Negative Gearing & CGT Are Changing: What Property Investors Need to Know

The 2026-27 Federal Budget, handed down on 12 May 2026, proposed the biggest shake-up to property investment tax in a generation: negative gearing limited to new builds, and the 50% capital gains tax (CGT) discount replaced. The changes are not law yet and are intended to start on 1 July 2027 – but if you own an investment property or plan to buy one, the time to understand them is now.

Negative gearing: new builds only

From 1 July 2027, the Government proposes to limit negative gearing to newly built homes. The detail that matters most:

Anything you already own is safe. Properties held before Budget night (12 May 2026) keep their current negative gearing treatment – they are grandfathered.
New builds keep full negative gearing. Buy a new build after Budget night and you can still deduct rental losses against your other income, including wages.
Established homes bought after Budget night change. You can still deduct losses, but only against other residential property income – not against your salary. Unused losses carry forward to future years.

Capital gains tax: discount replaced by indexation

The 50% CGT discount for assets held more than 12 months is proposed to be replaced from 1 July 2027 with two things: cost-base indexation (your purchase cost is lifted for inflation) and a 30% minimum tax on net capital gains. Transitional rules mean only the gain that accrues from 1 July 2027 onwards is affected – gains built up before then keep the current 50% discount.

What it means in practice

For existing investors the headline is reassurance: property you already hold is largely protected. The bigger impact is on future decisions – whether to buy established or new, how long to hold, and the timing of any sale. For higher-income earners, the shift from a flat 50% discount to indexation plus a 30% floor can change the maths on a sale significantly.

What to do now

Do not rush a decision based on rules that are not yet law – but factor them into anything with a 2027-and-beyond horizon
Keep clear records of your cost base and the value of holdings around key dates – indexation and transitional rules make this matter
If you are weighing established vs new, or considering a sale, model both the current and proposed rules before you commit
Review how your investments are owned – individual, joint, trust or SMSF – as the changes affect each differently

These are proposals, and the detail can change as legislation is drafted. We will keep clients updated as it progresses – but property investors should be planning with both the current and proposed rules in mind.