2026 Budget Impact: Property flipping into Private Credit

2026 Budget Impact: Property flipping into Private Credit

If you were thinking of buying a, say, a $2 million property to renovate and flip in 18 months, Labor’s 2026 budget just made that a perilous strategy, while also making investing in an AA rated Private Credit Fund way more attractive.

The 2026 Federal Budget has significantly shifted the goalposts for you. If you haven’t signed a contract yet, you are stepping into a very different tax environment than the one that existed last week.

In the current 2026 climate, a private credit fund returning 7.22 per cent as at 31 March 2026*, is almost certainly the superior choice for a $2 million allocation over an 18-month horizon.

*Returns are net of fees and assumes reinvestment of distributions. Past performance is not a reliable indication of future performance. Inception date 4 October 2022.

According to our assessment, property flipping has, thanks to Labor, become a ‘hero’s errand’ compared to the steady clip of private credit.

The 2026 Budget: Flipping the bird at Property Investors

If you were looking to buy after May 12, 2026, you are going to be hit by two specific changes that gut the traditional property flipping model:

• Quarantined Losses: If you are buying an ‘established’ property, you can no longer offset your holding costs (interest on any finance, council rates, insurance) against your salary. These carrying costs or losses are now ‘quarantined’ and can only be used to reduce the eventual capital gain. This creates a larger 18-month cash-flow drag that didn’t exist before.
• The CGT Cliff: The new rules kick in on July 1, 2027. Any profit you make after that date will be subject to the new regime (cost-base indexation + 30 per cent minimum tax) rather than the simple 50 per cent discount. While there are transitional arrangements, the administrative headache and the likely higher tax bill at the tail end of your profit make the maths uglier.

And none of this considers the massive entry and establishment costs. Just to break even on a property renovation flip, you have to overcome:

• Stamp Duty: on a $2 million property that’s roughly $110,000–$130,000 (depending on the state) gone the moment you sign.
• Selling Costs: Agent fees and marketing at 1.5-2.5 per cent will eat up to another $55,000.
• Renovation & Holding Costs: Assuming a $200k renovation and $100k in holding costs, you need the property to sell for at least $2.5 million just to break even.
• Market Sentiment: Treasury modelling predicts the government’s budget changes will dampen established house prices by about 3 per cent. You are essentially trying to flip into a headwind.

Private Credit: The good news gets better.

In a double AA-rated private credit fund earning, say, 7.22 per cent per annum, your $2 million is working for you from Day 1 without you needing to pick up a hammer or deal with a council permit.

Conclusion

The property flip requires you to manufacture circa $500,000 in value over 18 months just to compete with the after-tax return of the credit fund.

In a market where tax benefits for established homes have just been stripped away, finding a property that can support that kind of “forced appreciation” is statistically unlikely.

Unless you are a licensed builder who can do the work for the cost of materials and a slab of beer, the 7.5 per cent for no work offered by private credit has just become a lot more appealing following the 2026 Labor Federal Budget.

Disclaimer:

You should read the relevant Product Disclosure Statement (PDS) or Information Memorandum (IM) before deciding to acquire any investment products.  

Past performance is not a reliable indicator of future performance. Returns are not guaranteed and so the value of an investment may rise or fall.  

This information is provided by Montgomery Investment Management Pty Ltd (ACN 139 161 701 | AFSL 354564) (Montgomery) as authorised distributor of the Aura Core Income Fund (ARSN 658 462 652) (Fund). As authorised distributor, Montgomery is entitled to earn distribution fees paid by the investment manager and may be issued equity in the investment manager or entities associated with the investment manager.  

The Aura Core Income Fund (ARSN 658 462 652)(Fund) is issued by One Managed Investment Funds Limited (ACN 117 400 987 | AFSL 297042) (OMIFL) as responsible entity for the Fund. Aura Credit Holdings Pty Ltd (ACN 656 261 200) (ACH) is the investment manager of the Fund and operates as a Corporate Authorised Representative (CAR 1297296) of Aura Capital Pty Ltd (ACN 143 700 887 | AFSL 366230).   

You should obtain and carefully consider the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the Aura Core Income Fund before making any decision about whether to acquire or continue to hold an interest in the Fund. Applications for units in the Fund can only be made through the online application form that accompanies the PDS. The PDS, TMD, continuous disclosure notices and relevant application form may be obtained from www.oneinvestment.com.au/auracoreincomefund or from Montgomery.  

The Aura Private Credit Income Fund is an unregistered managed investment scheme for wholesale clients only and is issued under an Information Memorandum by Aura Funds Management Pty Ltd (ABN 96 607 158 814, Authorised Representative No. 1233893 of Aura Capital Pty Ltd AFSL No. 366 230, ABN 48 143 700 887).  

Any financial product advice given is of a general nature only. The information has been provided without taking into account the investment objectives, financial situation or needs of any particular investor. Therefore, before acting on the information contained in this report you should seek professional advice and consider whether the information is appropriate in light of your objectives, financial situation and needs.    

Montgomery, ACH and OMIFL do not guarantee the performance of the Fund, the repayment of any capital or any rate of return. Investing in any financial product is subject to investment risk including possible loss. Past performance is not a reliable indicator of future performance. Information in this report may be based on information provided by third parties that may not have been verified. 

MORE BY RogerINVEST WITH MONTGOMERY

Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.

Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances. 

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.