Tax Planning
How the 2026 Tax Reforms in Australia Affect Your Investment Property Strategies
The Budget 2026–27 introduces sweeping changes to negative gearing and the capital gains tax (CGT) discount—timing and property type matter now more than ever.
By NomadicTax Research Team • 5-8 min read • June 24, 2026
## Understanding the Upcoming Changes
In the 2026–27 Australian Federal Budget, significant reforms were announced aimed at **negative gearing** and the **50% CGT discount**:
- Negative gearing for residential property will be **limited to new builds** from **1 July 2027**. Properties acquired (or contracts entered) before **7:30pm AEST on 12 May 2026** are grandfathered. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
- The 50% CGT discount will be **replaced** from **1 July 2027** with **cost base indexation** for assets held more than 12 months, paired with a **minimum 30% tax** on realised gains. Only new builds will retain an option to use the old discount or the new indexation. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
## Who Will Be Most Impacted
- Property investors who focus on existing (established) residential properties—since deductions for operating expenses and interest will shrink.
- Trusts and partnerships with property investments since changes to deductions and capital gains hit them just as hard.
- First-home buyers and builders of new housing should find the old model less attractive, depending on geography and market.
## Strategies to Consider
| Strategy | What to Do | Why It Matters |
|---|---|---|
| **Act Before 12 May 2026 Deadline** | Lock in property purchases (or contracts) for established homes before 7:30pm AEST 12 May 2026 to retain existing tax benefits. | After this, negative gearing limited; CGT rules change; preserving old benefits can mean thousands in deductions. |
| **Pivot to New Builds** | Seek investment in newly constructed residential property, where full deductions and old CGT discount will still apply—or at least have the choice to use the old rule. | New builds are exempt, meaning investors retain more favorable tax treatment. |
| **Re-evaluate Investment Structuring** | If operating via discretionary trusts, consider restructuring into fixed trusts or companies—expanded rollover relief is available from **1 July 2027** to assist. | Discretionary trusts will face a minimum 30% tax on distributions from that date. Restructuring helps avoid some of the burden. ([austax.tools](https://austax.tools/budget-2026-27/?utm_source=openai)) |
## Actionable Example
> **Scenario**: Sarah owns two properties: one existing home bought in 2018, one new build contracted in March 2026.
- Sarah holds onto the existing home—she continues current negative gearing and CGT discount for that property.
- For the new build, after it’s completed, she can choose between the old 50% CGT discount or the new cost base indexation + minimum tax approach.
- If she expects high appreciation or long hold period, quantify both scenarios: the new rules may bite if inflation (and thus indexation) is high but income tax savings from negative gearing will still exist for new builds.
## Final Thoughts
These reforms represent among the most important shifts in housing taxation in over 25 years. For investors willing to act quickly and smartly before the policy cliffs on 12 May 2026 and 1 July 2027, there are options. But passive or slow-to-respond strategies, particularly in trusts or existing properties, will likely incur heavier tax burdens.