Negative gearing changes 2026: what the Federal Budget means for property

The 2026 Federal Budget proposed the biggest changes to residential property tax in a generation. Here's where negative gearing, CGT and first home buyer support stand.

The 2026 Federal Budget proposed limiting negative gearing to newly built homes for residential properties bought after Budget night, and replacing the 50% capital gains tax discount with indexation and a 30% minimum tax, both from 1 July 2027. Existing investments are grandfathered, and the 5% deposit scheme for first home buyers continues.

Update, 26 June 2026: The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed both houses of Parliament on 25 June 2026. The negative gearing and CGT changes described below are now law, starting 1 July 2027. The final bill also included a ban on new limited recourse borrowing arrangements for residential property held by self-managed super funds, agreed as part of a deal with the Greens.

The 2026 Federal Budget proposed the most significant changes to residential property tax settings in a generation.

At the time of writing, the key negative gearing and capital gains tax changes are not yet law. The government introduced the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 to Parliament on 28 May, and it has been referred to the Senate Economics Legislation Committee, expected to report by the end of June.

A Senate voting window is anticipated between 22 June and 2 July before Parliament rises for winter. Until the legislation passes, the final form of these measures may still change. With that context in mind, this is what is known.

Negative gearing is proposed to change

From 1 July 2027, if the legislation passes, negative gearing for residential property will be limited to newly built homes. Investors who purchase established properties after 7:30pm AEST on 12 May 2026 will no longer be able to offset rental losses against other income, such as wages, though those losses can still be carried forward against future property income.

Existing investment properties held before the budget announcement are grandfathered. Investors who already own established properties retain access to negative gearing under current rules for as long as they hold those properties.

Negative gearing concessions are proposed to be retained in full for newly built homes, which is the government’s stated mechanism for directing investment toward new supply rather than existing stock.

What negative gearing means

Negative gearing is when the costs of owning an investment property, mostly loan interest, exceed the rent it earns. Under the current rules, that loss can reduce the tax you pay on your wages or other income. Under the changes, a loss on an established property bought after Budget night can’t be used that way. It stays tied to residential property income instead.

For an investor relying on that tax offset to make the numbers work, the change affects cash flow from 1 July 2027. If you’re buying an established property now, run the numbers without the wage offset. Our article on interest-only home loans explains how repayment structure interacts with the tax position.

Capital gains tax is being restructured, not removed

The existing 50% Capital Gains Tax (CGT) discount is proposed to be replaced from 1 July 2027 with inflation-adjusted indexation and a minimum 30% tax rate. Investors would only be taxed on the real gain above inflation, which the government describes as restoring the original intent of the CGT arrangements.

Capital growth accrued up to 1 July 2027 remains eligible for the existing 50% discount, with the new treatment applying only to gains after that date. The main residence CGT exemption is unaffected, as are superannuation tax arrangements.

Investors in new builds can choose between the 50% discount or the new indexation arrangement, whichever delivers the better outcome.

Significant support for first home buyers remains in place

The expanded 5% deposit guarantee scheme continues, with no income caps and higher property price thresholds in many markets. Eligible buyers can purchase with a 5% deposit without paying Lenders Mortgage Insurance, which equates to significant savings. Unlike the negative gearing and CGT measures, this is already in place.

Read how the expanded Home Guarantee Scheme works and the Help to Buy shared equity scheme, or talk to a broker about first home buyer loans.

The ban on foreign investors purchasing existing residential dwellings has been extended to 30 June 2029. New builds remain open to foreign investment, consistent with the push to direct capital toward new housing supply.

What the changes mean for buyers and investors

The measures point investors toward new builds and leave first home buyer support untouched. A few practical points follow from that:

• Investors buying established property should model returns without the wage offset from 1 July 2027 and speak with an accountant before signing.
• Investors considering new builds keep negative gearing and can choose the better CGT method, but new builds carry their own risks, including construction timelines and valuation.
• Existing investors keep their current treatment while they hold their properties. Selling and buying another established property would bring the new rules into play.
• First home buyers may face less competition from investors for established homes, and the 5% deposit scheme remains available.
• SMSF investors should check the new borrowing restrictions for residential property. Our guide on SMSFs and property covers the background.

Commercial property is outside the negative gearing change, which some economists expect could shift investor demand over time. Our report on commercial property yields covers that view. Ahead of 30 June, our tax strategies for property investors before EOFY are also worth a read.

If you’re weighing an investment purchase under the new rules, a broker can compare investment property loans and show how different structures affect your cash flow. Attain Loans is a mortgage broker in Melbourne’s west working with investors and first home buyers, subject to each lender’s assessment.

This article contains general information only and does not constitute financial or tax advice. It doesn’t take into account your objectives, financial situation or needs. Speak with a qualified financial adviser or accountant before making investment decisions based on these changes.

Further questions

This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.