The headline numbers
Eligibility cut-off
7:30pm 12 May 2026
Contracts exchanged after this fall under the new rules.
New rules start
1 July 2027
One-year transition window for the system to adjust.
CGT minimum rate
30%
Floor on tax for real (inflation-adjusted) capital gains.
Treasury's modelling, released with the Budget Papers, projects the package will shift around 75,000 homes from investor to first-home-buyer hands over a decade, with a net increase of 30,000 dwellings once the supply-side measures are counted. Forecast house price growth: about 2 percentage points lower than otherwise. Forecast rents: up by around $2 per week. The Treasurer described the package as "the biggest tax shake-up in 25 years." Whether the modelling holds is the next decade's argument.
The measures, in order of who they affect
Eight changes from Budget Paper No. 2 and the Treasurer's tax-reform chapter that bear on property investors. "Major" means a meaningful change to after-tax position; "Minor" means it's worth knowing but won't move the strategy.
Negative gearing limited to new builds
Major impactEffective: Contracts after 7:30pm 12 May 2026 · rules apply 1 Jul 2027
For established residential property exchanged after Budget night, rental losses can no longer be deducted against wages or other ordinary income. Losses can still offset income from other residential properties or be carried forward to future rental income or to the eventual capital gain. Newly built homes are exempt — investors in genuine new supply keep full negative gearing.
CGT discount replaced with inflation discount + 30% minimum tax
Major impactEffective: Gains accrued after 1 Jul 2027
The flat 50% CGT discount is gone. From July 2027, gains are adjusted for inflation and then taxed as ordinary income — but with a minimum effective rate of 30%. Even a low-income investor pays at least 30% on the real gain. Investors in new builds can choose between the old 50% discount and the new inflation regime, whichever is better for them.
Grandfathering for properties held before Budget night
Major impactEffective: Existing investors
If you exchanged contracts before 7:30pm 12 May 2026, current negative gearing rules continue for as long as you hold the property. CGT is partly grandfathered: gains accrued up to 1 July 2027 keep the 50% discount; gains after that date fall under the new inflation regime. Most investors will need a 1 July 2027 valuation (or use a straight-line apportionment) when they eventually sell.
Knockdown-rebuild does not count as "new"
Moderate impactEffective: From Budget night
To qualify for the new-build carve-out, the project must genuinely add to housing supply. A standard knockdown-rebuild on a single block is excluded unless the land is subdivided and multiple dwellings are added. This narrows what most retail investors can do to access the new-build concession.
$250 Working Australians Tax Offset
Minor impactEffective: From 2027-28
A new ongoing $250 tax offset for over 13 million workers, on top of legislated tax cuts and the $1,000 instant work-expenses deduction. Modest direct effect on landlords, but it raises the effective marginal-rate threshold subtly for some PAYG earners.
$1,000 instant work-expenses deduction
Minor impactEffective: From 2026-27
Workers can claim a flat $1,000 instant deduction for work-related expenses without receipts. Average benefit ~$205 per worker. Doesn't directly touch rental property deductions but simplifies the broader return.
30% minimum tax on discretionary trust distributions
Moderate impactEffective: From 1 Jul 2028
A 30% floor on tax for discretionary trust distributions, with limited exceptions and three years of restructure rollover relief. Many family trusts that hold investment property to split income will need a structural rethink before 1 July 2028.
Loss carry-back reintroduced for companies
Minor impactEffective: From 2026-27
Eligible companies that make a loss can claim a refund against tax paid in the prior two years — useful for landlords who hold property in a corporate trustee or company structure.
Negative gearing — the new mechanics
For established residential property exchanged after 7:30pm 12 May 2026, rental losses no longer offset wages or other ordinary income. They can still offset:
- •Income from other residential investment properties in the same financial year.
- •Future rental income from the same or other residential properties (carry-forward).
- •The eventual capital gain on sale, the same way as today.
What you lose is the wage-offset path — the mechanic that drove the strategy for 27 years for any investor who only owned one or two properties. Run your numbers in the negative gearing calculator to see the after-tax cost gap between the old regime and the new for a typical $600/week property.
New builds are fully exempt — investors who buy a genuinely new dwelling keep the existing negative gearing rules. The carve-out is intentionally narrow: knockdown-rebuilds on a single block don't qualify unless the land is subdivided and multiple homes added. Build-to-rent investors and developers are the obvious beneficiaries.
CGT — inflation discount and a 30% floor
The 50% discount that has applied since 1999 is replaced from 1 July 2027 with two stacked rules:
- Inflation-adjust the gain. The cost base is grossed up by ABS CPI between purchase and sale. Only the real (above-inflation) gain is taxable.
- Tax the real gain at marginal rate, with a 30% minimum. The real gain is added to ordinary income and taxed at your marginal rate — but if that effective rate would be below 30%, you pay 30%.
The minimum-rate floor is the politically controversial part — a low-income retiree selling an investment property still pays 30% on the real gain. The trade-off: high earners get a smaller benefit too (the new top effective rate on the real gain is lower than 47% × 100% under the old rules).
For properties exchanged before Budget night, gains accrued up to 1 July 2027 keep the 50% discount; gains accrued after that fall under the new regime. The standard approach will be to obtain a 1 July 2027 valuation and apportion, or use straight-line time-apportionment if the cost is not justified. PropAlly's Investor module will store the valuation and apply the split automatically.
What to do this week
- •Document your acquisition date. The 7:30pm 12 May 2026 line is binary. Find your contract date (not your settlement date — exchange of contracts is what counts) and store it with the property file.
- •Plan for a 1 July 2027 valuation. If you held property before Budget night, you'll likely want a sworn valuation as at the changeover date. Book your QS or registered valuer now — demand will spike in the second half of 2027.
- •Re-run your hold-vs-sell case. Grandfathering only protects you while you hold. Selling crystallises the new CGT regime on post-July-2027 gains. Use the negative gearing calculator alongside a CGT projection.
- •If you're buying, decide established vs new now. A new-build still gets full negative gearing AND can choose between the old 50% CGT discount and the new inflation regime. The premium developers charge for "new" just got more justifiable.
- •Discretionary trust holders: review structure. The 30% minimum tax on trust distributions from 1 July 2028 will reshape income-splitting strategies. Three years of restructure rollover relief is available — start the conversation with your accountant.
- •Don't get a depreciation schedule late. A QS depreciation schedule done now still helps under both old and new regimes. See the full deductions checklist.
Don't panic-sell. Treasury and Grattan analysis both suggest most negatively geared properties become positively geared within a few years as principal is paid down. If your existing property is grandfathered, the rational case for holding has not materially changed — losing the wage-offset on a future purchase doesn't retrospectively damage your current one.
Frequently asked questions
Has negative gearing been abolished?
For established residential property exchanged after 7:30pm 12 May 2026, the wage-offset path is gone from 1 July 2027. Losses can still offset other rental income or be carried forward. Newly built homes remain fully negatively geared, and properties held before Budget night are grandfathered.
What replaces the 50% CGT discount?
From 1 July 2027, gains are inflation-adjusted (only the real gain is taxed) and then taxed at marginal rate — with a minimum effective rate of 30%. New-build investors can choose between the old 50% discount and the new regime.
What if I bought before 7:30pm 12 May 2026?
Negative gearing rules are unchanged for as long as you hold. CGT is partly grandfathered: gains up to 1 July 2027 keep the 50% discount, gains after that use the new inflation regime. Most owners will need a 1 July 2027 valuation when they sell.
Does a knockdown-rebuild count as a new build?
Not on a single-block KDR. The new-build carve-out only applies if the project genuinely adds to housing supply — the land must be subdivided and multiple dwellings added.
Is my own home affected?
Your principal place of residence remains fully exempt from CGT. If you later convert it to a rental, gains accrued during the rental period after 1 July 2027 fall under the new inflation regime.
How will this affect house prices and rents?
Treasury forecasts house price growth around 2 percentage points slower than otherwise over a decade, weekly rents up about $2, around 75,000 homes shifting investor→FHB, and a net increase of 30,000 dwellings once supply-side measures are counted. Forecasts, not guarantees — local effects will vary widely.