2026-27 Federal Budget

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

Negative gearing will be limited to new builds from 1 July 2027, and the 50% CGT discount is being replaced with indexation plus a 30% minimum tax. The impact depends entirely on when you bought, what you bought, and what you do next.

If you already own

Grandfathered

Existing properties at 7:30pm 12 May 2026 keep negative gearing for life. CGT changes affect future gains only.

If you buy before 30 June 2027

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?

The negative gearing changes apply differently depending on when you bought (or buy) the property. Three groups, three quite different positions.

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. Knock-down rebuilds and substantial renovations don’t count as new builds. A previously-sold property doesn’t count unless it was first owned by the builder and unoccupied for less than 12 months.

Impact on you

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

The two changes in detail

Negative gearing and CGT — how each works

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.
1 July 2027 value Established either by valuation or an ATO apportionment formula. The transitional valuation matters.
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.

Unaffected

The four small business CGT concessions

The 15-year exemption, 50% active asset reduction, retirement exemption and rollover are all unchanged. Important for clients 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.

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 — the maths is now different

New builds keep both negative gearing and the optional 50% CGT discount. This is a deliberate policy nudge toward new supply, and changes the relative attractiveness of new vs established.

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 trust minimum tax from 1 July 2028 is a separate change that may affect how income from your property trust is taxed. Worth reviewing structure ahead of that date.

One thing to keep in mind

These changes are Budget announcements, not yet legislation. Consultation on the detail is expected, and start dates or scope could change as the legislation passes Parliament. Important irreversible decisions — particularly restructures — should wait for the legislation to settle. Smaller planning steps (like documenting your cost base) make sense now regardless.

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

The 50% CGT discount is being replaced with indexation and a 30% minimum tax on real gains.

Read about CGT changes If this applies

I run a business through a trust

A 30% minimum tax on discretionary trusts from 1 July 2028, with rollover relief to restructure.

Read about trust changes If this applies

I have a Self-Managed Super Fund

Division 296 from 1 July 2026 affects balances over $3 million. SMSFs are carved out of NG/CGT changes.

Read about SMSF changes If this applies

I’m a PAYG employee

Two more rate cuts plus a $1,000 instant deduction and the new $250 Working Australians offset.

Read about employee changes If this applies

I run a small business

$20,000 instant asset write-off made permanent, loss carry-back returns, PAYG flexibility.

Read about small business changes If this applies

I’m retired or close to it

Private health insurance rebate cut for 65+, CGT changes, pension supplement updates.

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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