If you own investment properties — or have been thinking about buying one — last night's Budget directly affects you.
The 2026–27 Federal Budget, delivered by Treasurer Jim Chalmers on the evening of 12 May 2026, is one of the most significant overhauls of the Australian tax system in nearly three decades.
In a single Budget, the Government has made changes to capital gains tax, negative gearing, trust distributions, superannuation, electric vehicles, research and development, and a range of cost-of-living measures.
Almost every one of our clients will be affected in some way.
Property Investors and Changes to Negative Gearing
If you own investment properties — or have been thinking about buying one — last night's Budget directly affects you.
The changes announced are significant and the decisions you make in the next twelve months could materially affect your financial outcome. There are two major changes you need to understand:
- The changes to negative gearing; and
- The reform to capital gains tax.
These 2 changes are separate measures, but they interact with each other — and together they shift the economics of property investment more than any single Budget measure since the introduction of the CGT discount in 1999.
Existing Investment Properties
If you already own a negatively geared investment property, your ability to offset rental losses against your other income — including salary and wages — continues unchanged for as long as you hold that property.
The grandfathering is permanent and unconditional.
Nothing about your current arrangements needs to change on this front.
But the capital gains picture is different.
The CGT changes apply to all assets — including properties you already own. From 1 July 2027, any capital gain that accrues on your investment property after that date will be taxed under the new rules, not the old ones.
Here is what that means in practice.
When you eventually sell a property you currently own, the total gain will be split into two portions:
• The gain accrued up to 30 June 2027 — taxed under the current rules, with the 50% CGT discount applying in full.
• The gain accruing from 1 July 2027 onwards — taxed under the new rules, using cost base indexation and subject to a 30% minimum tax.
The longer you hold the property after 1 July 2027, the larger the portion of the gain that falls under the new, less generous rules.
What this means for you:
You do not need to make any immediate decisions about your existing properties.
But the CGT change does alter the economics of a long-term hold.
We recommend reviewing the expected holding period for each property you own so we can model the tax outcome under both scenarios.
The New Rules on Established Residential Properties
For established residential properties acquired after Budget night, from 1 July 2027 the tax treatment of rental losses changes.
What has changed?
Instead of being able to offset those losses against your salary or other income, they can only be deducted against:
1. Rental income from other residential properties, or
2. Capital gains from residential properties.
Excess losses are carried forward to future years — they are not permanently lost — but the immediate tax benefit of negative gearing against salary income disappears for these properties.
The New Rules on New Builds
If you purchase a newly constructed property — one that genuinely adds to Australia's housing supply — full negative gearing deductions against all income remain available.
The Government's intent is clear:
The tax incentive is being redirected toward investment that increases the housing supply, not investment in existing stock.
The Combined Effect of Both Changes to Negative Gearing
For a high-income earner considering a new established investment property purchase, the economics have shifted on two fronts simultaneously:
1. The annual cash flow benefit of negative gearing against salary is gone from 1 July 2027; and
2. The eventual capital gain will be taxed more heavily.
A new build avoids both restrictions.
What this means for you
If you are considering acquiring another investment property, the comparison between an established property and a new build has fundamentally changed. In many cases, a new build will now produce a significantly better after-tax outcome even if the purchase price is higher. Please contact us before committing to anything
NOTE: Contracts entered into before 7:30pm on 12 May 2026 — including those not yet settled — are covered by the grandfathering provisions.
What Should You Do Now?
If you own existing investment properties:
No immediate action is required on the negative gearing front — your arrangements are protected. The CGT question is worth reviewing, particularly if you have been thinking about selling within the next few years. We can model the tax outcome under both the current and new rules for each property.
If you are considering selling a property:
Before 1 July 2027, the full 50% CGT discount applies to the entire gain to date. After that date, only gains accrued before 1 July 2027 attract the discount. The decision to sell before or after that date is not straightforward and depends on your individual circumstances. Do not sell — or decide not to sell — without modelling the numbers first.
Other Federal Budget 2026/27 Blogs
Click here to view our Blog on The Budget's Changes to Capital Gains Tax
Click here to view our Blog on The Budget's Individual Tax Measures
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