The 14 May 2026 federal budget rewrites the tax settings that have shaped Australian property investment for a generation: negative gearing limited to new builds from 1 July 2027, the 50% CGT discount replaced with indexation and a 30% minimum rate on gains, and the foreign-buyer ban on established homes extended to 30 June 2029. A practical read of who is affected, who is grandfathered, and what the timetable allows.
The federal budget handed down on 14 May 2026 contains the most significant changes to property taxation in decades. None of them takes effect immediately (the operative dates are July 2027), but several are pegged to Budget night itself, which means decisions made now determine which side of the line an investment falls on.
Negative gearing: new builds only
From 1 July 2027, negative gearing will be limited to new residential properties that add to housing supply. For established residential property acquired after Budget night, rental losses will no longer be deductible against broader income such as wages. They can still be offset against residential property income and carried forward, but the classic negative-gearing arithmetic ends. Existing holdings are grandfathered.
Capital gains: indexation replaces the discount
From 1 July 2027, the 50 per cent CGT discount for individuals, trusts and partnerships is replaced with cost-base indexation, paired with a 30 per cent minimum tax rate on net capital gains. The change is prospective (it applies to gains accruing after that date), and investors in new builds retain a choice between the existing discount and the new indexation method.
The rest of the housing package
- The ban on foreign purchases of established dwellings (in place since April 2025) is extended to 30 June 2029. Existing foreign owners are unaffected.
- A $2 billion Local Infrastructure Fund to connect water, power, sewerage and roads for new housing, supporting up to 65,000 homes over the decade.
- Support for modular and prefabricated construction through voluntary certification, aimed at speeding up delivery.
What to do with the window
There is a 13-month runway before the 2027 start dates, but the grandfathering line for negative gearing has already been drawn at Budget night. Investors weighing an established-property acquisition should price the new treatment into the decision now, and anyone restructuring a portfolio (trusts especially, given the CGT changes) should take tax advice before the 2027 year begins. We act on the property side of those decisions every week: the contract, the structure the title is taken in, and the settlement timetable that makes the tax advice work.
As always with budget measures, the detail lives in the enabling legislation, which is yet to pass. We will publish an update if the final Act departs from the announced design.
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