Changes to CGT and Negative Gearing: WhatProperty Investors Need to Know
If you own an investment property, or you’re thinking about buying one, there’s a significant piece of tax reform now locked in that’s worth understanding. This article explains what’s changed, who it affects, and — just as importantly — who’s protected under the transitional rules. As always, this is general information about the law, not personal tax advice; your accountant is the right person to work out exactly what it means for your own portfolio.
What’s Happened
As part of the 2026–27 Federal Budget, the Government announced reforms to negative gearing and capital gains tax (CGT) for residential property. The relevant legislation, the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, passed the Senate and is now law.
The Negative Gearing Change
From 1 July 2027, net rental losses on established (existing) residential properties will no longer be able to be offset against your other income, such as your salary. This is the core mechanic of “negative gearing” as most Australians understand it, and it’s being wound back for a specific category of property.
Importantly, this doesn’t apply to everyone or every property:
Properties already held at 7:30pm AEST on 12 May 2026 (the moment of the Budget announcement) — including those under contract awaiting settlement — are grandfathered and can continue to be negatively geared under the current rules for as long as you hold them.
New builds remain exempt from this change. If you buy an eligible new residential property after the announcement date, negative gearing continues to apply as before.
Properties affected by the change will still be able to offset rental losses against rental income and capital gains from residential property — the change quarantines the losses to that category of income, rather than eliminating the deduction altogether.
In practice, this means the changes primarily affect established properties purchased after 12 May 2026 that are held for investment purposes.
The Capital Gains Tax Change
From 1 July 2027, the current 50% CGT discount for individuals, trusts and partnerships will be replaced with a different mechanism:
Cost base indexation — adjusting your original purchase cost for inflation over your holding period, so you’re only taxed on your real gain
A minimum 30% tax rate applied to net capital gains
This applies to gains that accrue after 1 July 2027 — gains that built up before that date continue to be taxed under the current discount rules. Investors in eligible new residential builds retain a choice between the existing 50% discount and the new arrangements. The main residence exemption for your home is unaffected.
Why This Matters for Financing
While the tax treatment itself is a matter for your accountant, it’s directly relevant to how you finance a purchase, because:
The purchase date, and specifically the contract date relative to 12 May 2026, determines which rules apply to a given property — this is worth confirming precisely with your accountant before you sign anything
New build finance is likely to see continued strong interest, given new builds retain access to both negative gearing and the choice of CGT treatment — this may shift lending demand toward construction and off-the-plan purchases
Cash flow modelling for established-property purchases after the cut-off date needs to account for reduced tax offsets, which can affect what an investment property actually costs you to hold, and in turn how a lender might assess your serviceability if you’re relying on rental income and negative gearing benefits in your figures
What Hasn’t Changed
Your main residence and its CGT exemption
Negative gearing on properties held before the announcement
Negative gearing and the existing CGT discount for eligible new builds
Small business CGT concessions
Talk to the Right People, in the Right Order
This is genuinely complex legislation with real transitional detail that affects different investors differently depending on exactly when and what they bought. If you’re considering an investment purchase, we’d suggest:
Speak with your accountant or tax adviser about how the reforms affect your specific situation and timeline
Speak with us about how to structure the finance — particularly if new-build finance now looks more attractive under the revised rules, or if timing a purchase around key dates is relevant to your strategy
Get Started and we’ll help you think through the financing side, alongside your accountant’s advice.
This article is general information only, current as at the time of writing, based on legislation that has passed the Senate as at the date of publication. It is not personal financial, tax, or legal advice, and should not be relied upon as a substitute for advice from a registered tax agent, accountant or financial adviser regarding your specific circumstances. Tax law is complex and its application depends on your individual facts — always seek professional tax advice before making investment decisions. The information provided on this site is on the understanding that it is for illustrative and discussion purposes only. Whilst all care and attention is taken in its preparation any party seeking to rely on its content or otherwise should make their own enquiries and research to ensure its relevance to your specific personal and business requirements and circumstances. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only. Spitfire Finance Pty Ltd ABN 70 700 362 956, ACN 700 362 956 is authorised under LMG Broker Services Pty Ltd ACN 632 405 504 Australian Credit Licence 517192, and is not licensed to provide tax or financial product advice.