Announced in the 2026-27 Federal Budget on 12 May 2026 and due to start 1 July 2027. The enabling legislation was still before Parliament at the time of writing — final details may change. This is general information, not tax advice.
If you own an investment property — or are planning to buy one — the May 2026 Federal Budget has delivered the biggest shake-up to property taxation in a generation. Negative gearing will be restricted for established homes but preserved for new builds, and the 50% capital gains discount will be replaced with inflation indexation. Here is what was announced, in plain English, so you can understand exactly how your property portfolio and tax strategy may be affected.
How negative gearing and the CGT discount work today
Under the current rules, if your rental property runs at a loss (rent minus interest, rates, insurance, maintenance and depreciation), that loss reduces your other taxable income — including your salary. That is "negative gearing". When you sell, holding the asset for over a year currently halves the taxable capital gain — the "50% CGT discount".
What changes from 1 July 2027 for property investors
1. Negative gearing is quarantined for established homes
For established residential properties purchased after 7:30pm AEST on 12 May 2026, rental losses will no longer be deductible against salary or other income from 1 July 2027. Instead, losses are carried forward — usable only against future rental income from residential property, or against the capital gain when you eventually sell.
A worked example: an investor earning $120,000 buys an established unit in late 2026 that runs $13,000 a year negative. Today, that loss comes off their salary income at tax time — worth roughly $4,000-$5,000 back in their pocket. From 1 July 2027, there is no annual refund: the $13,000 banks up year after year and is only used when the property turns cash-flow positive or is sold.
2. New builds keep full negative gearing deductions
Losses on a new home — including off-the-plan and house-and-land — remain deductible against salary and other income, exactly as now. This is deliberate policy: the Government wants investor capital directed at adding housing supply, not competing for existing stock. Combined with Queensland's zero transfer duty for first home buyers on new homes and the federal ban on foreign purchases of established dwellings, virtually every policy lever now points the same way: toward new stock.
3. The 50% CGT discount becomes inflation indexation
For assets acquired from 1 July 2027, the 50% discount for individuals, trusts and partnerships is replaced with cost-base indexation — you are taxed only on your "real" gain above inflation, with the announcement flagging a minimum 30% rate on those real gains. Assets already owned keep the 50% discount for gains accrued before 1 July 2027, with indexation applying after — which makes a market valuation around the transition date genuinely valuable paperwork. Buyers of new dwellings can reportedly choose between the old and new methods.
Which property investors are NOT affected by the changes
- Existing investors are grandfathered. Properties owned — or under a signed contract — before 7:30pm on 12 May 2026 keep today's negative gearing treatment until they are sold.
- New-build buyers, as above.
- Super funds (including SMSFs) and managed investment trusts are excluded, and there are carve-outs for build-to-rent and government housing programs.
One grey area flagged by tax professionals: moving out of your own home and renting it out after 12 May 2026. Whether such properties fall on the "grandfathered" side is exactly the kind of detail the final legislation will settle — get personal advice before restructuring anything.
How smart property investors are responding now
- Not panicking. Nothing changes before 1 July 2027, grandfathered properties are unaffected until sale, and the measure still has to pass Parliament.
- Re-running the numbers on cash flow, not tax breaks. If an established purchase only works because of the annual tax refund, it will not work after 1 July 2027. Our free cash flow calculator shows the true after-tax weekly cost of a property under your own assumptions.
- Looking harder at new stock. New builds now carry negative gearing, full depreciation benefits (2.5% a year of construction cost for 40 years, plus fixtures and fittings) and the CGT method choice. Browse the new and off-the-plan projects we currently have access to.
- Getting documents in order. Depreciation schedules and transition-date valuations will do more heavy lifting than ever.
- Booking time with an accountant before acting on any of this — every structure and income situation is different.
General information only, current as at 1 September 2026 and based on Budget announcements that were not yet law. Not financial or tax advice — consult a registered tax agent about your circumstances.
