Federal Budget Review 2026-2027

The 2026-2027 Federal Budget presents the biggest changes to property tax policies in decades, set to have a significant impact on property investors.

The property related elements of the budget are designed to drive investment in the new housing market over established homes, with a focus on property supply and affordability.

The key proposed measures include:

• Capital gains tax reform from 1 July 2027: the 50% discount to be replaced by cost-base indexation ensuring only capital gains above inflation are taxable, and by a 30% minimum tax rate on net capital gains.
• Negative gearing reform from 1 July 2027: negative gearing is to be restricted to new builds with exemption for properties already owned on budget night (12 May 2026).
• Approval reforms and proposed cash injections into government programs supporting new housing construction and help to buy schemes.
• Continued ban on foreign buyers purchasing established homes.

Housing supply remains Australia’s biggest concern. The proposed policies could facilitate increased housing supply and affordability through greater investment in new housing construction, supported by proposed faster approval processes and tax exemptions. For current property investors, the elements of interest in this budget include:

• The existing 50% CGT discount continues to apply to capital gains arising before 1 July 2027.
• From 1 July 2027 the 50% discount will be replaced by cost-base indexation ensuring only capital gains above CPI inflation are taxable.
• A 30% minimum tax rate will be applied to net capital gains, deterring taxpayers from deferring capital gains into years where they are subject to lower tax rates.
• Investors in new housing will have the option to choose either the current 50% CGT discount, or the new proposed rules when selling the property.

• Properties owned on 12 May 2026 are exempt from the proposed changes.
• Negative gearing for residential property investments is restricted to new builds only from 1 July 2027.
• Negative gearing deductions against all income (including salary and wages) is available to investors in new builds.
• The ability to offset property losses against salary and wage income will no longer be available to investors in established residential properties.
• Investments in government housing programs (eg affordable housing developments) will be exempt.
• Losses remain deductible against property income for investors in established residential properties.
• Unused losses will still be able to be carried forward to future property income from established residential properties.

The major suppliers of rental housing in Australia are private investors. Should the proposed reforms redirect investors towards the new housing market, supporting construction activity and improving housing supply outcomes in a timely manner, there is potential for rental supply and housing affordability to improve.

While the outcome of these proposed tax reforms may provide relief for renters and first home buyers, investors will need to assess the potential impact on their own property investment strategies.

If you are unsure how the proposed tax reforms might impact your current or future property investments, we recommend speaking with your accountant, or you can click here to read the Australian Federal Budget 2026-2027 in full.

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