Case Studies
Understanding the New Negative Gearing & CGT Reforms: A Case Study for Property Investors
From July 2027, negative gearing will be limited to new builds and big swings to CGT will apply. This case study walks through implications for investors with existing and new properties.
By NomadicTax Research Team • 5-8 min read • September 16, 2026
## Overview of the Reforms
The Budget 2026-27 introduces sweeping changes to both **negative gearing** and **capital gains tax (CGT)**:
- From **1 July 2027**, negative gearing for residential property will be **limited to new builds**. Properties acquired after **7:30pm AEST on 12 May 2026** will be affected. Properties held before that are “grandfathered.” ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7493&utm_source=openai))
- The **50% CGT discount** for individuals, trusts and partnerships will be replaced with a **cost-base indexation method** and a **minimum 30% tax on real capital gains**, for gains accruing from 1 July 2027. Investors in new builds will be able to choose either the old 50% discount or the new method. Existing gains accrued before that date stay under old rules. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
## Case Study: The Wilsons’ Property Portfolio
| Property | Acquisition date | Type | Under old rules | Under new rules (if bought after 12 May 2026) |
|---|---|---|---|---|
| Property A | 2010 | Established house | Negative gearing allowed; CGT discount 50% applies | No change (grandfathered) |
| Property B | 2028 | New build | N/A | Negative gearing allowed; CGT discount or new indexation + 30% minimum tax |
| Property C | 2025 | Established but sold in 2028 | Negative gearing until 2027; 50% discount on gains accrued before 1 July 2027, then new rules apply for latter gains |
## What this means financially
- **Current investors** with established properties bought before 12 May 2026 will continue using negative gearing deducting losses against all income, and use 50% CGT discount for gains accruing over threshold, but only for periods before 1 July 2027.
- **New investors** (new builds): can access negative gearing and either CGT treatment. Must plan timing: decide whether traditional discount is more beneficial or choose new method depending on expected holding period and profit.
- Investors in **established property post-budget** will be restricted: losses only deductible against rental income, not other income like wages; excess losses to be carried forward to offset future residential income. CGT for those properties will use new framework.
## Strategic considerations
- **Holding period matters**: gains before 1 July 2027 will receive benefit of the old rules. Declaring sale just after that date could mix treatments—advice recommended.
- **New builds supply incentives**: developers or investors may be more likely to target new builds, or convert projects to qualify under “new build” definition to retain favourable treatment.
- **Complex structures**: Trusts, partnerships, super funds have carve-outs: widely held trusts, super funds, including SMSFs, will be excluded from negative gearing limits. Must verify how legal structure interacts. ([budget.gov.au](https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf?utm_source=openai))
## Recommendations for Property Investors
1. Review your portfolio against the cutoff date (12 May 2026). Know which properties are grandfathered and which will be affected.
2. Before entering new property investment contract, check whether it qualifies as a “new build” under the reforms.
3. Consult advisors to model tax outcomes under both CGT frameworks for estimating gain, especially if holding period spans the change date.
4. Consider tax impacts beyond income tax—such as cash flow, financing, valuation in new builds versus established properties.
5. Stay informed if further details emerge—exposure drafts and consultations may change definitions and carve-outs.
---
**Bottom line:** the negative gearing & CGT changes coming July 2027 represent a paradigm shift. Investors need to assess timing, types of properties, and structuring to make informed decisions. Existing investments are largely preserved—but new acquisitions will be judged under a much tighter framework.