Last night’s Federal Budget introduced two significant changes to the tax framework for residential property investors in Australia: reforms to negative gearing and capital gains tax (CGT). Both changes take effect from 1 July 2027, and both include transitional protections that are important to understand before drawing conclusions from the headlines.
The short version: the 2026 Budget changed the tax framework for property investment in Australia. It did not change the underlying economic case for property as a wealth-building asset.
Here is a plain-language breakdown of what has changed, what has not, and what it means depending on your situation.
Your existing properties are protected
If you owned an investment property at the time of the Budget announcement (7:30pm AEST, 12 May 2026), your negative gearing entitlements are fully protected. Nothing changes for those properties for as long as you continue to own them.
This is the single most important point for existing investors to understand.
Change 1: Negative Gearing
Negative gearing allows investors to offset rental property losses against other taxable income, such as salary, reducing their overall tax liability. From 1 July 2027, this benefit will be limited to new builds for residential property. What applies to you depends on when you bought or plan to buy.
Properties owned before 12 May 2026 (7:30pm AEST) Fully protected. Negative gearing continues indefinitely, for as long as you own the property.
Established properties purchased after the announcement but before 1 July 2027 Negative gearing applies until 30 June 2027. From 1 July 2027, losses can no longer be offset against salary or other income. Instead, they carry forward to offset future property income or capital gains from that property.
Established properties purchased from 1 July 2027 No negative gearing available. Losses carry forward to offset future property income or capital gains only.
New builds purchased at any time Full negative gearing is retained, regardless of when the purchase occurs. This includes newly constructed apartments purchased off-the-plan and house and land packages on previously vacant land. The Government’s definition of “new build” may be broader than initial headlines suggested, potentially including properties that have undergone significant structural extensions or renovations, and granny flats constructed alongside an existing dwelling. The precise definitions will be confirmed when the Explanatory Memorandum is published.
SMSFs Superannuation funds, including SMSFs, are explicitly excluded from the negative gearing changes entirely.
Change 2: Capital Gains Tax
When you sell an investment property for a profit, that profit is a capital gain. Currently, if the property has been held for more than 12 months, investors receive a 50% CGT discount. From 1 July 2027, that discount is replaced with two measures for gains accruing after that date.
Cost base indexation Your purchase price is adjusted for CPI inflation over the period you held the property. Only the real gain above inflation is taxed. For lower-growth assets, this can actually result in less tax than the current 50% discount.
30% minimum tax on capital gains Even if your marginal tax rate is very low (for example, in early retirement), you will pay at least 30% tax on capital gains. Exceptions apply for people receiving the Age Pension, JobSeeker, or similar income support payments in the year of sale.
Critically, there is no reason to rush and sell before July 2027. The new CGT rules only apply to gains that accrue after 1 July 2027, and only when you actually sell. Gains built up before that date continue to receive the 50% discount, regardless of when the sale takes place.
Investors in new builds get the better of both worlds at sale: they can choose between the 50% CGT discount or the new indexation method, whichever produces the more favourable outcome.
How the transitional rules apply: three scenarios
Scenario 1: Owned before 12 May 2026
Negative Gearing: Continues indefinitely for as long as you own the property.
Capital Gains Tax: Gains up to 30 June 2027 receive the 50% CGT discount. Gains from 1 July 2027 are subject to the new indexation method and 30% minimum tax. No impact until you sell.
Scenario 2: Purchased between 12 May 2026 and 30 June 2027
Negative Gearing: Applies until 30 June 2027 only. From 1 July 2027, losses carry forward to offset future property income or capital gains.
Capital Gains Tax: Same split treatment as Scenario 1. Pre-July 2027 gains taxed under old rules, post-July 2027 gains under new rules. No impact until you sell.
Scenario 3: Purchased from 1 July 2027
Negative Gearing: Established properties: no negative gearing available, losses carry forward against property income only. New builds: full negative gearing continues.
Capital Gains Tax: New builds: choice of 50% discount or indexation, whichever is better. Established properties: indexation and 30% minimum tax apply to the full gain.
What we recommend
If you already own investment properties, no immediate action is required. Your properties are protected under the existing rules.
If you are considering a new purchase, the distinction between new builds and established properties now carries meaningful tax implications. The window between now and 30 June 2027 also presents a specific consideration for investors looking at established properties. We would encourage you to speak with the Mirren team to work through your options clearly.
For all investors, the CGT changes will apply to your portfolio when you eventually sell. Speak with your accountant or tax adviser to understand how the new rules interact with your personal tax position.
For SMSF investors, the negative gearing changes do not apply to your fund structure. However, how the CGT changes interact with SMSFs is not yet fully specified in the Budget papers. We recommend seeking specific advice from your SMSF accountant or adviser once further ATO guidance is released.
The headlines will be loud for a while. The fundamentals of property investment in Australia remain intact. Investors who focus on the numbers rather than the noise and take a considered, long-term approach will continue to build wealth through property.
We are here to help you make sense of this. If you have any questions about how these changes relate to your investment plans, please reach out to your Mirren adviser.
The negative gearing and CGT changes raise real questions for investors at every stage. Whether you already own property or are weighing up your next move, the Mirren Investment Properties team can help you work through what these changes mean for your specific situation. Book a consultation with us today.
This article has been prepared by Mirren Investment Properties for general information purposes only. It does not constitute financial, legal or tax advice. Individual circumstances vary. Please consult your accountant, tax adviser or legal professional before making any investment decisions.
