Key takeaways:
Under the proposed 2026 Budget reforms, negative gearing would be limited to eligible new builds from 1 July 2027.
Not every newly constructed property qualifies. Eligibility may depend on factors like occupancy history, dwelling numbers and ownership structure.
Off-the-plan apartments, house-and-land packages and qualifying duplex developments may remain eligible under the proposed rules.
Financing a new build often works differently to buying an established home, particularly for construction and off-the-plan purchases.
If you’re considering an investment property after the 2026 Federal Budget, the definition of a “new build” may become far more important than many buyers realise.
Under the government’s proposed tax reforms, negative gearing would be limited to eligible new builds from 1 July 2027. Investors purchasing eligible new builds may choose either the 50% CGT discount or the new CPI indexation and minimum tax arrangements when they sell.
But not every newly constructed property qualifies under the proposed rules.
The government’s definition is relatively specific, and in some cases, a property that appears “new” may not meet the eligibility requirements. Understanding the distinction before signing a contract could help buyers avoid unexpected tax or financing issues later.
Importantly, the reforms are still proposed and remain subject to legislation being passed.
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Why the proposed new build definition matters
The proposed reforms are designed to direct tax incentives toward adding new housing supply rather than competing for existing homes.
Under the proposal, investors purchasing eligible new builds may continue to access:
Negative gearing losses can still be offset against taxable income, including wages and salary
Access to the choice of CGT treatment at sale
The ability to offset losses against wages after 1 July 2027
Meanwhile, investors purchasing established properties after 1 July 2027 would no longer be able to negatively gear losses against wage income under the proposed changes.
For everyday buyers, that may influence:
which property types may become more attractive
how investors compare cash flow outcomes
where new housing demand increases
how lenders assess certain projects and property types
The practical impact will still depend on factors including interest rates, rental income, purchase price, holding costs, and individual tax circumstances.
As Aussie Broker Samantha Harvey noted, the proposed changes are already shifting how many investors approach the market.
“While new builds may become more attractive from a policy perspective, investors still need to ensure the property stacks up from a lending, growth and demand perspective; not just a tax one,” she said.
What is the government trying to achieve?
According to Treasury modelling released alongside the Budget, the proposed reforms are intended to:
reduce investor competition for established homes
support additional housing supply
encourage investment into newly constructed housing
The government estimates the changes could support around 75,000 additional Australians into home ownership over the next decade, while maintaining investor demand for new housing construction.
Independent economist Saul Eslake said the proposed changes will redirect investor demand.
“Retaining the tax breaks for investors in new properties whilst withdrawing them for investors in existing ones will prompt some skewing of investment towards new builds,” he said.
For buyers and investors, the bigger question may be practical: How do these proposed rules affect the type of property worth considering, and how should buyers assess the trade-offs?
That may include balancing:
potential tax treatment
borrowing capacity
construction risks
location fundamentals
cash flow sustainability
long-term resale demand
A property’s eligibility for tax concessions is only one part of the overall decision.
The core rule: does the property genuinely add to housing supply?
Under the proposed reforms, a property generally needs to add to Australia’s housing supply to qualify as an eligible new build.
The government has identified two main categories that would qualify:
1. Properties built on previously vacant land
This includes newly constructed homes, apartments, or townhouses developed on land that did not previously contain residential dwellings.
Examples may include:
house-and-land packages on vacant land
new apartment developments
newly developed townhouse estates on vacant land
2. Redevelopments that increase dwelling numbers
A knock-down rebuild may qualify where the redevelopment results in more dwellings than previously existed.
For example:
demolishing one house and building a duplex may qualify
demolishing one house and replacing it with another single house would not
The proposed rules are focused on increasing total housing stock, not simply replacing older homes with newer versions of the same dwelling count.
Eligible vs not eligible new builds: what qualifies under the proposed rules?
An eligible new build | Not an eligible |
|---|---|
Newly constructed apartment bought off-the-plan | Established home with renovations or extensions |
Duplex built through a knock-down rebuild replacing one single house | Single house replacing one existing house |
Residential construction on vacant land | Granny flat added to an existing property |
A newly built property occupied for less than 12 months before being first sold | Newly built property occupied for more than 12 months before sale |
First purchaser of an eligible new build | Subsequent purchaser of the same property |
(Source: Australian Government Budget 2026–27 — CGT and Negative Gearing factsheet)
Eligibility under the proposed rules may depend on the final legislation and how the property is structured and sold.
The key rules buyers may want to understand
You need to be the first purchaser
Under the proposed framework, the concessions would apply only to the first purchaser of an eligible new build.
That means a property may lose eligibility after its first sale, even if construction was recently completed.
A new build cannot have been previously sold, unless it was first owned by the builder and not occupied for more than 12 months before that first sale.
This is one area where contract timing and occupancy history may matter.
Knock-down rebuilds only qualify if supply increases
Not all redevelopments would qualify as eligible new builds. A redevelopment generally needs to increase dwelling numbers.
For example:
one house replaced with a duplex may qualify
one house replaced with one new house would not
For buyers considering duplexes, townhouses or small multi-dwelling projects, confirming the property structure and planning approval may become increasingly important.
Renovations and extensions do not qualify
Substantial renovations alone would not convert an established property into an eligible new build under the proposed rules.
That includes:
major extensions
internal refurbishments
cosmetic upgrades
adding bedrooms or living areas
Even large renovation projects would still generally be treated as established housing.
Affordable housing concessions remain
The existing 60% CGT discount for qualifying affordable housing investments would remain under the proposed reforms.
Further exemptions to the negative gearing changes may also be available for private investors who support government housing programs, for example through the provision of affordable housing.
However, eligibility requirements for affordable housing remain separate and may involve additional compliance obligations.
Commercial property is unaffected
The proposed negative gearing changes apply to residential property only. Commercial property investment arrangements would remain unchanged under the proposed reforms.
Eligibility under the proposed rules may depend on the final legislation and how the property is structured and sold.
What this may mean for common investment property types
Many off-the-plan apartments are likely to qualify, provided:
the development genuinely adds housing supply
the buyer is the first purchaser
occupancy requirements are met
But off-the-plan purchases also come with financing and valuation considerations that differ from established homes.
For example:
lenders assess borrowing capacity before settlement
property valuations may change between exchange and completion
buyers may need to contribute additional funds if valuations come in lower than expected
Understanding these risks before committing to a long settlement period can be important.
An Aussie Buyer’s Agent may also help assess whether a development aligns with the proposed eligibility rules and broader investment fundamentals beyond tax outcomes alone.
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House-and-land packages built on previously vacant land would generally qualify under the proposed rules.
These purchases are commonly financed through construction loans, which work differently to standard investment lending.
Construction loans typically:
release funds progressively during the build
charge interest only on drawn funds during construction
convert to a standard loan once construction is complete
For some buyers, staged lending can help manage cash flow during the build process. However, construction delays, valuation changes and cost overruns may still affect the overall project.
Buyers may also want to confirm:
the land was genuinely vacant
the contracts are structured correctly
the build meets eligibility requirements
An Aussie Broker can help explain how construction finance is assessed and structured by lenders.
Knock-down rebuilds and duplex projects
Multi-dwelling redevelopments may become more attractive under the proposed rules because they can increase housing supply while retaining eligibility for the proposed concessions.
However, these projects can also involve:
higher construction costs
more complex lending requirements
council approval risks
longer project timelines
Financing for duplexes and multi-dwelling projects may differ significantly from standard residential lending.
Depending on the scale of the development, lenders may apply different deposit requirements, valuation methods and serviceability assessments.
Aussie Broker, Matthew Hawley, said the proposed reforms may encourage investors to think more strategically about the type of property they purchase.
“There are still opportunities there in the construction space… there’s the opportunity to build and go down the path of picking up newer assets to get those tax benefits,” he said.
Granny flats
A granny flat added to an existing residential property would generally not qualify as an eligible new build under the proposed framework.
That’s because the concession applies at the dwelling level rather than the overall land parcel.
While granny flats may still improve rental income or flexibility for some owners, they would not typically access the proposed new build tax concessions.
Newly built properties purchased second-hand
This is one area that may catch some buyers off guard.
A newly constructed property that has already been sold once would generally lose eligibility for the proposed concessions, even if the building itself is still relatively new.
That means buyers considering recently completed resales may want to carefully verify:
ownership history
occupancy history
whether the property has already been sold previously
Financing a new build: what investors may want to understand
As investor demand potentially shifts toward newly constructed housing, financing structures may become increasingly important.
New builds are often financed differently to established homes, particularly where construction or delayed settlement is involved.
Construction loans, also known as a building loan, release funding in stages as building milestones are completed, such as:
slab
frame
lock-up
fixing
completion
Interest is usually charged only on funds already drawn during construction.
This can help reduce holding costs early in the project, although buyers still need to budget for:
rising interest rates
unexpected build delays
contingency costs
changes to borrowing capacity before completion
Off-the-plan lending
Off-the-plan purchases may involve long settlement periods between exchange and completion.
During that time:
lender policies can change
interest rates can move
valuations can fluctuate
personal financial circumstances may change
Some buyers may need to reassess their borrowing position closer to settlement.
Understanding how lenders manage valuation risk and pre-approval expiry can help buyers plan more conservatively.
House-and-land finance structures
House-and-land purchases often involve separate contracts for land and construction.
The financing structure can vary depending on:
the builder
lender policy
land registration timing
construction arrangements
Seeking guidance before signing contracts may help buyers understand how the overall funding structure works in practice.
An Aussie Broker can help buyers understand what type of loan you may be able to get for a new build purchase, and how the proposed Budget changes could apply to your borrowing strategy and potential tax benefits.
*Loan approval, borrowing capacity and investment suitability will depend on individual circumstances and lender criteria.
Questions worth asking before buying a proposed eligible new build
Before committing to a purchase, buyers may want to ask:
Is the property genuinely newly constructed?
Has the property already been sold previously?
Was it built on vacant land?
If it involved redevelopment, did the number of dwellings increase?
Has the property been occupied for more than 12 months before sale?
How will the loan be structured?
What happens if valuations change before settlement?
Are there construction, developer or settlement risks worth considering?
How do the cash flow outcomes look without relying solely on tax benefits?
A property that appears eligible at first glance may not necessarily qualify under the proposed rules.
Likewise, a financing structure that looks manageable initially may create pressure later if costs, valuations or lending conditions change.
Speaking with a broker, buyer’s agent or tax adviser before signing contracts may help buyers better understand both the opportunities and trade-offs involved.
What investors may want to consider
The proposed 2026 Budget reforms are designed to direct investor demand toward newly constructed housing, but the definition of a “new build” is narrower than many buyers may expect.
In general, off-the-plan apartments, house-and-land packages built on vacant land, and duplex developments that increase dwelling numbers are among the property types most likely to remain eligible under the proposed rules.
Meanwhile, single-home knock-down rebuilds, granny flats on established properties. renovated homes, second-hand purchases of new builds would generally not qualify under the proposed framework.
For buyers, the proposed changes may influence not just which property types look attractive, but also how financing, cash flow and long-term ownership costs are assessed.
Tax treatment is only one part of the equation. For many buyers, factors like loan structure, repayment flexibility, location quality and the ability to comfortably manage holding costs over time may matter just as much as the proposed tax treatment.
An Aussie Broker can help you understand how different lenders assess new build purchases, construction finance and off-the-plan lending depending on your circumstances.