What the Negative Gearing Changes Australia Can't Ignore: The 2026 Federal Budget and Your Property Plans

The 2026-27 federal budget has landed, and if you own property, plan to invest, or are still trying to break into the market, there is a lot here that directly affects your next move. Treasurer Jim Chalmers has placed tax reform squarely on the table, reshaping how investment property is taxed in ways that will ripple through buying decisions for years to come.

At Osinski Finance, Perth's family-owned mortgage broking team with 25 years of combined experience in banking and finance, we have been fielding questions from investors, first home buyers, and existing homeowners about what these changes mean in practice. This post breaks down the negative gearing reform in Australia so you can make an informed decision about where you stand.

What Did the 2026 Budget Actually Change for Property?

The Albanese Government's 2026-27 budget introduced two major reforms targeting investment property tax:

Negative gearing will be restricted to newly built homes from 1 July 2027. Investors who purchase established properties after 12 May 2026 (budget night) will no longer be able to offset property expenses against other income. Investors who already hold rental properties keep their existing entitlements.

Capital gains tax (CGT) will also change from 1 July 2027. The current 50% CGT discount for assets held longer than 12 months will be replaced by an inflation-indexed discount, and a minimum 30% tax rate will apply to capital gains on investment property sales. Gains accrued before the start date retain the 50% discount.

Whether you are an investor, a first home buyer, or a current homeowner, the implications are different. Here is what you need to know.

Key Dates and Transition Rules

Before unpacking who wins and who loses, it helps to understand the timeline clearly.

This distinction matters. Investors who already own a rental property are largely protected under grandfathering provisions.  The reforms apply prospectively, meaning the impact falls most heavily on investors looking to buy next.

The Negative Gearing Reform Australia Is Talking About: What It Means in Practice

Negative gearing has long been one of the most debated mechanisms in Australian property. At its core, it allows investors to offset property running costs, including loan interest and council rates, against their assessable income. When outgoings exceed rental income, the shortfall reduces your taxable income, which has historically given investors a tax advantage over standard owner-occupiers.

The government's position is that this arrangement has distorted the market in favour of investors at the expense of people trying to buy their first home. Framing the reform as levelling the playing field, Labor has moved to restrict negative gearing to new construction only.

From 1 July 2027, if you buy an established investment property, you cannot claim negative gearing. The negative gearing changes Australia is introducing draw a hard line between newly built homes, which remain fully eligible, and existing stock, which does not. For investors already in the market, nothing changes. For anyone planning to purchase an established investment property after budget night, the tax position has shifted significantly.

Capital Gains Tax Changes 2026: The Full Picture

The CGT reform runs alongside the negative gearing changes and is, in some respects, more consequential for long-term investors.

Currently, selling an investment property you have held for more than 12 months attracts only a 50% CGT discount on the gain. From 1 July 2027, that blanket discount is gone. In its place, gains will be indexed to inflation, returning to the pre-1999 method, and a minimum 30% tax rate will apply to capital gains on investment property sales.

The government's rationale is that the current discount system means capital gains are taxed at a lower effective rate than wages, which it considers inequitable.

The capital gains tax changes do include one targeted carve-out. Investors who purchase newly built properties can choose between the inflation-indexed method or the 50% discount, subject to the 30% minimum rate. This is designed to encourage construction activity while limiting the tax advantage on established property transactions.

What This Means: A Breakdown by Situation

If You Are Trying to Buy Your First Home

Cotality data shows that investor activity has been rising at the more affordable end of the market, making competition harder for first home buyers at exactly the price points they are targeting. The budget reforms are designed to reduce that pressure.

By removing the tax incentive for investors to buy established homes at the lower end, the government hopes to help an estimated 75,000 Australians purchase their first home. A further $2 billion in infrastructure funding has been committed to support the construction of an additional 65,000 new homes over the next decade.

In short, first home buyers stand to benefit most from this budget, particularly those targeting established properties in the sub-$800,000 bracket where investor competition has been strongest.

If You Are a Property Investor

The negative gearing changes Australia investors have been watching will reshape the investment landscape in two clear directions.

First, newly built properties become substantially more attractive. They retain negative gearing eligibility in full, give investors the flexibility to choose between CGT methods, and typically carry higher depreciation deductions, which remain unchanged. Your tax adviser can walk you through the specific depreciation benefits available on new construction versus established stock. Depreciation on depreciating assets in rental properties is worth understanding in detail before you commit to a purchase.

Second, the case for buying established investment properties is weakened for new purchasers, particularly at lower price points where the negative gearing benefit was most valuable. Investors considering buying established rental properties after budget night should model the numbers carefully.

For existing investors, the key question is whether to sell before July 2027 to lock in the 50% CGT discount on accumulated gains. That decision depends on your holding period, the size of your gain, your marginal tax rate, and what you plan to do with the proceeds. This is a conversation worth having with both your accountant and your mortgage broker before acting.

If You Are an Existing Homeowner

The budget does not target owner-occupiers directly, but the downstream effect on property prices may shape your decisions. Treasury estimates suggest that cooling investor demand may see property price growth reduce by around 2% over the coming years.

For homeowners who have been building equity over time, this is an opportunity worth considering. National home values have risen 40.2% over the past five years, according to PropTrack, meaning many owners are sitting on substantial equity. If the market softens slightly, that equity goes further when upgrading to a larger home or a different location. Now may be a good time to review whether your current loan is still the right product for your situation.

Why New Builds Are Now the Strategic Investment Choice

The budget has, in effect, created a two-tier investment market. Established properties lose their negative gearing eligibility and full CGT discount for new buyers. New construction retains both.

Beyond the capital gains tax changes for 2026, new builds carry structural advantages for investors: lower initial maintenance costs, stronger depreciation schedules, and alignment with the government's stated housing supply agenda. There is also a practical consideration that builders and developers may price some of the demand premium into new stock as investor interest increases, so timing and location selection will matter.

If you are reviewing your investment strategy in light of these changes, the question is not simply "new build or established" but "what does the full financial picture look like across a five to ten year holding period with the new rules applied?" That is where a broker who understands both lending and the property market adds genuine value.

Talk to Osinski Finance About Your Next Move

Osinski Finance is a fully accredited, family-owned mortgage broking business based in Rockingham, WA. We work with nearly 100 lenders. 

We can help you with:

• Home loans: We compare options across our full lender panel to find the right rate and structure for your situation.
• Becoming a first home buyer: we walk you through your borrowing capacity and every step from application to settlement.
• Investing in property: from new build investment loans to portfolio structuring, we help you make lending decisions that support your long-term goals.

Don’t hesitate to message our team today for your next move.

Key Takeaways

• Negative gearing on established investment properties will be restricted from 1 July 2027. Properties purchased after 12 May 2026 do not qualify. Existing investors are grandfathered in full.
• The 50% CGT discount will be replaced by an inflation-indexed method, with a 30% minimum tax rate on capital gains from investment property sales, also from 1 July 2027.
• Newly built investment properties retain full negative gearing eligibility and CGT flexibility, making them the more tax-advantaged option for new investors under the reformed rules.
• First home buyers are the intended beneficiaries. The government projects the changes will help 75,000 Australians enter the market, backed by $2 billion in housing infrastructure funding.
• Existing homeowners are not directly targeted but may see modest property price growth moderation as investor demand for established stock softens.
• Gains accrued on existing investments before 1 July 2027 retain the 50% CGT discount. Investors with significant accumulated gains should take advice on timing before acting.

Frequently Asked Questions About the 2026 Federal Budget and Property

Will I lose my negative gearing if I already own an investment property? 

No. The changes apply to new purchases of established properties made after 12 May 2026. If you already own a rental property, your negative gearing entitlements continue under the grandfathering provisions. You can continue to offset property expenses against your income exactly as you do now, with no changes required.

What is the exact negative gearing cut-off date? 

Budget night, 12 May 2026, is the cut-off for established properties. Any established investment property purchased from that date onward will not be eligible for negative gearing. The formal legislative commencement is 1 July 2027, but the budget night cut-off exists to prevent investors from front-running the change in the interim period.

Can I still negatively gear a new build after July 2027? 

Yes. The negative gearing reform applies specifically to established properties. Newly constructed homes remain fully eligible under the new rules, which is a deliberate design choice to stimulate housing supply and direct investment activity toward new construction.

How does the CGT change work for gains already accrued on my investment? 

The reforms are prospective. Gains accrued on your investment before 1 July 2027 will still attract the 50% CGT discount when you sell. Only gains that accumulate after that date are subject to the new inflation-indexed method and the 30% minimum tax rate, so your current position is not retrospectively disadvantaged.

Will house prices fall because of these changes? 

Treasury modelling suggests the reforms could moderate property price growth by approximately 2% over the coming years, primarily by reducing investor demand for established properties. This is a slowing of growth, not a price crash, and the effect will vary considerably by location, price bracket, and local supply conditions.

Should I sell my investment property before July 2027?

This is a highly individual decision that depends on your total gain, your marginal tax rate, your holding period, and what you intend to do with the proceeds. There is no universal answer. Speaking with a tax adviser and a mortgage broker before making this call is strongly recommended, as the right timing depends on your specific financial picture.

Do the new CGT rules affect my primary residence? 

No. The CGT changes apply to investment property sales only. The main residence exemption is entirely unchanged. Your primary home is not affected by any of the 2026 budget property reforms.

What happens to depreciation on investment properties? 

The budget did not change depreciation rules. Investors can still claim depreciation on depreciating assets in rental properties as normal. New builds typically carry stronger depreciation schedules than established properties, adding further to their attractiveness under the new tax framework.

How do these changes affect investors buying interstate? 

The rules apply nationally, regardless of where the investment property is located. However, the practical dollar impact will vary by market. In states where established property prices are higher and growth has been stronger, the removal of the CGT discount will carry a greater financial consequence. Interstate investment patterns may shift toward markets with stronger new build pipelines and lower entry prices.

How can a mortgage broker help me navigate these changes? 

A broker can review your current borrowing capacity, assess whether a new build investment aligns with your financial goals, and explore whether your existing investment loans are structured optimally given the changed tax environment. The lending side of an investment decision is as important as the tax side, and having both pieces aligned before you commit is the difference between a confident decision and an expensive one.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.