Understanding the Changes
Australia’s 2026-27 budget makes significant changes for property investors, especially in terms of negative gearing and capital gains tax (CGT). From 1 July 2027, negative gearing will be limited to new builds. Existing properties (held before 7:30 pm AEST on 12 May 2026) will be grandfathered—meaning current arrangements remain until those properties are sold. (budget.gov.au) Meanwhile, the 50% CGT discount for individuals, trusts and partnerships is replaced with cost-base indexation and a minimum 30% tax rate on real gains from 1 July 2027. (budget.gov.au)
Strategic Planning Before 1 July 2027
To safeguard current opportunities:
- Lock in your investment arrangements early. Buy new builds before the deadline if you want to preserve full negative gearing benefits. (budget.gov.au)
- Sell underperforming assets now. CGT reforms apply to gains accruing after the cut-off; gains made before are still taxed under the current 50% discount. (community.ato.gov.au)
- Review property structuring. Discretionary trusts become less appealing with a 30% minimum tax from 1 July 2028. Fixed trusts or direct ownership may be worth considering. (budget.gov.au)
Illustrative Example(s)
| Scenario | Before Reforms | After Reforms (post-1 July 2027) |
|---|---|---|
| Investor owns established home since 2015; sells in 2028 | Eligible for CGT discount on full gain; negative gearing losses offset against other income. | Only portion of gain accrued after 1 July 2027 taxed under new indexation + minimum tax. Negative gearing treats losses differently (deductible only against residential property income). |
| Purchases new build in 2026 | Full negative gearing and CGT discount still apply. | Investor can choose either original 50% discount or new rules for CGT; full negative gearing preserved for the new build. |
Actionable Advice
- Review investment property contracts/settlements; act quickly before Budget night (12 May 2026 at 7:30 pm AEST) deadlines. (budget.gov.au)
- Maintain strong records of acquisition dates, improvement costs, and usage periods. These will be critical for determining what part of a gain falls under old vs new rules.
- Consult with tax advisors to explore trust restructure or ownership changes, especially if heading toward 2028 when trust minimum tax becomes effective.
- Monitor ATO’s guidelines on what qualifies as “new builds” and how cost-base indexation is calculated.
Bottom line: These reforms mark a tipping point in property investment planning. Acting ahead of the deadlines can preserve tax benefits; delaying may incur unwanted tax cost surprises.