2026-27 Federal Budget

What the Budget means if you own (or are buying) an investment property

Start with one date. If you held the property at 7:30pm AEST on 12 May 2026 — including under a contract signed but not yet settled — you are grandfathered, and negative gearing continues under the existing rules for as long as you hold it. If you bought after that moment, rental losses on established residential property will be quarantined from 1 July 2027. Separately, the 50% CGT discount is replaced with indexation plus a 30% minimum tax from the same date. All of this is now law.

Current as at 28 August 2026. Tax law is changing rapidly following the 2026–27 Budget. Measures marked Passed — awaiting assent, Before Parliament, Consultation or Announced are not law and may change or not proceed.

Held at 7:30pm 12 May 2026

Grandfathered

Including contracts signed but not settled. Negative gearing continues under existing rules for as long as you hold it. The CGT changes still apply, but only to gains accruing after 1 July 2027.

Acquired after 12 May 2026

Short window

Negative gearing on established property is available now, but only until 30 June 2027 — not for the life of the asset.

If you buy from 1 July 2027

New builds only

No negative gearing on established residential property. New builds retain it. SMSFs are exempt.

Which group are you in?

The first thing to work out: when did you buy?

Law — Tax Reform No. 1 Act 2026, assented 26 June 2026

The negative gearing changes apply differently depending on when you bought (or buy) the property. Three groups, three quite different positions. The acquisition cut-off is already operative even though the loss quarantining does not start until 1 July 2027.

Law Passed and assented. Plan around it.

Passed — awaiting assent Through both Houses; commences on Royal Assent.

Before Parliament Introduced, not yet passed.

Consultation Treasury paper or exposure draft only.

Announced Budget announcement. No draft, no paper.

You bought before 7:30pm AEST on 12 May 2026

Including contracts signed but not yet settled before that time. You’re fully grandfathered for negative gearing — you can continue to deduct rental losses against other income until the property is sold, regardless of when that is.

The CGT changes still apply to gains accruing from 1 July 2027, but the 50% discount remains on gains up to that date. Values will need to be established as at 1 July 2027 (either by valuation or an ATO apportionment formula).

Impact on you

Minimal — provided you keep the property. Plan ahead for CGT timing.

You buy an established property between now and 30 June 2027

You can negatively gear during this window — but only until 30 June 2027. From 1 July 2027, rental losses on established property purchased in this window can only offset other residential property income, not your salary.

This is the most easily misunderstood group. The grandfathering applies to pre-12 May 2026 purchases only. Properties bought between 13 May 2026 and 30 June 2027 do not get lifetime negative gearing — only a short window.

Impact on you

Be very deliberate about purchase decisions in this window.

You buy an established property from 1 July 2027

No negative gearing against other income. Rental losses from established property can only be offset against other residential property income (rent or capital gains on residential property), and can be carried forward.

New builds remain negatively geared — but nobody can yet tell you exactly what a “new build” is. The definition is still in an exposure draft and is not law. See the section below before you assume a project qualifies.

Impact on you

Established property must be cash-positive (or close to it) to make sense.

The gap in the law

“New build” has no legal definition yet

Consultation — exposure draft only

The entire new-build carve-out — from both the negative gearing restriction and the CGT changes — depends on a definition that does not yet exist in legislation. Treasury released an exposure draft in early August 2026 and consultation closed on 21 August 2026. As at 28 August 2026 no bill has been introduced.

If you are planning a knock-down rebuild, do not assume you qualify

The organising principle in the draft is whether the dwelling genuinely adds to housing supply. On the criteria under discussion, demolishing one dwelling and replacing it with one dwelling looks unlikely to qualify. Demolishing one and replacing it with two separately titled dwellings looks more likely to. Neither outcome is settled, and a development decision made now on the strength of the current draft carries real risk.

The draft also proposes that a property counts as new where it is acquired within 24 months of the occupancy certificate being issued — longer than the 12-month window flagged at Budget time, to allow for builder inventory sales. That is an indication of direction, not a rule you can rely on.

If a project only works financially because it qualifies as a new build, that is a conversation to have with us before you commit — and, on most numbers we have seen, a reason to wait for the legislation.

The two changes in detail

Negative gearing and CGT — how each works

Law

These are two separate reforms that take effect at the same time. Negative gearing is about what you can deduct each year. CGT is about what happens when you eventually sell.

Change 01

Negative gearing limited to new builds

From 1 July 2027, rental losses from established residential property can only be offset against other residential property income, not against your salary or other income.

Before announcement Grandfathered. Properties owned at 7:30pm AEST 12 May 2026 (including contracts signed) keep negative gearing for life.
12 May 2026 to 30 June 2027 Transitional. Established properties bought in this window can be negatively geared until 30 June 2027, then not.
From 1 July 2027 New builds only. Established residential property cannot be negatively geared against other income.
Excess losses Carried forward and able to be offset against future residential property income, including capital gains on residential property.
SMSF carve-out Properties held in widely-held trusts and superannuation funds (including SMSFs) are excluded from these changes.

Change 02

CGT discount replaced with indexation

From 1 July 2027, the 50% CGT discount is replaced by cost base indexation (real gains adjusted for inflation), with a 30% minimum tax rate on net capital gains.

Before 1 July 2027 50% discount preserved. Gains accruing before 1 July 2027 keep the existing discount on sale.
From 1 July 2027 Indexation + 30% minimum. Real (CPI-adjusted) gains taxed at marginal rate, with a 30% floor.
Split treatment Assets owned at 1 July 2027 use 50% discount for pre-1 July 2027 portion, new method for post-1 July 2027 portion.
Deemed disposal Every CGT asset you hold at 30 June 2027 is treated as sold and immediately reacquired just before 1 July 2027. No tax is payable at that point — it is a mechanism for splitting the gain, not a taxing event.
1 July 2027 value The split is normally based on market value at 1 July 2027, with an alternative apportionment method available by election. The apportionment method assumes even growth across your ownership period — so where growth was concentrated before 30 June 2027, a formal valuation will usually produce a better result. The valuation evidence is the thing to get right.
Pre-1985 assets Now caught. Pre-CGT assets (acquired before 20 September 1985) are included from 1 July 2027 — though gains accrued before that date remain exempt.
New builds Investors can choose the 50% discount or the new indexation method, whichever is better.

A change that surprises most clients

Pre-1985 assets are no longer forever-exempt from CGT

Assets acquired before 20 September 1985 have always sat outside the CGT regime. From 1 July 2027, that ends — though the impact is more measured than the headline suggests.

What changes — and what doesn’t

Pre-CGT assets — the family farm bought in the 1970s, the holiday house held since 1982, the long-held investment property — have always been outside CGT entirely. Under the new rules, they’re brought into the CGT net from 1 July 2027. This affects clients who have planned (and structured their estates) on the basis that these assets would never trigger CGT.

The key relief: only gains accruing after 1 July 2027 will be taxed. The full pre-1 July 2027 appreciation — in many cases, the bulk of the gain on a 40-year-old asset — remains CGT-free. The cost base resets to market value at 1 July 2027, and only future appreciation gets indexed and taxed under the new method.

For clients with significant pre-CGT holdings, establishing a defensible 1 July 2027 valuation matters enormously. Get it right, and the historic gain stays exempt. Get it wrong, and you risk a much larger taxable gain when you eventually sell.

What this doesn’t change

Important carve-outs and exemptions

Several common property investment strategies are unaffected. Worth knowing what these changes don’t apply to.

Unaffected

SMSFs holding investment property

Negative gearing remains in SMSFs. Property held in your SMSF can still be negatively geared within the fund. A Treasury official also confirmed in the Budget Lockup that SMSFs will continue to receive the 33⅓% CGT discount on disposals — effectively a 10% tax rate on discounted gains in accumulation phase.

Unaffected

Commercial property

The negative gearing changes apply only to residential property. Commercial property — offices, retail, industrial — remains fully negatively gearable against other income. The CGT changes still apply to commercial property as a CGT asset.

Unaffected

Main residence exemption

The CGT main residence exemption is unchanged. Your principal place of residence remains exempt from CGT in the usual way.

Partly changed

The four small business CGT concessions

Three are unchanged: the 15-year exemption, retirement exemption and rollover keep the existing $2M aggregated turnover / $6M net asset tests. The 50% active asset reduction is different — from 1 July 2027 its turnover test rises from $2M to $10M, so more businesses will qualify for that concession alone. Relevant when selling business premises.

Unaffected

Shares and other investments

Negative gearing on shares, managed funds and other non-residential investments is not affected. The CGT changes do apply to these — see the shares page for more.

Announced

Property received on death, divorce or forced separation

Announced — not finalised

The Government has said it intends to preserve existing negative gearing access where an investment property passes from a spouse on death, divorce or forced separation — so that a surviving or separating spouse does not lose grandfathering simply by inheriting or receiving the property. This relief has not been finalised and is not in the legislation. If a property is likely to change hands this way, raise it with us rather than assuming grandfathering carries across.

Carve-out

Build-to-rent and affordable housing

Targeted exemptions apply for build-to-rent developments and private investors supporting government housing programs (such as affordable housing programs).

Worked example

A typical investor selling in 2029–30

How the CGT change actually works in practice for a property bought before announcement and sold a couple of years after the new rules start.

Michael — investor on a 39% marginal rate

Bought 2018 for $450,000, sells 2029–30 for $560,000

Michael’s property was purchased well before announcement, so he keeps negative gearing for the life of the property. He sells two years after the policy starts. He uses ATO tools to establish a 1 July 2027 value of $500,000.

Pre-1 July 2027 portion Old method

Purchase price (2018)	$450,000
Value at 1 July 2027	$500,000
Gross gain	$50,000
Less 50% CGT discount	− $25,000
Taxable gain	$25,000
Tax at 39% (Medicare incl.)	$9,750

Post-1 July 2027 portion New method

Cost base (1 July 2027)	$500,000
Indexed cost base (2.5% CPI × 2yr)	$525,312
Sale price (2029–30)	$560,000
Real (indexed) gain	$34,688
Tax at 39% (above 30% floor)	$13,529
Total tax on this portion	$13,529

Total CGT for Michael: $23,279. Under the old 50% discount method applied to the full $110,000 gain, the tax would have been around $21,450. So Michael pays about $1,800 more — modest, because most of his gain accrued before the new rules. For properties with longer post-1 July 2027 holding periods, the gap widens.

The 30% minimum tax usually doesn’t bite for property investors

If you’re on the 30% or higher marginal tax rate (i.e. earning over $45,000), the 30% minimum tax floor doesn’t actually change your outcome — you’re already above the floor. It mainly catches investors on lower marginal rates (e.g. retirees, low-income spouses) who previously realised gains to take advantage of lower brackets. That income-splitting CGT strategy is largely dead from 1 July 2027 unless the recipient is on an income support payment.

What you should do

Practical steps for each group

Different actions for different positions — some immediate, some over the next 12 to 24 months.

If you own a pre-1985 asset — get a valuation now

Pre-CGT assets are being brought into the CGT net from 1 July 2027. The historic gain stays exempt, but you’ll need a defensible market value at that date. The further you leave this, the harder it gets — especially for unique or hard-to-comp assets like rural land.

If you already own — document your cost base now

For post-1985 properties, gather improvement records, settlement statements and any prior valuations before the transition date. The same 1 July 2027 valuation question applies, just with a smaller stakes gap than for pre-CGT assets.

If you’re considering buying established property — talk first

The window between now and 30 June 2027 only gives you about 14 months of negative gearing on an established property purchase. The maths often won’t stack up. Work the numbers before signing.

If you’re considering new builds — check the definition risk first

New builds are intended to keep both negative gearing and the optional 50% CGT discount, which changes the relative attractiveness of new versus established. But the definition of a new build is still only an exposure draft. Knock-down rebuilds in particular should not be assumed to qualify.

If you have an SMSF — consider the relative advantage

SMSFs are exempt from the NG and CGT changes, which makes them relatively more attractive than personal-name property from 1 July 2027. The underlying suitability questions still need to stack up — this isn’t a green light, just a changed comparison.

If you hold property through a trust — check the wider picture

The proposed trust minimum tax from 1 July 2028 is a separate change that may affect how income from your property trust is taxed. It is at consultation stage only, with no bill. Worth understanding your exposure, but not a reason to restructure yet.

What is settled, and what isn’t

The negative gearing restriction and the CGT changes on this page are law — Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Royal Assent 26 June 2026. The 12 May 2026 acquisition cut-off already operates. These are not proposals and planning should assume they will happen.

Two things are not settled: the definition of a new build, which is still an exposure draft, and the relief for property transferred on death, divorce or forced separation, which has been announced but not finalised. If a decision turns on either of those, wait or come and see us. Everything else on this page — documenting your cost base, getting valuation evidence in order for 1 July 2027 — makes sense to do now.

Mastin Harris Family Wealth Protection

How will your property pass on to the next generation?

The Budget’s grandfathering of pre-12 May 2026 properties only lasts while you hold them. Transferring property to a spouse, child or testamentary trust can trigger CGT events and lose the grandfathered position. Estate planning matters more — not less — after these changes.

Learn more →

Other Budget changes that might apply to you

Property investors often fit more than one of these

Most property investors also hold shares, run a business, or have an SMSF. Other Budget changes may compound or offset the property impacts.

If this applies

I hold shares or other investments

Now law from 1 July 2027. The 50% discount is replaced with CPI indexation and a 30% minimum tax.

Read about CGT changes If this applies

I run a business through a trust

A proposed 30% minimum tax on discretionary trusts from 1 July 2028. Consultation stage — no bill.

Read about trust changes If this applies

I have a Self-Managed Super Fund

Division 296 has commenced, and from 10 August 2026 SMSFs can no longer borrow to buy residential property.

Read about SMSF changes If this applies

I’m a PAYG employee

All law: the rate cut on the $18,201–$45,000 bracket, the $1,000 instant deduction and the $250 offset.

Read about employee changes If this applies

I run a small business

Permanent $20,000 write-off and loss carry-back passed Parliament 19 August 2026. PAYG changes announced only.

Read about small business changes If this applies

I’m retired or close to it

The private health rebate cut for over-65s is a bill before Parliament, not law. CGT changes and Division 296 are law.

Read about retirement changes

See the real after-tax cost of your property — not just the headline.

The Budget figures above are stylised. Your actual position depends on when you bought, what you paid, your marginal rate, your other income, your plans for the property and how you’re structured. We can run the numbers for your circumstances.

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