The biggest property tax shift since 1999 – what it means for you
On 25 June 2026, the legislation behind the Federal Budget’s property tax reforms passed both houses of Parliament. The most significant changes to property tax in Australia since the introduction of the CGT discount in 1999 are now law.
The headlines at the time focused almost entirely on what investors were losing. That’s understandable, the changes are real and they matter. Now that the legislation has passed and the detail is settled, a clearer picture has emerged. For some people these reforms represent a genuine opportunity. For others, not much has actually changed. And for a small group, the changes are more complex than the early coverage suggested.
This post is our attempt to cut through the noise. No spin in either direction — just a plain-English guide to what changed, what didn’t, and what it actually means depending on your situation.
What are the property tax reforms – the short version
The reforms centre on two things that have shaped Australian property investment for 25 years: negative gearing and capital gains tax. Here’s what changed for each.
Negative gearing
From 1 July 2027, negative gearing is no longer available for investors who purchase established residential properties. If you buy a property that has previously been lived in and your rental income doesn’t cover your costs, you can no longer deduct that loss against your salary or other income.
That said, three important things remain unchanged:
- Negative gearing is fully retained for brand new residential builds — houses, apartments, townhouses, or anything that hasn’t been lived in before
- Any investment property you owned before 7:30pm AEST on 12 May 2026 is fully grandfathered, your existing negative gearing rights are protected
- Losses on affected properties don’t disappear, they are quarantined and can be carried forward to offset future income from residential property, including capital gains when you sell
That last point matters more than most people realise. The deduction isn’t lost. It’s delayed.
Capital gains tax
The 50% CGT discount – which has applied since 1999 to assets held for more than 12 months – has been replaced. From 1 July 2027, the taxable gain is calculated using cost base indexation: you only pay tax on your real gain after accounting for inflation, with a minimum effective tax rate of 30%.
For existing holdings, the transition is structured carefully. Gains that accrued before 1 July 2027 still qualify for the old 50% discount. Only gains that accrue after that date are subject to the new indexation model. So if you’ve held a property for years, you’re not losing the discount on growth that’s already happened.
For investors in new residential builds, there’s a meaningful advantage: you can choose between the old 50% discount and the new indexation method, whichever delivers the better outcome when you sell. That flexibility is genuinely valuable, particularly in an inflationary environment where indexation could outperform a flat 50% reduction.
If you already own investment property
For existing investors, the headline message is this: not much has changed for what you already own.
Properties held before 7:30pm on 12 May 2026 — including those under contract at that time, even if settlement hasn’t yet occurred — retain full negative gearing rights indefinitely. The new rules simply don’t apply to them.
On the CGT side, gains that accrued before 1 July 2027 continue to be taxed under the old rules. What changes is how gains are calculated on growth that occurs after that date. The practical impact of this will depend on when you sell and how much the property has grown in value before and after the cut-off.
| If you’ve owned your investment property for years and have no plans to sell soon, the direct financial impact of these changes on your existing position is limited. The bigger question is what you do next. |
Where it gets more complex is any new established property purchase you make from here. Between now and 30 June 2027, you can still claim rental losses in the usual way. From 1 July 2027, those losses can only be used to offset income from other residential properties — not your salary or business income. They carry forward, but the timing of when you benefit changes.
This means the question of established versus new build has become a fundamentally different decision than it was 12 months ago. It’s worth getting proper advice before committing to either.
If you’re considering a new build investment
New build investors are in an unusual position: the reforms left them largely untouched, while simultaneously creating a relative advantage over established property buyers.
Full negative gearing is retained. The CGT flexibility described above applies. And there’s a depreciation advantage that often gets overlooked in this conversation.
The depreciation difference
Brand new properties attract significantly higher depreciation deductions than established ones. On average, new properties have claimed around $15,363 in first-year depreciation deductions, compared to $8,032 for fairly new properties and $6,249 for established properties. Over five years, the difference between buying new versus buying a one-year-old property could amount to approximately $35,000 in additional deductions.
| Property type | Average first-year depreciation deductions |
| Brand new build | $15,363 |
| Fairly new (a few years old) | $8,032 |
| Established (post-2017 legislation) | $6,249 |
Source: Industry data. Figures are averages and will vary by property type, location and asset composition.
| While the legislation has passed, exactly what counts as a ‘new residential dwelling’ for negative gearing and CGT purposes has not yet been spelled out in the Bill itself. This definition – along with other technical carve-outs – is expected to follow later via separate legislative instruments issued by the Minister, rather than being settled by Parliament directly. The broad principle is clear: new, previously unoccupied residential properties qualify. But edge cases — knock-down-rebuild projects, off-the-plan purchases, dual-occupancy builds — sit in a genuine grey area until that detail is published. If you’re planning a new build investment, get specific advice on your project before assuming it qualifies. |
The timing question
There’s also a timing dimension worth thinking through carefully. Sign a contract today on a new build with a 12 to 18 month construction timeline and settlement lands in late 2027 or early 2028 — when the new tax settings are fully in effect and established property investor activity may have moderated.
That said, timing a build introduces real risks that shouldn’t be glossed over. Builder stability and track record matter significantly in the current environment. Construction delays mean lost rental income and additional holding costs. And Treasury has forecast that the policy changes will result in approximately 35,000 fewer homes being built over the next decade, which creates the possibility of stock shortages and longer queues for those who move too late.
One more thing worth flagging: the precise definition of what counts as a ‘new residential dwelling’ for negative gearing purposes will be determined by the Minister via legislative instrument. The broad principle is clear – new, unoccupied residential properties qualify – but certain edge cases like knock-down-rebuild projects need careful consideration before assuming you’re covered. If you’re planning a new build investment, get specific advice on your project before committing.
If you’re a first home buyer
The Budget’s property narrative was dominated by the investor story. The first home buyer changes received far less attention – which is a shame, because they’re meaningful.
The expanded First Home Guarantee
The First Home Guarantee – which allows eligible buyers to purchase with just a 5% deposit without paying Lenders Mortgage Insurance — has been significantly expanded. Place caps and income limits were removed from 1 October 2025. The property price caps have also been lifted substantially across most states and territories.
| State | Location | Previous cap | New cap |
| NSW | Sydney & regional centres | $900,000 | $1,500,000 |
| NSW | Other areas | $750,000 | $800,000 |
| VIC | Melbourne & Geelong | $800,000 | $950,000 |
| VIC | Other areas | $650,000 | $650,000 |
| QLD | Brisbane, Gold Coast, Sunshine Coast | $700,000 | $1,000,000 |
| QLD | Other areas | $550,000 | $700,000 |
| WA | Perth | $600,000 | $850,000 |
| WA | Other areas | $450,000 | $600,000 |
| SA | Adelaide | $600,000 | $900,000 |
| SA | Other areas | $450,000 | $500,000 |
| TAS | Hobart | $600,000 | $700,000 |
| TAS | Other areas | $450,000 | $550,000 |
| ACT | All areas | — | $1,000,000 |
| NT | Darwin | — | $750,000 |
| NT | Rest of NT | — | $600,000 |
Source: Federal Budget 2026–27, 12 May 2026.
To put the Sydney change in concrete terms: a buyer purchasing at $1.2 million previously fell outside the scheme entirely. Under the new cap, they qualify. That’s a material shift for a market where properties at that price point are common in many suburbs.
Other changes that passed in the same Bill
A few additional measures were included in the same legislation and are now law:
- A new $250 Working Australian Tax Offset, effectively lifting the tax-free threshold for workers from 1 July 2027
- The $1,000 instant tax deduction for work-related expenses (replacing the previous $300 receipt-free limit) for the 2026–27 financial year
- A ban on new limited recourse borrowing arrangements for residential property purchased through self-managed super funds, taking effect 45 days after royal assent, existing arrangements are grandfathered
Reduced competition on established homes
With investors now redirected toward new builds, competition for established homes — where the majority of first home buyers are looking — is expected to ease. The government projects that around 75,000 people who previously couldn’t get into the market will benefit from reduced investor competition over the coming years.
This isn’t guaranteed and market dynamics are complex. But the directional intent of the policy — steering investor capital toward new supply — is designed to create more breathing room for buyers of existing homes.
What to do now – depending on where you’re starting from
The right response to these changes depends entirely on your situation. Here’s a practical starting point for each audience.
If you already own investment property
- Review your loan structure. The post-reform environment makes how your loans are set up more important, not less. Offset versus redraw, fixed versus variable, and how your equity is positioned across properties are all worth revisiting.
- Understand your grandfathered position clearly. It’s valuable, and it’s worth having accurate records of when each property was purchased and what contracts were in place at Budget night.
- Think carefully about your next purchase. Any new established property you buy is now subject to the new rules from 2027. New builds have a meaningful structural advantage – but that doesn’t automatically make them the right choice for your situation.
If you’re considering an investment purchase
- Established versus new build is no longer just a lifestyle or yield question. The tax treatment is now materially different, and getting independent tax advice before committing has never been more important.
- If a new build appeals to you, builder track record and financial stability matter as much as the property itself. Do your due diligence properly.
- You don’t need to rush. The negative gearing changes on established properties don’t take effect until 1 July 2027. There is time to make a considered decision.
If you’re a first home buyer
- Check whether the expanded First Home Guarantee changes what’s possible for you.
- Understand your actual borrowing capacity — not just your deposit. Three rate rises in 2026 have shifted what lenders will approve.
- The conditions for first home buyers are arguably the most favourable they’ve been in several years. That doesn’t mean rushing — it means being prepared so you’re ready when the right property comes up.
The bottom line
The legislation has passed. The property tax reforms are real and significant. But significant doesn’t mean catastrophic, and for some buyers and investors, this environment has created genuine opportunities that didn’t exist before.
What matters most right now isn’t whether you agree with the policy. It’s understanding what it actually means for your specific situation – and making decisions from a position of clarity rather than anxiety.
Every borrower’s situation is different, and the post-Budget landscape makes personalised advice more valuable than ever. Whether you’re an existing investor reviewing your position, weighing up a new build, or a first home buyer working out where you stand – we’re happy to help you think it through.
We don’t just help people get home loans. We help them build futures.
| This post provides general information only and was correct at the time of posting. It does not constitute legal, tax or financial advice and has been prepared without taking into account your personal objectives, financial situation or needs. Always seek independent professional advice – including tax, financial and legal advice – before making any investment or property decisions. |
