The May 2026 Federal Budget announced the biggest changes to property investment tax settings in decades. Both measures have since been legislated and start on 1 July 2027. If you own, or are thinking about buying, an investment property, here's what's changing.
This is general information only. Tax outcomes depend on your circumstances, so talk to your accountant before acting.
The two changes
1. Negative gearing limited to new builds
Negative gearing lets investors deduct rental losses (when interest and costs exceed rent) against other income, like salary.
From 1 July 2027, this will be limited to new residential builds. For established properties bought after the cut-off, rental losses won't be deductible against other income in the same way.
2. CGT discount replaced
Currently, individuals who hold an asset for more than 12 months generally get a 50% discount on capital gains.
From 1 July 2027, the 50% discount is being replaced with cost base indexation (adjusting the purchase price for inflation) and a 30% minimum tax rate on gains. For individuals, trusts and partnerships, gains accruing after 1 July 2027 will be taxed under the new rules.
What's grandfathered
According to the ATO:
- Negative gearing: properties owned at the time of the announcement, 7:30pm AEST on 12 May 2026, keep their existing negative gearing treatment.
- CGT: only gains that accrue after 1 July 2027 are subject to the new rules.
So if you already owned an investment property on Budget night, your negative gearing position is protected. Gains up to 1 July 2027 keep the current treatment.
Who's most affected
- Investors buying established properties after 12 May 2026 who rely on negative gearing to make cash flow work
- High-income investors for whom the tax deduction was a big part of the strategy
- Investors planning to sell after 2027 with large expected gains
Who's less affected
- Owner-occupiers. Your own home is generally exempt from CGT under the main residence exemption, and you don't negatively gear a home you live in. Confirm your situation with your accountant.
- Investors buying new builds, which remain eligible for negative gearing.
- Positively geared investors, whose rent covers their costs.
- Existing investors, for negative gearing purposes.
Practical questions we're hearing
"Should I buy an established investment property now?"
The tax benefit of negative gearing on a newly purchased established property is limited for purchases after 12 May 2026. Focus on cash flow, yield and long-term growth rather than tax.
"Should I buy new instead?"
New builds keep negative gearing. But new properties can have lower capital growth, and off-the-plan purchases carry valuation and completion risks. Don't let tax drive the whole decision.
"What about refinancing my existing investment loan?"
Grandfathering is linked to the property you held. Refinancing to a better rate shouldn't in itself change that, but restructuring, cash-out or re-borrowing could raise questions. Get tax advice before restructuring.
"Should I sell before July 2027?"
Possibly, depending on your gains, income and plans. Selling has costs too: agent fees, the tax itself and stamp duty if you buy again. Get advice.
How this affects lending
Lenders assess investment loans on rental income and your ability to repay, not tax deductions in detail. But some lenders factor in negative gearing benefits when calculating serviceability. As the rules change, expect some lenders to adjust how they treat tax benefits for new purchases of established properties.
Frequently asked questions
Is this law yet?
Yes. The ATO states the changes were enacted through the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026.
Do the changes affect shares too?
The CGT changes apply to capital gains more broadly, not just property. Speak to your accountant.
What counts as a "new build"?
The legislation sets out the definition. Generally, newly constructed dwellings that haven't been previously sold as residential premises. Check the specifics before relying on it.
Reviewing your investment strategy after the Budget changes? Call Finfident on 0424 545 654. We'll work with your accountant to structure your lending properly.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Figures, rates and scheme rules are current as at October 2026 and can change. Finfident Finance Brokers (ABN 94 679 280 801) is Credit Representative 569374 of Outsource Financial Pty Ltd (ACN 131 090 705), Australian Credit Licence 384324.