Mum-and-dad investors say tax grab forces them to hike tenant rents

Investors Prabhat Kumar and his wife Ashvini Bharti say they want to look after their tenants. Picture: Tim Hunter

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Investors Prabhat Kumar and his wife Ashvini Bharti say the federal government has broken their trust, leaving them little choice but to slap their tenants with rent hikes to survive a brutal tax overhaul.

Over a rapid nine-month period between October 2023 and June 2024, the hardworking parents of two partnered with InvestorAid director Rohit Gehlot to secure four regional properties across Queensland and Western Australia.

While the portfolio, purchased for between $493,000 and $610,000, has generated strong equity, the homes remain negatively geared.

Now, with holding costs exploding and sudden tax changes shifting the goalposts mid-game, the Kumars, of Doonside, say they have been backed into a corner.

The couple says the government has broken their trust. Picture: Tim Hunter.

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“Most landlords really want to look after our tenants, but at the same time, you have to see how sustainable those properties will be when expenses go through the roof,” Mr Kumar said.

He said mum-and-dad investors bleeding cash to high interest rates traditionally had two solutions: sell the property or raise the rent.

But the government had effectively slammed the door on selling.

Because their existing investments are grandfathered under the new rules, Mr Kumar said selling now would mean being hit with higher capital gains taxes and losing their negative gearing buffer if they tried to reinvest.

“If everyone goes out to sell now, then there will be less investors in the market. Then the question is, if I want to sell, what do I do with that money?” the IT worker said.

“The only option is to hold that property, and to make it sustainable, the only other option is to raise that rent.”

They planned to build wealth for their future but now feel trapped. Picture: Tim Hunter.

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Mr Kumar said the government was pulling the rug out from under everyday Australians trying to build financial independence.

“You make a decision on a certain set of rules, but down the line if those rules change, it completely changes your paradigm,” he said.

“We trust their words, and they have veered from their path. They are breaking that trust.”

Mr Gehlot said the government’s tax grab risked triggering a massive supply shock.

While landlords clung to their current properties to preserve their tax break, any rental homes hitting the market would likely be swallowed by owner-occupiers taking advantage of government incentives, wiping them the rental pool and causing prices to rise again on the back of heightened tenant demand.