The 2026 Budget Has Changed the Rules for Property Investors: What It Means for You
The 2026 Federal Budget dropped some big news for property investors across Australia. The Government has announced changes to negative gearing and Capital Gains Tax (CGT), and if you own or are planning to buy an investment property, this affects you.
Negative Gearing Is Being Limited for Established Properties
If you exchanged contracts on an established investment property after Budget night on 12 May 2026, the new negative gearing restriction will apply from July 2027.
Previously, if your property was making a loss (i.e. your expenses were higher than your rental income), you could offset that loss against your salary or other income. This reduced your tax bill. That's what negative gearing is.
From 1 July 2027, that benefit goes away for established properties bought after Budget night. Instead, your rental losses can only be used against other rental income or future capital gains from property, not your wages.
The good news? Those losses don't disappear. They get carried forward and used later. But the immediate cash flow benefit you were counting on? That changes.
If you already own an investment property, or you were under contract before Budget night, you're protected. Nothing changes for you.
New Builds Are Still Fully Supported
Here's something worth noting: new build properties are exempt from these changes. Investors who buy a newly constructed property can still use negative gearing the traditional way, offsetting losses against their salary and wages.
The Government's intent is clear: they want to push more investment into new housing supply, not established stock. If you've been sitting on the fence between buying established vs. new, this changes the maths considerably.
For investment loan options on new builds, we can help you compare what works best for your situation.
CGT Discount Rules Are Also Changing From July 2027
On top of the negative gearing changes, the 50% Capital Gains Tax discount is being replaced.
From 1 July 2027, the Government is introducing:
- Cost base indexation (you're only taxed on gains above inflation), and
- A 30% minimum tax on net capital gains
This applies to gains arising after 1 July 2027. So if you sell a property you've held for years, your gain is split; the portion up to that date still gets the 50% discount, and only the gain after that date is under the new rules.
New build investors get a choice: stick with the 50% discount or use the new indexation method, whichever is better for them.
The 2026 Budget is reshaping property investment in Australia. It's not the end of investing in property, not even close. But it is a signal that the way you structure your investment and your loan needs to be smarter.
New builds are now more attractive from a tax angle. Loan structure and cash flow planning are more important than ever. And if you're sitting on an existing portfolio, it's worth reviewing everything before the rules fully kick in from July 2027.
If you're not sure how these changes affect your investment plans, contact us at KM Financial Services.
At KM Financial Service, We’ve been helping buyers across Australia for over 20 years. We understand the current lending environment, what banks are actually assessing when they look at your application, and how to structure your loan so it works for you through multiple market conditions, not just today's.
Call us on 0402 879 531 or book a free consultation today. We'll walk through your situation, look at your loan structure, and help you figure out the right next step.
