What Reforms Were Announced in the 2026 Budget
Several measures aimed at investor tax settings will take effect from 1 July 2027: (treasury.gov.au)
- Negative gearing for residential property will be limited to new builds. If you own an existing (established) property, deductions for losses versus other income will be restricted. (treasury.gov.au)
- Capital Gains Tax (CGT) discount of 50% will be replaced with a new discount based on inflation, with a minimum tax rate of 30% on real gains. Investors will have choice: use the old or new regime for new builds. (treasury.gov.au)
Who’s Exempt or Protected
- Properties held before announcement time (7:30pm AEST, 12 May 2026) are exempt; existing owners or contracts already entered into won’t be affected. (treasury.gov.au)
- New builds under CGT rules get flexibility: option to choose between existing discount or new inflation-adjusted regime. (treasury.gov.au)
Examples
- Carla bought an established investment property in 2024. From 1 July 2027, any losses she can claim against her wage income will be limited—negative gearing only available for her property’s capital costs but not against other income.
- David, planning to build a new duplex, can take advantage of negative gearing for that build since it qualifies as a new build, even after the effective date. Carpeting depreciation and ongoing expenses can still feed into deductions.
Planning Tips Before the Reforms
- If you currently invest in established properties, evaluate the timeline: whether entering new contracts or purchases before 12 May 2026 could offer protection.
- Consider shifting toward new builds or development projects if you want to preserve negative gearing deductibility later.
- Assess whether holding periods align with the CGT reform timing so you can choose structure and build timing to maximise discount options.
Key Takeaways
- Reforms take effect 1 July 2027, so there’s time to reorganise investment strategy.
- The shifts aim to funnel tax incentives toward new housing supply, reshape investor behavior, and improve fairness.
- For existing property investors, these changes may adjust expected returns—run the numbers early and get financial advice if needed.