How the Federal Budget Could Accelerate the Shift from Residential to Commercial Property

Federal Budgets often create winners, losers, and plenty of uncertainty.

For residential property investors, much of the discussion has centred around negative gearing, borrowing capacity, and tax changes.

But what about commercial property?

Interestingly, one of the biggest takeaways from the latest Budget may be that commercial property was largely left alone.

In this episode of the Commercial Property Investing Podcast, Arjun Paliwal, Chris Huxter, and Jack Fouracre explored how the Budget impacts commercial investors, what trust structure changes could mean for future acquisitions, and why some investors are already reconsidering how they allocate capital across their portfolios.

The discussion revealed that while commercial property may not have received significant direct changes, the indirect effects could reshape how many investors think about commercial assets over the coming years.

What Happened

This episode examined the Federal Budget through a commercial property and lending lens.

While much of the media attention focused on residential property taxation, the panel discussed why commercial property investors may be among the least impacted groups.

The conversation covered:

• Proposed trust distribution changes.

• Commercial ownership structures.

• Land tax considerations.

• Borrowing capacity impacts.

• Commercial lending trends.

• Investor behaviour following the Budget.

A major theme throughout the episode was that "no change" can often be a positive outcome, particularly when compared to sectors facing significant policy uncertainty.

Key Findings

1. Commercial property was largely untouched by the Budget

One of the most immediate observations from the discussion was that commercial property itself received very little direct attention.

Unlike residential property, commercial assets were not significantly impacted by proposed changes to negative gearing or capital gains tax treatment.

For many commercial investors, that stability may prove valuable.

The panel suggested that maintaining existing settings could actually strengthen commercial property's relative attractiveness as investors seek certainty in an increasingly uncertain environment.

2. Trust structures may face greater scrutiny

While commercial property itself remained largely unchanged, trust structures became a major talking point.

Many commercial investors hold assets through discretionary or family trusts.

Under the proposed changes, the ability to distribute income to lower-income beneficiaries or bucket companies may become significantly less attractive.

The discussion highlighted that while legislation has not yet been finalised, investors should begin understanding how future changes could impact existing structures and future acquisitions.

3. Commercial investors may increasingly use company structures

One of the strongest themes throughout the episode was the potential shift toward company ownership structures.

Because commercial properties are often positively geared from the outset, many of the lending advantages traditionally associated with trust ownership become less significant.

The panel suggested that future commercial purchases may increasingly occur through company structures supported by trusts or shareholders where appropriate.

For many investors, this could provide greater simplicity while still supporting long-term portfolio growth objectives.

4. Land tax can create significant differences between ownership entities

The conversation highlighted an important distinction many investors overlook.

In New South Wales, company ownership structures may benefit from land tax thresholds that family trusts do not receive.

For example, a company may receive access to the applicable land tax threshold before liabilities arise, while certain trust structures may become liable from the first dollar above the relevant assessment rules.

Depending on asset values, this difference can translate into meaningful annual savings.

The episode reinforced that ownership structures influence far more than tax distributions alone.

5. High-income investors may be less affected than first-time investors

Jack explained that many high-income professionals and business owners already purchase through structures or have sufficient borrowing capacity to absorb policy changes.

The investors likely to feel the greatest impact are those who rely heavily on negative gearing benefits within their personal names to maximise borrowing power.

For experienced investors with substantial equity positions, the practical effects may be far less significant than media headlines suggest.

6. Smaller lenders could become major beneficiaries

One of the more interesting observations related to lender behaviour.

The panel noted that some lenders have already adjusted policies despite legislation not yet being finalised.

As larger institutions take a more conservative approach, smaller lenders and non-bank lenders may become increasingly competitive.

The discussion suggested that investors who work with experienced finance professionals may uncover lending opportunities that are not immediately available through traditional channels.

7. Commercial property remains a retirement and income strategy

A recurring theme throughout the conversation was the role commercial property plays within a long-term wealth plan.

According to Arjun, many investors build wealth through residential property but ultimately seek income through commercial assets.

Residential property often excels at capital growth.

Commercial property often excels at generating cash flow.

The episode reinforced the idea that different asset classes can serve different purposes at different stages of an investor's journey.

8. More investors may transition capital from residential into commercial property

One of the most practical observations came from client conversations already occurring after the Budget announcement.

Chris shared examples of investors who had not previously planned to expand their commercial holdings but were now actively exploring the possibility.

As policy changes create uncertainty around residential investing, some investors may choose to recycle equity or capital into commercial assets sooner than originally planned.

The discussion suggested that this trend may continue if commercial property remains relatively insulated from future policy changes.

Action Steps

If you're a commercial investor or considering commercial property as part of your strategy, consider the following:

• Review your ownership structures with qualified accounting and legal professionals.

• Understand how proposed trust changes may affect future distributions.

• Assess whether company ownership structures could provide advantages for future acquisitions.

• Review land tax implications across different ownership entities.

• Speak with finance professionals about lender policy changes and borrowing capacity.

• Evaluate whether commercial property aligns with your income and retirement objectives.

• Consider how existing residential equity may support future commercial opportunities.

• Focus on long-term portfolio outcomes rather than reacting solely to policy headlines.

While the Budget may have introduced uncertainty for some residential investors, commercial property remains largely unchanged.

For many investors, that stability may become one of the sector's most attractive features as they plan the next stage of their wealth-building journey.

If you'd like help understanding how commercial property could fit into your long-term investment strategy, book a discovery call with InvestorKit.