spent the last few years building real operating leverage, rather than chasing valuation on promise, are entering a market where that discipline is about to be worth more, not less.

For operators weighing succession, a capital raise, or an eventual sale, the practical implication is timing. A tax-driven reallocation of this size does not happen quietly, and buyers with capital to deploy are unlikely to wait for a perfect entry point before engaging with the right business.

Let's talk

If your business sits in healthcare, wellness and beauty, consumer or specialty retail and you are thinking through what the next twelve to eighteen months look like, whether that's growth capital, succession planning or an eventual sale, we would welcome the conversation. No pitch, just a conversation about where your business sits in this market.

Sources

This article is provided for general informational purposes only and does not constitute financial, investment, legal or tax advice, nor an offer, solicitation or recommendation in respect of any security, fund or transaction. Views expressed are those of Astra Capital Proprietary Limited ACN 691553849 at the time of publication and may change without notice. Information sourced from third parties is believed to be reliable but has not been independently verified and no warranty is given as to its accuracy or completeness. Past performance and industry trends are not indicative of future results. Readers should seek independent professional advice before making any investment decision. © Astra Capital Proprietary Limited ACN 691553849. All rights reserved.

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