Negative Gearing and CGT Just Changed. Here's What It Means For You.

You’ve probably seen the headlines. “Negative gearing axed.” “CGT discount gone.” “Property investing is dead.” None of that is accurate. What the 2026 Federal Budget actually announced on the night of 12 May 2026 is a restructuring of the tax treatment of investment property, with changes that take effect from 1 July 2027.

There are meaningful implications here, and I’m not going to minimise them. But there are also enormous misunderstandings already circulating, and the misunderstanding will cost people money just as surely as the policy change will.

So let’s be clear about what was announced:

Negative gearing will be limited to new builds only (from 1 July 2027)

The 50% CGT discount will be replaced by a CPI indexation model

A 30% minimum tax rate will apply to capital gains

Properties purchased before 7:30pm AEST on 12 May 2026 are grandfathered — the old rules continue to apply to those properties indefinitely

The changes apply to individuals, not to superannuation funds (separate tax rules apply to SMSFs)

“Announced” and “enacted” are not the same thing. Policy announced in a Budget becomes law only after it passes parliament. Until then, it’s a proposal — important, likely, but not yet binding.

Before You Read Anything Else – Read This First

If you already own investment property, this is the section I want you to read first. Because I’ve already had people ask me whether they should sell. I’ve had people ask whether they’ve missed something. And I’ve had people ask whether years of planning just became irrelevant overnight.

The answer, for most existing investors, is no.

The government has proposed grandfathering existing holdings. In simple terms, the rules you bought under remain the rules that apply to you.

What does “grandfathered” mean?

Grandfathering means that existing investments are protected from new rules that apply to future investments. Your property doesn’t get taxed under the new system — it stays under the rules that applied when you bought it. Think of it as a commitment from government that the rules you bought under are the rules that apply to you.

What this means practically:

Your existing investment properties continue to operate under the current tax framework

You can still negatively gear against those properties if they are loss-making

You will still receive the 50% CGT discount on those properties when you sell

You do not need to sell, restructure, or panic

The grandfathering does not extend to new purchases after Budget night. Any investment property you buy from 13 May 2026 onwards will be subject to the new rules once they are legislated and take effect from 1 July 2027.

“The rules you bought under are the rules that apply to you.” For anyone who already owns investment property — that is the most important sentence in this article.

Why Is Everyone Talking About Negative Gearing? What Changes and When

Let’s start with a simple truth. Most people don’t buy investment properties because of negative gearing. They buy them because they hope the property will help them build wealth over time.

Negative gearing is a tax treatment. Not an investment strategy. And I think that’s an important distinction.

Because if the only thing making an investment work is a tax deduction, I’d be questioning the investment before I’d be questioning the tax law.

That doesn’t mean the change isn’t significant. But it’s helpful to remember what negative gearing actually is — a supporting factor, not the whole reason for investing.

Here is what changes under the 2026 announcement:

Before 1 July 2027 (Current Rules)

You can negatively gear any investment property — new or established — against your personal income. If your rental income is less than your interest, rates, maintenance and other deductible costs, the loss reduces your taxable income.

From 1 July 2027 (New Rules — for New Purchases After Budget Night)

Negative gearing applies only to qualifying new builds. If you purchase an established investment property after 7:30pm on 12 May 2026, you cannot offset losses from that property against your income once the new legislation takes effect. You can still deduct costs within the property itself (i.e., against rental income from that property), but you cannot claim the net loss against other income.

What this means for established property buyers

If you’re considering buying an established investment property from now on, the tax structure of that investment changes significantly under the proposed rules. You should not assume negative gearing will be available on new established purchases after July 2027. This needs to factor into your yield calculation and borrowing strategy. Talk to your accountant before committing.

For new builds, negative gearing continues — deliberately, as a policy incentive to increase housing supply. The government’s position is that the tax benefit should flow to supply-creating activity, not to competition for existing stock.

The CGT Conversation Is More Nuanced Than It Sounds

This is where a lot of people are looking for a simple answer. “Is this better?” “Is this worse?” The truth is that neither question is particularly useful. What matters is how it affects your circumstances.

How long are you planning to hold the property?

What income bracket are you in?

What level of growth are you expecting?

The answer for one investor could be completely different from the answer for another.

Which is why this is the point where I stop pretending general advice exists and start encouraging people to speak with their accountant.

CPI Indexation vs 50% Discount — which is better?

It depends on how long you hold the property and how much it grows. In a high-inflation environment, CPI indexation can be beneficial for long-hold properties because it strips out the inflationary component of any gain. In a low-inflation / high-real-growth environment, the 50% discount is typically more generous. For most residential property held 10–20 years in a normal market, the 50% discount has historically been more valuable. But this is specific to your individual situation — it needs modelling by a tax adviser.

Note: the 30% minimum tax rate means that even high-income earners who might otherwise pay CGT at their marginal rate of 45% will not see a dramatic increase on this component. For lower-income earners, it may actually represent a higher effective rate than they would otherwise have paid. Again — this is individual and needs proper advice.

“Better or worse” is the wrong question. “How does this affect my specific situation” is the right one. The answer depends on your income, your hold period, and how much the property grows.

What Counts as a ‘New Build’ Under the New Rules

This is where the detail matters, and where the headlines have been loosest. “New build” under the proposed framework is not simply “anything recently built.” There are specific qualifying criteria.

What qualifies:

New construction — a property that has never been previously occupied or sold as a residential dwelling

Off-the-plan purchases where the dwelling is a new build that will increase housing supply

Developments that increase supply density — for example, a development that replaces one dwelling on a block with three

What does not qualify:

Knock-down rebuilds — demolishing an existing dwelling and building a new one on the same site. The site already contained a dwelling; you are replacing, not adding

Renovations of existing properties — improvements to an existing dwelling do not make it a “new build”

Existing property bought shortly after construction — once a new build has been previously sold as a residence, it is no longer considered “new supply” for the purpose of these rules

Why the “new supply” test?

The policy intent is to direct investment towards properties that add to the housing stock — not to rewarding investors for competing over existing homes. A knock-down rebuild still results in one dwelling on that site. A development that puts three townhouses where one house stood adds two net dwellings to supply. The rules are designed to distinguish between these outcomes.

The precise definition of a qualifying new build is still to be determined by legislation. This is the area most likely to evolve before the law is enacted. If you are planning to buy off-the-plan or invest in a development project, confirm the status of the specific project with your solicitor and accountant before committing.

What This Means for Different Types of Investors

If you are…	What this means for you
An existing investor (purchasedbefore Budget night)	Your existing properties are fully grandfathered. No action required on that basis alone. Review your overall portfolio strategy with your accountant — not because you need to, but because significant policy change is always a good prompt for a portfolio health check.
Considering buying an established investment property	The proposed rules change your tax position materially. Run the numbers on yield, borrowing costs, and tax treatment without the negative gearing offset. It may still stack up — but you need to model it properly. Do not assume old rules apply.
Considering a new build or off-the-plan purchase	Negative gearing continues to apply under the proposed framework. This may make new supply relatively more attractive than established property for investors. But due diligence on the developer, the location, and the project is as important as ever — tax incentives do not override poor fundamentals.
A first home buyer	These changes do not directly affect you — first home buyers are not negatively gearing their primary residence. Indirectly, policy designed to reduce investor competition for established property may ease some pressure in that market, though the effect and timing are uncertain.
Thinking about an SMSF property investment	Superannuation funds are subject to different tax rules (15% concessional rate). The announced changes apply to individuals. However, SMSF strategy is complex and specialist advice is essential before any change to your approach.

So What Would I Do?

The first thing I’d do is nothing. And I don’t mean forever. I mean today (that is what I have done with my four).

Because whenever a major policy change is announced, people feel pressure to act immediately. But there is a difference between being informed and being reactive.

The legislation hasn’t passed. The implementation date is still some time away. And for many existing investors, nothing has actually changed at all.

So before you make a decision:

Understand whether you’re grandfathered.

Speak to your accountant.

Run the numbers properly.

Revisit your goals.

Then decide.

Not because a headline scared you. Not because someone on social media told you to. Because you’ve worked through the facts and understand what they mean for you.

If you are actively looking to invest

Pause long enough to model your specific scenarios. What does the yield look like on the properties you’re considering without the negative gearing offset? Is there a case for prioritising qualifying new builds? This is not a reason to stop investing, it is a reason to invest more carefully and with better information.

If you are not yet invested but planning to be

The policy environment has shifted. That does not mean property is off the table — it means the analysis needs to be more rigorous. Yield, location fundamentals, infrastructure, population, and hold-period assumptions all matter more in a post-discount framework. This is exactly the work I do with clients.

If you have no idea where to start

That is not a problem. That is the whole point of coaching. You do not need to already know the answers — you need someone who can help you work through the questions properly. That is what The Continuum Pathway is for.

“This is a reason to invest more carefully and with better information — not a reason to stop investing.”

Your Tax Questions: A Note From Our Trusted Tax Adviser

Tax strategy in a changing environment is not guesswork — it is modelling. The difference between a good outcome and a poor one often comes down to the quality of advice you receive before you act. The Continuum Pathway works closely with Charlie Trikilis at KZC Tax, a specialist property tax adviser who works with investors and buyers navigating exactly this kind of complexity.

Continuum Pathway Trusted Partner

Charlie Trikilis — KZC Tax

Property Tax Specialist | Registered Tax Agent

Charlie works with property investors, first-time buyers, and high-net-worth clients on tax structuring, CGT planning, depreciation schedules, and entity selection. If you need to model the impact of the 2026 Budget changes on your specific situation — including grandfathering, CGT, negative gearing, and SMSF implications — Charlie is the person to call. The Continuum Pathway clients receive a direct referral and an initial consultation to understand what these changes mean for them personally.

Website: kzctax.com.au

Quick Reference: Old Rules vs New Rules

Feature	Current Rules	Proposed Rules (from 1 July 2027)	Grandfathered Properties
Negative gearing	Any investment property	New builds only	Yes — continues under current rules
CGT discount	50% for assets held 12+ months	CPI indexation model	Yes — 50% discount continues
Min CGT tax rate	None (marginal rate applies)	30% minimum rate	Existing rules apply
Knock-down rebuild	Qualifies	Does NOT qualify as new build	Yes — if purchasedbefore Budget night
Renovation of existing property	Qualifies for gearing	Does NOT qualify as new build	Yes — if purchasedbefore Budget night
New construction / off-the-plan	Qualifies	Qualifies (new build)	Yes — if purchasedbefore Budget night

Note: “Grandfathered” means properties purchased before 7:30pm AEST on 12 May 2026. Verify all details with a qualified tax adviser once legislation is enacted.

Related Reading

If this article has you thinking about your broader investment approach, these might be useful next:

Do You Need an Accountant When Buying Property? → thecontinuum.com.au/insights/do-you-need-an-accountant-property-australia

Property Investing in Australia: 10 Real-World Rules for Smarter Decisions → thecontinuum.com.au/insights/property-investing-australia

Why Smart People Make Bad Property Decisions → thecontinuum.com.au/insights/why-smart-people-make-bad-property-decisions

Is Tarneit a Good Investment in 2026? → thecontinuum.com.au/insights/is-tarneit-a-good-investment

The Questions First Home Buyers Don’t Know to Ask → thecontinuum.com.au/insights/questions-first-home-buyers-dont-know-to-ask

Frequently Asked Questions

Is the 2026 Budget negative gearing change already law?

No. As of Budget night (12 May 2026), these are announced policy — not enacted legislation. The changes need to pass parliament before they become law. You should treat them as likely but not certain, and plan accordingly with qualified advice.

I bought my investment property before Budget night. Do I need to do anything?

Your properties purchased before 7:30pm AEST on 12 May 2026 are grandfathered under the existing rules. You do not need to take any immediate action on that basis. However, a policy environment of this magnitude is a sensible trigger for a portfolio review with your accountant — not because you’re at risk, but because you want to make sure your strategy is still aligned with your goals.

Can I still buy a new investment property and negatively gear it?

Under the proposed rules (once legislated), yes — but only if the property qualifies as a new build under the policy definition. This means new construction or supply-increasing development, not established properties or knock-down rebuilds. The exact qualifying criteria will be set out in the legislation.

Is the 50% CGT discount completely gone?

For new investment property purchases made after Budget night, yes — the 50% discount is proposed to be replaced by a CPI indexation model with a 30% minimum tax rate. For properties already held at Budget night, the 50% discount is grandfathered. Again — this is proposed policy, not yet law.

Does this affect my home? I’m not an investor.

No. The primary place of residence has always been exempt from CGT and was never negatively geared. These changes relate only to investment properties.

I’m thinking about a knock-down rebuild. Does that count as a new build?

Under the announced policy, knock-down rebuilds are explicitly excluded from the definition of qualifying new supply. The logic is that you are replacing an existing dwelling rather than adding to the housing stock. If this is relevant to your plans, get specific advice before proceeding.

What if I’m buying off-the-plan?

Off-the-plan purchases of genuinely new dwellings that add to housing supply should qualify under the new framework — but you need to confirm the specific project meets the criteria. Not all off-the-plan projects involve new supply in the way the policy defines it. Ask your solicitor and accountant to confirm the status of any project you’re considering.

Should I sell my investment property now because of this?

Almost certainly not, but this is entirely specific to your situation. If your property is grandfathered, the existing rules still apply and a rushed sale might crystallise a CGT liability you would otherwise have managed carefully over time. Run the numbers, get advice, and make a decision based on your personal circumstances — not on the headlines.

Sources & references

The following sources are relevant to the content covered in this article.

Australian Government — 2026-27 Federal Budget Overview: budget.gov.au

Australian Treasury — Housing and Negative Gearing Policy Announcement: treasury.gov.au

Australian Taxation Office — Capital Gains Tax: ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax

Australian Taxation Office — Negative Gearing: ato.gov.au/individuals-and-families/investments-and-assets/residential-rental-properties

MoneySmart (ASIC) — Investment Property: moneysmart.gov.au

KZC Tax — Property Tax Specialists: kzctax.com.au

Reserve Bank of Australia — Property Market and Monetary Policy: rba.gov.au

Disclaimer

This article contains general information only and does not constitute financial, legal or tax advice. Please speak to a licensed financial advisor, solicitor or mortgage broker about your specific circumstances. Aimee Templeman is a licensed real estate agent however approaches property through the lens of learning and empowerment. She has decades of experience coaching and advising everyday Australians and executive decision makers. Book a conversation with Aimee at Contact.