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?

When deleveraging in your 50s and 60s usually makes sense

The mistake I see most is pre‑retirees carrying on with a gearing strategy designed for their 30s, while their energy, job security and tax benefits are all quietly falling.

I’ll be blunt: for many pre‑retirees, a staged de‑gearing starting 5–10 years before retirement is now the default, not the exception (see /insights/when-to-start-degearing-paying-down-investment-debt).

1. Your repayments are over 30–35% of net income

A healthy guide we use across higher‑income clients is: keep all home + investment repayments at 30–35% of net household income and maintain 6–12 months’ expenses in offset (knowledge fact 7).

If you’re in your 50s and:

• total repayments are pushing past that band, and
• you don’t have a solid cash buffer,

then the maths is telling you to de‑risk before the economy does it for you.

2. You’re within 10 years of your “work optional” date

Once you’re inside a 10‑year window to the age you want work flexibility, your priority usually shifts from building wealth to locking in resilience.

Signs it’s time to delever:

• You’d be forced to sell if rates went up another 1–2%.
• You’re relying on tax refunds to cover basic living costs.
• A single vacancy or big repair would blow up your budget.

3. Your portfolio has passengers

In nearly every portfolio review, there’s at least one property that:

• has underperformed the rest,
• has mediocre land value or poor long‑term drivers, and
• only looked “OK” once tax benefits were added in.

Under the new rules, those passengers stand out. Deleveraging doesn’t always mean selling everything; it often means:

• sell 1–2 weaker assets,
• clear high‑cost or non‑deductible debt first, and
• keep your strongest holdings with more manageable gearing.

4. Your health or industry risk has changed

If you’re in a volatile industry (construction, start‑ups, consulting) or facing health uncertainty, heavy gearing is now a double risk: income risk + policy risk.

In those cases, starting a de‑gearing plan now—even if gradual—is usually smarter than waiting for a forced event.

When it can still make sense to keep gearing in later life

Keeping or even adding some leverage into your 50s and early 60s isn’t crazy, if you’re clear on why and the numbers stack up without leaning on tax perks.

1. You have strong, stable income and long runway

If you’re, say, 52, on a stable professional income, plan to work to 70, and your total debt service is comfortable, you may legitimately:

• hold existing high‑quality properties with moderate gearing, and
• even do selective upgrades or a final targeted purchase.

But the bar has moved. For new purchases, the rule from /insights/self-employed-business-owners-high-income-professionals-negative-gearing-cgt-strategy applies to everyone now: assess properties on pre‑tax cashflow and growth; treat tax benefits as upside only.

2. You’re re‑gearing for a clear, time‑bound objective

Examples that can make sense:

• Renovating or subdividing a quality holding to improve rent and value before de‑gearing.
• Short, targeted debt (say, a 5–10 year P&I investment loan) with a firm exit date aligned to a sale or downsizing.

Here, you’re not gearing “because that’s what investors do”; you’re using it as a tool with an expiry date.

3. You’ve mapped gearing into your downsizing / super plan

Gearing can still work if it’s part of a coordinated exit:

• hold a quality property or two a bit longer,
• accept modest, manageable leverage,
• then sell, downsize and move surplus into super using downsizer contributions and CGT exemptions.

That only works if you’re deliberately mapping:

• which assets will be sold,
• in what order,
• under which CGT rules,
• and how the loans will be cleared.

The companion piece /insights/pre-retiree-downsizer-smsf-property-heavy-strategy steps through this for property‑heavy pre‑retirees.

The hidden factor: Age Pension and turning home equity into taxable assets

For many in their 60s, the big blind spot is Centrelink.

Your home is generally exempt from the Age Pension assets test. But as we’ve noted elsewhere (knowledge facts 12–13), turning equity into cash or financial investments can pull value into the means tests.

So if your long‑term plan is to:

• aggressively pay down your home, then
• release equity via selling or reverse mortgage, and
• put the proceeds into financial assets,

you need to understand:

• that may increase assessable assets, reducing Pension entitlements;
• but keeping a large, geared investment portfolio may increase income and risk beyond what you want in your late 60s.

This isn’t a reason to avoid deleveraging; it’s a reason to sequence it thoughtfully.

A one‑week decision framework you can actually use

You don’t need to solve everything this week. But you can move from “vague unease” to a clear direction.

Here’s the practical framework I use with pre‑retirees—adapted from the one‑week plans in /insights/mum-and-dad-investors-protecting-plan-under-new-rules:

Step 1: Map your true position (2–3 hours)

List, in one place:

• each property, current value, loan balance, rate, and repayment type (P&I vs IO);
• rent, ongoing costs, and whether it’s likely protected or exposed under the new negative gearing rules;
• your target “work optional” age and minimum income needed in retirement.

Step 2: Re‑run cashflow under the new rules (2–4 hours)

For each investment property:

1. Ignore tax benefits for now—assume you get no help from negative gearing.
2. Model interest at +1–2% above your current rate.
3. Check if you can still cover:
   • all loan repayments, plus
   • living costs, plus
   • at least some extra to build buffers.

If the result scares you, that’s useful information.

Step 3: Sort properties into three buckets (1–2 hours)

• CORE – you’d be happy to hold this through retirement with low/moderate debt.
• OPTIONAL – good assets but not essential.
• CANDIDATE FOR EXIT – weak performers, high‑risk, or high stress.

Step 4: Choose your bias: delever, hold, or selective gear (decision)

Given your time to retirement and cashflow results, pick a bias:

• Bias to delever if you’re <10 years to retirement and cashflow is tight.
• Bias to hold / mild gearing if you have strong surplus income and high‑quality assets.
• Bias to selective re‑gearing only if you have a specific, time‑bound plan (e.g. final value‑add project before selling).

Step 5: Take one concrete action this week

Examples:

• Request payout figures and rate summaries from all lenders.
• Switch one IO investment loan to P&I to start slow de‑gearing.
• Put a hard cap on total debt repayments as a % of after‑tax income.
• Book a combined tax and lending review with someone who can see both sides.

Even one of these shifts you from reacting to policy changes to designing your exit from risk.

A structured one-week process can turn vague worry into a clear gearing plan.

Delever vs keep gearing: how I frame the trade‑off with clients

When I sit with a couple in their 50s or 60s, I’ll often draw two simple columns on a whiteboard.

If you prioritise deleveraging, you’re buying:

• lower mandatory outgoings and less reliance on work;
• more resilience against interest rate and policy shocks;
• simpler decisions later when health or energy levels change;
• more flexibility to help kids without risking your own security.

If you prioritise keeping or adding gearing, you’re buying:

• more exposure to property growth (good or bad);
• potentially higher long‑term net worth if things go well;
• more complexity when CGT events and new rules bite;
• a retirement plan that stays entwined with property markets.

There’s no universal right answer. But in this tax environment, with this level of uncertainty, the burden of proof has shifted onto keeping high gearing later in life.

If you can’t explain—in one or two sentences—why keeping significant leverage into your mid‑60s makes sense for you specifically, that’s usually your answer.

Key takeaways

• The 2026–27 reforms to CGT and negative gearing mean older investors can’t rely on tax breaks to justify holding or adding high debt.
• Most pre‑retirees should assume weaker tax benefits, model no negative gearing refunds and higher rates, and see if their portfolio still works.
• Deleveraging doesn’t mean selling everything; it often means selling passengers, clearing bad debt and keeping core assets with lower gearing.
• Keeping or adding gearing into your 50s and 60s can still work, but only with strong cashflow, high‑quality assets and a clear, time‑bound plan.
• The real goal is a retirement where your lifestyle isn’t hostage to interest rates, vacancies or the next Budget.

If you want a decision‑grade answer for your situation, not a generic rule of thumb, book a free 15‑minute strategy call. We’ll look at your loans, tax position and retirement timing together—your tax, your loan, one expert—and map out whether your next move should be to delever, hold, or selectively keep gearing. Book at: /book-strategy-call.

General advice only.