Delever or Keep Gearing in Your 50s and 60s After Tax Changes

You shouldn’t decide to pay down all your investment debt or keep borrowing in your 50s and 60s based purely on tax. Under the 2026–27 tax changes, negative gearing and CGT concessions are reduced for many residential investors, so the right call now depends on: 1) your pre‑tax cashflow, 2) how much risk you can carry into retirement, and 3) what income you actually need from your assets.

This guide gives you a decision‑grade framework you can work through in a week with your accountant and broker.

Balancing deleveraging and gearing decisions after the 2026–27 tax changes.

1. What’s Changed: Why This Question Matters More Now

1.1 The new tax backdrop in one page

From 1 July 2027, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and related Budget measures reshape how geared property is taxed:

• Negative gearing on many established residential properties bought after 12 May 2026 is restricted – losses are quarantined against rental income, not your wages or other income (see also /insights/new-budget-negative-gearing-negative-gearing-on-investment-properties).
• Existing investments and most new builds remain fully negative‑gearing eligible, but you must track which bucket each property is in.
• The traditional 50% CGT discount for individuals and many trusts is replaced by indexation plus a minimum 30% tax on many capital gains.
• Post‑2027, tax differences between individuals and discretionary trusts on residential property shrink (knowledge fact 12), so structure choices are less about tax arbitrage and more about control and asset protection.

Net result: the tax system is less friendly to high‑geared, negatively geared residential portfolios. That doesn’t mean all debt is bad – but you need stronger pre‑tax numbers and a clearer retirement plan to justify keeping large loans.

1.2 Why your 50s and 60s are the pivot point

In your 30s and 40s, you can often fix mistakes with time and income growth. In your 50s and 60s:

• Your peak earning years are close to, or just behind, you.
• Lenders shorten maximum loan terms, lifting repayments.
• You have less time to recover from rate shocks, vacancies, or rule changes.
• Retirement income rules, super caps and age pension tests start to bite.

The question shifts from “How do I maximise growth and tax benefits?” to “How much risk do I want to carry into my 60s and 70s – and why?”

For many, that means considering deleveraging (paying down or reshaping debt). For others, it may still be rational to keep some gearing – but with guardrails.

2. Delever vs Keep Gearing: What Are You Actually Choosing Between?

2.1 Deleveraging: what it looks like in practice

Deleveraging usually means one or more of:

• Paying down home and investment loans faster.
• Switching some loans from interest‑only to principal and interest.
• Selling one or more properties or business assets to clear debt.
• Restructuring loans (e.g. fixing, extending terms) to reduce cashflow risk.

The aim is to lower your fixed repayment burden and make your retirement income less dependent on high rental yields, perfect occupancy or a booming economy.

2.2 Keeping gearing (or even adding to it)

Continuing to gear into your 50s and 60s might look like:

• Refinancing to release equity for another property or business investment.
• Extending interest‑only terms on investment loans.
• Using a debt recycling strategy to convert home debt into investment debt (see /insights/can-debt-recycling-still-work-when-negative-gearing-benefits-shrink).

This can still make sense where:

• You have strong, stable income and surplus cashflow.
• Assets are high quality and genuinely long‑term holds.
• Your retirement income plan doesn’t rely on tax losses.

But post‑2026, any gearing strategy needs to stand up on a pre‑tax basis, assuming minimal negative gearing benefit, especially on post‑2026 established properties (knowledge fact 1).

2.3 How the new rules change the balance

Under older rules, investors could justify holding or adding debt because:

• A portion of interest cost came back as tax savings.
• CGT discounts softened the sting when they eventually sold.

Now:

• Negative gearing benefits are capped or quarantined for many future purchases.
• Capital gains are taxed more heavily and consistently.

So each extra dollar of debt carries the same risk, but offers less tax offset. That tilts the balance towards modest gearing with stronger cashflow, particularly as you approach retirement.

Stress‑testing repayments under different debt strategies approaching retirement.