The 2026 Federal Budget: What Changed for Property Investors and How to Respond

The 2026–27 Federal Budget, announced on 12 May 2026 and now law, changed two core tax settings for property investors. From 1 July 2027, negative gearing for residential property is limited to new builds, and the 50% CGT discount is replaced by indexation with a 30% minimum tax. Existing holdings are largely protected, so review your strategy before acting.

Update (3 November 2026): This article was first published on 15 May 2026, when the measures were Budget announcements. The ATO now confirms “these measures are now law”, under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (royal assent 26 June 2026; the changes take effect from 1 July 2027) and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (ATO).

The changes at a glance

Sources: Treasury, Budget 2026–27; Budget 2026–27 Tax Explainer: Negative Gearing and Capital Gains Tax Reform (PDF); ATO.

What to do first: review your strategy

Tax settings change; the fundamentals of a good investment don’t. Before acting on the Budget, work through these steps with your advisors:

1. List your holdings and their status. Note which established properties were held or under contract at 7:30pm AEST on 12 May 2026. These keep current negative gearing treatment until sold.
2. Model after-tax cash flow under the rules that apply to you. For a future purchase of an established property, assume rental losses won’t reduce tax on your salary from 1 July 2027.
3. Re-test holding capacity. If a property relies on a tax refund to be affordable, check your buffer against higher rates and vacancy.
4. Review exit timing and CGT. For assets owned before 1 July 2027, gains up to that date keep the 50% discount and later gains use indexation. Record evidence of value at 1 July 2027.
5. Choose assets on fundamentals. Location, tenant demand, supply and growth drivers matter more than ever when tax benefits are narrower. Our guide on how to choose the best suburb for property investment explains how to assess them.

Negative gearing: the detail

Negative gearing occurs when the deductible costs of an investment property exceed its rent. Until now, that loss could offset salary and other income.

• Held at announcement: established properties held at 7:30pm AEST 12 May 2026 (including contracts entered but not yet settled) can continue to be negatively geared until sold.
• Bought between announcement and 30 June 2027: may be negatively geared during that period, but not from 1 July 2027.
• Bought from 1 July 2027: established properties can’t be negatively geared against other income.
• Losses aren’t lost: excess losses can be carried forward to offset residential property income, including capital gains, in future years.
• Scope: only residential property is affected. Commercial property and shares remain under existing arrangements.

Capital gains tax: the detail

• From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced by CPI-based cost base indexation and a 30% minimum tax rate on capital gains.
• Assets bought and sold before 1 July 2027 are unaffected. Assets bought after that date are treated wholly under the new rules.
• For assets owned before and sold after 1 July 2027, the 50% discount applies to gains up to 1 July 2027 and the new rules apply to later gains.
• The value at 1 July 2027 can be set by a valuation or by an apportionment formula; the ATO will provide tools.
• The main residence exemption continues, and the 60% discount for qualifying affordable housing is retained.

What counts as a new build

Under the Tax Explainer, new builds are residential properties that genuinely add to supply:

Subsequent buyers of a new build can’t access negative gearing or the 50% discount for that property.

Weighing new builds against established property

New builds keep negative gearing and offer a CGT choice, but tax treatment is only one factor. Weigh it against:

• Location and land content: many new builds are in growth corridors or apartment precincts with significant future supply.
• Resale market: later buyers won’t receive the same tax treatment, which may affect demand from investors at resale.
• Construction and settlement risk: off-the-plan purchases can face delays and valuation shortfalls.
• Rental demand: a tenant pays the same rent regardless of tax settings.

An established property in a supply-constrained location with strong rental demand may still suit your goals better, even without negative gearing against wages. The right answer depends on your cash flow, timeframe and portfolio. For more on how negative gearing fits a strategy, read negative gearing in 2026.

Key takeaways

• If you held investment property at 7:30pm AEST on 12 May 2026, it keeps current negative gearing treatment until sold.
• Established properties bought after that time lose negative gearing against wages from 1 July 2027.
• The 50% CGT discount is replaced for gains accruing from 1 July 2027.
• Losses can be carried forward against future residential property income and gains.
• Review your strategy and model your numbers before making irreversible decisions.

Talk through your plan

Equimax Property Investment Advisors is a national advisory, helping investors across Australia build long-term portfolios through strategy, planning and research. To review how the changes affect your plan, book a strategy session or call 1300 943 232. The strategy session takes 60 minutes.