The 2026–27 Australian Federal Budget announced major proposed changes to negative gearing and capital gains tax (CGT).

Most measures are proposed legislation and still need to pass Parliament. The final wording, exemptions and transitional rules may change.

Key Dates and Changes

7:30pm AEST – 12 May 2026

Grandfathering cut-off begins.

Existing residential investment properties held before this time are expected to remain under the current rules.

From 12 May 2026

New purchases of established residential investment properties are affected.

Investors buying established residential property after this time are proposed to move into the new regime from 1 July 2027.

1 July 2027

Negative gearing is proposed to be restricted on established residential properties purchased after 12 May 2026.

Losses from affected properties will no longer be able to offset wages or other personal income.

Rental losses will be quarantined.

This means losses may only be offset against other residential investment income or future capital gains. Unused losses may be carried forward.

Newly built dwellings are proposed to retain full negative gearing benefits where they add to housing supply.

The current 50% CGT discount for assets held for more than 12 months is proposed to be replaced with an inflation-indexed cost base system.

A minimum 30% tax rate on capital gains is also proposed, even where an investor’s marginal tax rate is lower.

From 1 July 2027 Onward

Existing assets owned before 1 July 2027 are expected to keep the current CGT treatment for gains accrued up to that date.

Gains accrued after 1 July 2027 are proposed to move into the new indexed system.

Investors in eligible new residential builds may be able to choose either the existing 50% CGT discount or the new inflation-indexed method.

1 July 2028

A separate proposed reform may introduce a minimum 30% tax on discretionary trusts.

What Happens to Existing Investors?

Existing Properties Held Before Budget Night

If you already owned the investment property before 7:30pm on 12 May 2026:

• Existing negative gearing rules continue.
• Existing 50% CGT discount arrangements continue for gains accrued before 1 July 2027.
• You are largely grandfathered under the proposed rules.

Established Properties Purchased After 12 May 2026

If the property is purchased after the announcement:

• Negative gearing remains available only until 1 July 2027.
• After that date, losses are quarantined to property income only.
• CGT rules transition to the new indexed system from 1 July 2027.

New Builds

Newly constructed housing remains favoured under the proposed changes.

• Full negative gearing is retained.
• Investors may be able to choose the more favourable CGT method.

Important Practical Impacts Being Discussed

The proposed reforms may:

• Push more investors toward new construction rather than established homes.
• Reduce borrowing capacity for some investors.• Increase pressure on rental supply over time.• Shift investor focus from capital growth toward income-producing assets.

Important Note

These measures are currently proposed policy announcements from the 2026–27 Federal Budget and still require legislation to pass Parliament.

The final wording, exemptions, transitional rules and any Senate amendments may still change.

Whilst all care has been taken to prepare this article, it should not be relied upon as financial or taxation advice.

Before making any financial decision, seek independent professional advice.