The 2026 / 2027 Australian Federal Budget includes Major Tax Changes that are Targeted at Property Investors
Most people in Australia were expecting changes to property taxes in this budget, due to widespread pre-budget media coverage.
The 2026–27 Australian Federal Budget introduced major changes to property investment taxes.
Primarily focusing on restricting negative gearing and overhauling the Capital Gains Tax (CGT) discount for residential properties.
These changes are formulated to target intergenerational inequity and cool investor demand.
The policies heavily favor “new builds” while winding back concessions for established dwellings.
The central idea is about trying to redistribute’intergenerational’ wealth by allowing younger people and first home buyers access to ‘home ownership’.
Reforming Negative Gearing
From 1 July 2027, negative gearing will be restricted to focus exclusively on boosting housing supply.
The New Build Rule: Investors who purchase newly constructed residential properties can continue to deduct net rental losses against their salary and other personal incomes.
Established Properties Quarantined: For established dwellings purchased after 7:30 PM AEST on Budget night (12 May 2026), rental losses can no longer be used to offset wages or ordinary income. Instead, these losses are “quarantined” and can only be offset against residential rental income or future capital gains from property. Unused losses can be carried forward indefinitely.
Grandfathering Exemptions: Any investment property acquired (or under binding contract) prior to 7:30 PM on 12 May 2026 is fully exempt and retains full legacy negative gearing rights until it is sold.
Capital Gains Tax (CGT) Overhaul
The long-standing, blanket 50% CGT discount for assets held over 12 months will be abolished on 1 July 2027 for most assets and replaced with an older, inflation-adjusted model.
Return to Indexation: Instead of halving the taxable gain, the property’s cost base will be indexed to inflation. Investors will effectively only pay tax on the real capital gain rather than nominal increases.
30% Minimum Tax Rate: A new minimum tax rate of 30% will be applied to capital gains to prevent high-income earners from deferring property sales until retirement to sit in lower tax brackets.
The New Build Incentive: Investors in newly constructed homes are exempt from the mandatory rollout—they retain the option to choose either the legacy 50% CGT discount or the new inflation-indexed method upon sale.
Pro-Rata Grandfathering: For established properties purchased before Budget night but sold after 1 July 2027, a dual formula applies. Capital gains accrued up to 1 July 2027 retain the 50% discount, while any gains generated after that date follow the new indexation and 30% minimum rules.
