Key takeaways:
Federal Budget 2026 changes negative gearing and CGT for property investors
Negative gearing on established homes ends for new purchases from 1 July 2027
The 50% CGT discount will be replaced with CPI-based indexation from July 2027
Treasury estimates the reforms could help 75,000 Australians enter home ownership
Property investors are facing some of the most significant changes to Australia’s investment tax settings in decades, following the 2026-2027 Federal Budget , handed down by Treasurer Jim Chalmers on 12 May 2026.
The Budget announced proposed reforms to both negative gearing and capital gains tax (CGT), two of the most widely used strategies in Australian property investment. The impact will look different for every investor, depending on factors like the type of property they own, when they bought it, their cash flow position and their long-term goals.
“The 2026–27 Budget introduces significant reforms targeting inflation and long-term economic productivity,” Chalmers said. “The budget is about adapting to the uncertain circumstances facing Australia’s economy.”
CTA: Speak with a local Aussie Broker to understand how the announced changes may affect your borrowing power and home loan options.
What was announced in the Federal Budget 2026?
The Budget announced several measures that will directly affect property investors:
Negative gearing deductions for losses on established residential properties purchased after 7:30pm AEST on 12 May 2026 are proposed to be restricted, with further changes from 1 July 2027
The 50% CGT discount is proposed to be replaced with CPI-based cost base indexation for affected gains from 1 July 2027, subject to legislation.
A proposed minimum 30% tax rate on certain capital gains from 1 July 2027
A minimum 30% tax on discretionary trusts from 1 July 2028
The foreign buyer ban on established homes extended until mid-2029
Together, these measures are designed to improve housing affordability and encourage investment in new supply.
“We’ll invest another $2 billion in the power, roads and drains needed for new housing developments, which will help build around 65,000 new homes over the next decade,” Chalmers said.
“These changes will level the playing field for workers and first home buyers, and support investment in productive assets, including new housing supply.”
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The government estimates the CGT and negative gearing changes may support an additional 75,000 Australians into home ownership over the next decade, equivalent to reversing around 10 years of declining home ownership rates. (Source: budget.gov.au — Tax Reform factsheet)
What’s changed with negative gearing?
One of the most significant changes is to negative gearing, which will be limited to newly built properties from 1 July 2027. The transition is staged across three tiers depending on when you purchased.
What negative gearing is: when the cost of owning an investment property, including loan interest and expenses, s higher than the rental income it brings in. Investors can typically claim that loss as a tax deduction.
Example: If an investor earns $25,000 a year in rent but spends $35,000 on loan interest and property expenses, they may currently deduct the $10,000 loss from their taxable income. Under the proposed rules, that deduction against wages will no longer be available for established properties purchased after 7:30pm 12 May 2026.
When you purchased | Negative gearing treatment |
|---|---|
Before 7:30pm AEST 12 May 2026 | Fully grandfathered with no change, can continue to negatively gear until sold |
Between 12 May 2026 and 30 June 2027 | Can negatively gear during this window, but deduction against wages stops from 1 July 2027 |
From 1 July 2027 onwards (established homes) | Cannot negatively gear against wages or other income |
New builds — any purchase date | Full negative gearing retained, before and after 1 July 2027 |
(Source: budget.gov.au — CGT and Negative Gearing factsheet)
Grandfathering provisions are expected to play a key role in how the reforms apply to existing investors, allowing existing investors to keep the current tax rules for properties they already own.
Investors buying established properties after budget night will still be able to deduct losses against other residential property income and carry forward any unused losses to future years, they just cannot offset those losses against wages or salary. The changes only apply to residential property. Commercial property is not affected.
What qualifies as a new build?
This matters more than it may seem. The definition of an eligible new build is specific, not all newly constructed properties qualify, and neither do all knock-down rebuilds.
Under the official government definition, an eligible new build must genuinely add to housing supply:
Eligible new build | Not an eligible new build |
|---|---|
Newly constructed apartment bought off-the-plan | An established property recently extended with additional bedrooms |
A duplex built through a knock-down rebuild replacing a single house | A single house rebuilt through a knock-down rebuild replacing one older house |
Any residential construction on previously vacant land | A granny flat built adjacent to an established property |
A newly built property occupied less than 12 months before first sale | A newly built property occupied more than 12 months before being sold to an investor |
Importantly, only the first purchaser of a new build can access negative gearing and the CGT concession choice. Subsequent purchasers of that same dwelling cannot. (Source: budget.gov.au — CGT and Negative Gearing factsheet)
What’s changed with capital gains tax?
The 50% CGT discount is being replaced with CPI-based cost base indexation and a 30% minimum tax on real capital gains, effective from 1 July 2027.
This applies to CGT assets held for at least 12 months by individuals, partnerships and trusts, including property and shares. For assets held before 1 July 2027, gains are split between pre- and post-commencement periods, and the ATO will provide tools to help calculate the 1 July 2027 value.
How the tax impact varies by return:
According to Treasury analysis in the official factsheet, based on an asset purchased for $500,000 in July 2027 and held for 10 years at 2.5% inflation:
An investor earning a 5% annual return may pay around $8,075 more in tax
An investor earning a 2.5% return (no real gain above inflation) may actually pay $24,858 less in tax
An investor earning a 7.5% annual return may pay around $58,851 more in tax
(Source: budget.gov.au — CGT and Negative Gearing factsheet)
Example of selling a property bought before 1 July 2027:
An investor buys a property before 1 July 2027 and later sells it. The 50% CGT discount applies to any gain accrued up to 1 July 2027. For gains accruing after that date, CPI indexation and the minimum 30% tax apply. The ATO will provide tools to help investors calculate the split.
Example of CGT on shares:
An investor buys shares for $100 on 1 July 2027 and sells them five years later for $125, a 4.6% annual return. With inflation at 2.5% annually, the indexed cost base is $113. The taxable gain reduces from $25 to $12 under indexation.
The existing 60% CGT discount for qualifying affordable housing investments is fully retained. The four small business CGT concessions are also unchanged.
You might also be interested in: Your financing options for your investment property
What do the changes mean for existing property investors?
For current investors, the most important factor is whether they owned their investment properties before 7:30pm AEST on 12 May 2026. Existing properties are fully grandfathered, including where a contract has been entered into but not yet settled at the time of announcement.
Budget 2026 change | Existing investors | Potential impact from 1 July 2027 |
|---|---|---|
Negative gearing limited to new builds | Existing properties fully grandfathered | Current deductions remain for all properties held before 12 May 2026 |
Established homes bought 12 May 2026 to 30 June 2027 | Can negatively gear until 30 June 2027 | Deduction against wages stops from 1 July 2027; losses carry forward against property income |
CGT discount replaced with CPI indexation | Applies to gains accruing after 1 July 2027 only | Tax impact varies depending on returns and inflation; may be higher or lower than current settings |
New builds retain full concessions | Investors in new builds can choose best CGT treatment at sale | May increase investor interest in new housing stock |
(Source: budget.gov.au — Tax Reform | CGT and Negative Gearing factsheet)
The changes may encourage some investors to focus more heavily on rental yield, cash flow and long-term growth potential rather than relying on tax concessions alone.
Alternative markets advisor, investor and founder, Rachel Hind, said the changes may shift the way Australians think about building wealth over the long term.
“People will start investing in shares, managed funds, and other businesses,” she said. it could fundamentally shift the mindset of Australians, who have largely relied on property to grow their wealth.”
“If you look at other countries, and I lived in Singapore for four years, property is not the dominant wealth strategy. People buy property to live in, and then they invest in shares, managed funds, and businesses to grow wealth. Property is just a small part of the portfolio.”
An Aussie Broker can help you understand how the confirmed changes may affect your borrowing power and investment plans. If you are reassessing your property strategy under the announced changes, an Aussie Buyer's Agent can also help you identify properties that align with your investment goals, whether that is finding the right new build, assessing rental yield potential or understanding which markets may suit a cash flow-focused approach.
What do the changes mean for new or potential investors?
For Australians considering entering the property market as an investor, the proposed rules shift what makes a property financial attractive.
From 12 May 2026, investors buying established homes can no longer offset losses against wages. From 1 July 2027, only new builds will qualify for full negative gearing. That may shift more investor focus toward new housing stock, particularly as the government aims to increase supply.
“If you're wanting tax benefits, then an existing property may not be the option if that's what you're buying for,” said Aussie Broker, Matthew Hawley.
“There's the opportunity to build and go down the path of picking up newer assets to get those tax benefits.”
The CPI-based CGT change may also affect after-tax returns when selling in future, making loan structure, property selection and long-term planning more important considerations.
Rental yield and cash flow
Access to new-build tax concessions
Property location and long-term demand
Loan flexibility and borrowing capacity
Long-term capital growth potential
Economists say the reforms are more likely to reshape investor behaviour than remove investors from the market entirely.
As ANZ Head of Australian Economics Adam Boyton noted in an ANZ Federal Budget 2026-27 webinar, “people respond to incentives… [and] will try and find an alternate way to achieve the same outcome if they can.”
Are there still opportunities for property investors?
While the proposed reforms represent one of the biggest changes to investment tax rules in decades, opportunities remain for investors who adapt their approach.
From 1 July 2027, investors purchasing eligible new builds retain full negative gearing and the choice of CGT treatment at sale. That may increase interest in:
House-and-land packages on vacant land
Off-the-plan properties that genuinely add supply
Knock-down rebuilds that replace one dwelling with multiple dwellings*
Build-to-rent developments
*Knock-down rebuilds replacing a single home with another single home, or granny flats added to established properties, do not qualify under the official new build definition.
Strong population growth, tight rental markets and ongoing housing shortages in some areas may continue supporting rental demand and long-term investment potential.
Treasury modelling suggests the reforms are expected to cause house prices to grow around 2% less over a couple of years relative to no policy change, described as small and temporary.
Sophie Hayek, Aussie Buyer’s Agent General Manager, said the reforms may shift investor focus away from tax-driven decision making and back towards underlying property fundamentals.
“For a long time, many Australian investors were taught to view property primarily through the lens of tax outcomes,” she said. “The challenge with that approach is that tax incentives can improve the performance of a strong asset, but they rarely rescue a poor one. As policy settings change, investors will need to focus more heavily on the underlying fundamentals of a property”
Hayek added investors who adapt successfully are more likely to focus more closely on rental yield, vacancy rates and long-term demand.
“The investors who will navigate this environment well are the ones who make the shift from tax-led decision making to fundamentals-first,” she said.
“That means being clear about yield, vacancy rates, and genuine long-term demand in the markets you're targeting, before you think about the tax treatment. That analysis is what a buyer's agent brings, and right now, getting it wrong is a lot more costly than it used to be."
PRD Chief Economist Dr Diaswati Mardiasmo noted the impact may not be uniform across the market.
“Around 68 to 70% of Australians with investment properties only own one, so the impact may be limited,” she said.
For investors reassessing their approach, working with an Aussie Buyer's Agent may help identify properties that offer strong rental yield, genuine new build eligibility and long-term demand — particularly in markets where those factors are harder to assess independently. An Aussie Broker can then help you understand how any purchase may affect your borrowing capacity and overall loan structure.
How the changes may affect your borrowing capacity
Lenders assess investment loans using strict servicing buffers. If negative gearing deductions on established properties are reduced, net disposable income may fall, annual tax refunds may reduce, and borrowing capacity for future purchases may be affected.
According to the official factsheet, around 1% of tax filers acquire negatively geared properties each year, approximately 230,000 individuals in 2022-23. The reforms are targeted at future investment decisions, with existing investors fully protected.
Cash flow sustainability is likely to become a more important consideration than tax minimisation under the announced changes. An Aussie Broker can help you review your borrowing position and understand how the changes may affect your capacity to hold, refinance or expand your portfolio.
Investing through an SMSF or managed fund?
Investors using SMSFs or widely held managed investment trusts should note that these structures are specifically excluded from the negative gearing changes. The CGT changes will still apply to gains from 1 July 2027, so it is worth discussing the impact with your SMSF adviser or financial planner.
Holding property in a trust?
Investors who hold property through a family trust should be aware of two separate changes. First, the negative gearing changes apply to most trust structures. Second, a minimum 30% tax on discretionary trusts takes effect from 1 July 2028, with rollover relief available for three years from 1 July 2027.
Speak with your accountant or financial adviser if you hold investment property through a trust.
Key dates for investors
Date | What happens | Source |
|---|---|---|
7:30pm AEST 12 May 2026 | Negative gearing restricted for new purchases of established homes from this moment | |
30 June 2027 | Last day established properties bought after 12 May 2026 can be negatively geared against wages | |
1 July 2027 | Negative gearing fully limited to new builds; CPI-based CGT discount and 30% minimum tax apply to gains from this date | |
1 July 2028 | 30% minimum tax on discretionary trusts begins | |
Mid-2029 | Foreign buyer ban on existing homes scheduled to end |
Speak to Aussie about your next move
The 2026 Budget changes have been announced and timing matters, particularly for investors considering a purchase now or before 1 July 2027. An Aussie Broker can help you understand what these changes mean for your borrowing capacity and loan structure. If you are also reassessing which properties to target under the proposed rules, an Aussie Buyer's Agent can help you find the right fit, from new build eligibility to rental yield and location.