The 2026 Federal Budget introduced the most significant changes to property investment taxation in a generation. If you own an investment property — or are thinking about buying one — understanding these changes is essential. Here is a clear breakdown of what is changing, when it takes effect, and what the grandfathering rules mean for you.

The grandfathering date: 7:30PM AEST, 12 May 2026

Before diving into the changes, this date is critical. Properties acquired before 7:30PM AEST on 12 May 2026 — including contracts signed but not yet settled — are grandfathered. This means the current negative gearing and CGT rules continue to apply to these properties for as long as you own them. When you eventually sell a grandfathered property, the old rules apply to that sale.

If you already own an investment property, or were under contract before the Budget announcement, your existing investment is protected under the current arrangements.

Negative gearing: what changes from 1 July 2027

Under current rules, if an investment property runs at a loss — that is, interest and costs exceed rental income — that loss can be offset against all other income, including wages and business income.

From 1 July 2027, for established residential properties acquired from 12 May 2026 onwards, rental losses will only be deductible against rental income or capital gains from residential properties. They cannot be offset against wages or salary. Any excess losses are carried forward and can be offset against residential property income in future years — they are not lost entirely.

There is an important carve-out: newly built residential properties remain fully negatively geared. This is designed to maintain incentives for investment that increases housing supply. Build-to-rent developments and certain government housing programs are also excluded.

Capital gains tax: what changes from 1 July 2027

Under current rules, if you hold an asset for more than 12 months and sell it, you receive a 50% CGT discount on the gain. That 50% discount is being replaced for new acquisitions from 12 May 2026 onwards.

From 1 July 2027, individuals, trusts, and partnerships will receive cost base indexation — adjusting the cost of the asset for inflation — plus a 30% minimum tax on net capital gains. Transitional arrangements protect existing positions: gains arising before 1 July 2027 continue to attract the 50% discount as normal.

Income support recipients, including Age Pension recipients, are exempt from the 30% minimum tax. Investors in new residential properties can choose either the 50% CGT discount or cost base indexation, ensuring new builds retain their attractiveness.

What should you do now?

If you have owned an established investment property for a long time and were considering selling, reviewing the timing of any sale in light of the CGT changes taking effect in mid-2027 is worthwhile. If you are thinking about buying an investment property, understanding the difference between established properties and new builds will be important in your decision-making.

The details of these changes are significant — get in touch with us before making any decisions about buying, selling, or holding investment property.