Delever or Double Down? Gearing Into Your 50s and 60s After Tax Shifts

Most of the pre‑retiree clients I see aren’t asking “Can I retire?” anymore. They’re asking, “Should I keep this much debt?” The old script—“property always goes up, the tax man chips in, just hang on”—doesn’t fit a world where negative gearing and the 50% CGT discount are being wound back.

In plain English: after the 2026–27 tax changes, pre‑retirees should assume weaker tax benefits from gearing and re‑test whether their property and loans still work on cashflow and risk alone. For some, that means deliberate de‑gearing. For others, it means holding or even carefully re‑gearing—but with a much tighter brief.

What I tell my clients is simple: in your 50s and 60s, the real question isn’t “Is gearing dead?” It’s “What kind of risk do I still want to be taking, and for what exact payoff?”

Balancing lower risk from deleveraging against potential growth from keeping some gearing.

The new rules: why the old gearing playbook is broken

Before we talk about deleveraging, we need to be clear on the ground shifting under your feet.

Key tax changes that hit older investors

From the 2026–27 Budget measures and the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 (Cth):

1. 50% CGT discount abolished from 1 July 2027
   For resident individuals and most trusts, the traditional 50% discount on capital gains will go. Instead, cost bases will be indexed for inflation and a minimum 30% tax will apply to most net capital gains (knowledge facts 16–20).

2. Negative gearing sharply narrowed
   From 1 July 2027, many losses on established residential properties purchased after 12 May 2026 will be quarantined. Existing properties and qualifying new builds are largely grandfathered, but the broad “wage income soaks up rental losses” model is fading fast (see /insights/negative-gearing-after-budget-what-still-works-what-doesnt).

3. Greater complexity and record‑keeping
   You’ll need to track gains and cost base adjustments across different time periods and rules. That complexity raises the risk cost of holding marginal properties into your late 50s and 60s.

Put together, these reforms mean the “set‑and‑forget, negative gear until retirement, then sell tax‑efficiently” plan needs a full rewrite—especially for pre‑retirees.

Delever vs keep gearing: the real question you need to answer

Most people frame this as:

“Should I smash down debt, or keep buying / holding with debt?”

That’s the wrong question. The right question is:

“Given my age, income runway and new tax rules, what mix of:
• debt level,
• property exposure, and
• liquidity
gives me the best shot at a resilient retirement?”

To answer that, I walk clients through four filters:

1. Time – years until you want genuine work flexibility.
2. Cashflow – how easily you can wear higher rates and reduced tax offsets.
3. Portfolio quality – are you holding A‑grade or passengers?
4. Risk tolerance and health – how much stress you can, and want to, carry.

Let’s make this concrete.

A simple worked example

Say you’re 56, couple, earning $260k combined. You own:

• Home: $1.6m, home loan $650k (P&I, 6.2%, 23 years left).
• Investment unit: $900k, loan $720k (IO, 6.4%). Rent $780/week. Costs (interest + other) total about $59k a year.

Annual rent ≈ $40,500.
Annual cash cost ≈ $59,000.
Pre‑tax loss ≈ $18,500.

Under the old rules, a good chunk of that $18.5k loss came back via higher refunds. Under the new rules, that loss may be quarantined or less valuable.

Using a rough stress test we use across this cluster (knowledge fact 9 and /insights/negative-gearing-after-budget-what-still-works-what-doesnt):

• Model no immediate tax refund from the loss; and
• Add +1.5% to interest rates.

Suddenly that property is maybe $23–25k cashflow negative per year.

If you only plan to work 7–10 more years, you’re effectively writing a quarter‑million dollar cheque to keep that asset—before thinking about sale costs and a less generous CGT regime.

That’s the real decision: is that risk and cash strain worth it, in this new tax world, at your age?