Compliance

Preparing for the Reshaping of Negative Gearing and CGT: What Investors Should Know

The Budget 2026 announcement paves in sweeping reforms to negative gearing and capital gains tax, changing what kinds of property qualify and how gains are taxed from 1 July 2027—grasp the new rules now to stay ahead.

By NomadicTax Research Team • 5-8 min read • July 5, 2026

## What Are the Changes? Australia’s 2026-27 Budget introduced significant reforms to **negative gearing** and **capital gains tax (CGT)** aimed at boosting housing supply and improving fairness in the tax system.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) ### Negative Gearing Reforms - From **1 July 2027**, **negative gearing** (using rental losses to offset income from unrelated sources such as wages) will be **limited to “new builds”**. Established properties will no longer qualify unless bought before announcement (7:30pm AEST, 12 May 2026).([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) - For established dwellings acquired after announcement but before 30 June 2027: past losses can be used temporarily but will eventually be **ring-fenced**—only offset against income from residential properties (not wages or other non-residential income).([austax.tools](https://austax.tools/budget-2026-27/?utm_source=openai)) ### Capital Gains Tax (CGT) Reforms - The 50% CGT discount is being replaced with a regime that: * Allows for **cost-base indexation** (adjusting for inflation) to determine “real gains” * Sets a **minimum tax rate of 30%** on real capital gains (after inflation adjustment) for assets disposed of from 1 July 2027.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) - Transitional rules: Gains accrued before 1 July 2027 continue to be taxed under old rules; gains after that date under the new system. For ongoing holdings, either step-in the valuation at that date or apportion.([austax.tools](https://austax.tools/budget-2026-27/?utm_source=openai)) ## Who Is Affected Most? - **Property investors** in established dwellings: • Those who buy after the announcement (12 May 2026) and before 1 July 2027 will face ring-fencing for negative gearing losses. After 1 July 2027, they cannot use negative gearing unless the property is a new build.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) - **Investors in new builds** will largely retain current negative gearing deductions and have the choice between old CGT discount or new real gains treatment.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) - **Owners of assets held before 1 July 2027** – grandfathered for CGT gains before that date. Gains after treated under new rules.([austax.tools](https://austax.tools/budget-2026-27/?utm_source=openai)) ## How You Should Respond Now - Review your investment decisions if you’re planning to purchase property or hold assets. **New builds** will provide future flexibility with negative gearing. - If you own established properties, consider whether changes in cash flow or tax projections after July 2027 might affect your investment returns. - For trusts and those with discretionary trust income, assess the **30% minimum tax rate** coming from 1 July 2028. Rollover relief is available for three years from 1 July 2027 to ease restructuring.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) - When disposing of assets, plan around the transition date. Choosing valuations at the cutoff could reduce future tax liabilities. Consult financial advisers to decide whether to hold or sell before 1 July 2027 based on your holdings. ## Practical Examples **Example 1**: Jane bought an existing rental house on 15 May 2026. She will still be able to claim negative gearing until she sells it. After 1 July 2027, any rental losses can only be offset against other residential property income, not wages. Any capital gains will be split: pre-1 July 2027 gains using old discount, post-cutoff gains taxed under new real gains regime.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) **Example 2**: Sam wants to buy a property in 2027. He considers a new build vs established housing. Under new rules, only the new build would retain full negative gearing deduction. Also, when disposing in future, Sam has option between discounted gain or inflation adjusted gain + 30% minimum tax. Established property will face less favourable treatment.([budget.gov.au](https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf?utm_source=openai)) **Category**: Compliance **TaxHome**: Australia **Author**: NomadicTax Research Team **ReadTime**: 5-8 min **Published**: true