Rules Just Changed: Why Smart Investors Are Looking at Commercial Property

Australia's investment landscape in 2026 is undergoing a shift that is less visible, but profound enough.

While most discussion centres on tax reform and sentiment swings in the residential market, commercial property is being placed back on the table by a group of investors. Not because they are chasing a trend, but because the rules themselves have changed.

The "default playbook" for residential investment has been rewritten

Let's start with what actually happened.

The core changes in the 2026 Federal Budget can be summarised in one sentence: the tax advantages of residential investment are contracting.

Negative gearing has been limited to new residential builds. Investors in established residential properties can no longer offset rental losses against other income. The 50% CGT discount has been replaced by inflation indexation plus a minimum tax rate.

At the same time, discretionary trusts — the long-standing "default holding structure" for  property investment — will face a 30% minimum tax on distributions from 1 July 2028.

This is not a judgment that "residential is going to fall." It is a fact that after the rules changed, the relative position of different asset classes has been repriced.

Commercial property's return structure happens to sit on the opposite side of the new rules

The key lies in where the returns come from.

Residential investment returns have historically relied heavily on capital growth. Yields typically sit between 3% and 4%, with the bulk of returns coming from price growth.

Commercial property has a different return structure — rental income carries significantly more weight. Its returns come primarily from consistent, predictable rental cash flow.

This difference matters under an inflation-indexed CGT regime. Indexation only taxes real capital gains — the portion of growth above inflation. Commercial property's capital growth has historically tracked at or only slightly above inflation, meaning the taxable real gain is small, and the effective tax rate is naturally lower.

Knight Frank's analysis states it clearly: the tax reforms will "significantly tilt the playing field in favour of commercial property."

At the same time, commercial property's negative gearing treatment remains unchanged. Loss deductions on established residential properties have been curtailed, but commercial property losses can still be offset against other income. This is a genuine advantage of commercial property relative to residential under the current tax settings.

Layer on one more structural factor: prime commercial space in core Sydney, particularly office and industrial, has extremely limited new supply. High construction costs and constrained development feasibility mean the underlying logic for rental growth over the coming years is solid. When demand exists and supply cannot respond quickly, pricing power naturally shifts toward asset holders.

Commercial lending: different logic, but a clear pathway

Many investors stop at the impression that "commercial lending is complex." The reality is that commercial and residential lending do operate within different frameworks — but the framework is not hard to understand.

Lenders assess the core fundamentals: the quality of the property itself, tenant stability, lease length and terms, and whether the rent sufficiently covers repayments. This differs from residential lending, which looks at the borrower's income — commercial lending looks more at whether the asset itself can speak.

This leads to two fast track lending pathways that are critically important for many clients: Low Doc and Lease Doc.

Low Doc works on the logic of: no full tax records required; alternative documents verify income instead. It suits self-employed borrowers, trusts, or business owners. Acceptable alternatives include an accountant's declaration, BAS, or business bank statements.

Lease Doc takes the logic one step further: the lender does not look at the borrower's personal or business income at all — only the property's lease. The core question is: can the rent from this lease cover the loan repayments? If it can, the loan stands.

The significance of this distinction: for investors with complex financial positions who hold quality leased properties, Lease Doc offers a financing pathway based on asset quality rather than personal tax history. It is not circumventing scrutiny — it is switching to a more rational assessment basis.

Holding structure: an issue that needs to be planned before 2028

Commercial property is rarely held in individual names. The core reason is risk isolation — risks such as tenant default, property liability, and environmental compliance need to be isolated within a company or trust structure.

But after the 2026 Budget, "using a trust" — the long-standing default option — needs to be re-examined. The government has provided a three-year transition rollover relief from 1 July 2027, allowing entities to restructure out of discretionary trust structures. But restructuring itself involves costs such as stamp duty — it is not free.

This is not a question of "whether to use a trust," but rather: "in your specific circumstances, which structure remains optimal after 2028?"

What MoreMore Finance can do

The investment logic of commercial property is clear, but execution involves many forks in the road: company or trust? Full Doc or Lease Doc? Which lender has a stronger preference for your specific property type?

These are not questions that can be solved by AI search engine.

MoreMore Finance specialises in commercial lending for Australian market. This means we have focused judgment on different lenders' preferences, the assessment logic for different property types, and the applicability of different documentation pathways.

Our job is not to "submit an application for you," but to get the structure and pathway right before the application is lodged.

If you are considering commercial property, or simply want to know which lending pathway your situation can access, we welcome you to book a strategy conversation. No sales pitch — just numbers and options.

Book a commercial lending strategy conversation.