Adam Empringham,
Director of Sales at Image Property.
What the 2026 Federal Budget Means for Property Investors
The 2026-27 Federal Budget introduced some of the most significant changes to investment property tax rules Australia has seen in decades. If you own an investment property, are thinking about buying one, or managing your portfolio, this is worth understanding clearly.
These are proposed changes announced on Budget night, 12 May 2026. They are not yet law and will need to pass through parliament before taking effect. Details may change as legislation is drafted and debated.
Here’s a plain-language breakdown of what was announced and what it could mean for you.
Negative Gearing Is Changing
Negative gearing is when your investment property costs you more to hold than it earns in rent. Under the existing rules, you can use that loss to reduce the tax you pay on your other income, including your salary.
That’s proposed to change, but only for certain investors.
The cut-off was Budget night, 7:30pm AEST on 12 May 2026. It is the contract date that determines which rules apply to you.
If you already owned an investment property before that point, nothing changes. Your existing arrangements are fully protected.
If you purchased an established property after Budget night, you’ll lose the ability to offset those losses against your wages from 1 July 2027. You can still carry losses forward and use them against future rental income, but the ability to reduce your salary tax is gone.
If you purchase an established property from 1 July 2027 onward, negative gearing is not available. Losses can only be carried forward against future residential property income.
If you’re buying a new build, the existing arrangements still apply in full. This is the government’s way of directing investor activity toward new housing supply rather than established homes.
It’s worth understanding what actually qualifies as a new build under these proposed rules. The definition is specific. A new build must genuinely add to housing supply, not simply replace what was already there.
Eligible new builds include:
- Dwellings constructed on previously vacant land
- A duplex or greater number of dwellings constructed through a knock-down rebuild, replacing a single dwelling
- A newly constructed apartment bought off the plan
- A newly built property occupied for less than 12 months before being first sold
The following do not qualify:
- A knock-down rebuild that replaces one house with one house
- An established property extended to add additional bedrooms
- A granny flat built adjacent to an existing property
Capital Gains Tax Is Also Shifting
When you eventually sell an investment property, you pay tax on the profit. Under the current rules, if you’ve held the property for more than 12 months, you only pay tax on half of that gain. That’s the 50% CGT discount.
A simple example of how that works: if you bought a property for $500,000 and sold it for $800,000, your gain is $300,000. Under the current rules, only $150,000 of that is taxable.
From 1 July 2027, the 50% CGT discount is proposed to be replaced with cost base indexation and a 30% minimum tax rate on capital gains.
The important thing to understand is that gains accrued up to 30 June 2027 would continue to receive the current 50% discount treatment. Only growth after that date moves to the new model.
A note for long-term owners:
Properties purchased before 20 September 1985 have historically been entirely exempt from capital gains tax. That is proposed to change from 1 July 2027, but not in the way many people might assume.
Everything that has grown in value up to 30 June 2027 remains fully exempt. The cost base for these properties would be effectively reset at their market value on 1 July 2027, meaning only growth from that date forward becomes taxable under the new rules.
To establish that starting point, owners would need either a formal valuation at 30 June 2027 or an ATO-approved apportionment methodology. For anyone in this situation, getting a valuation documented before that date is worth discussing with your accountant now. It sets the baseline from which any future tax would be calculated.
Will you need a valuation?
To establish how much of your total gain falls under the old rules versus the new ones, a value would need to be set for your property as at 30 June 2027. The ATO has indicated it will provide a specified apportionment formula as an alternative to a formal valuation, but investors would have the choice of using either.
Getting an accurate appraisal before that date gives you a documented baseline and more control over how that calculation is made. This is worth discussing with your accountant well ahead of time.
If you’re buying a new build, you would have the option to choose between the existing 50% discount or the new arrangement, whichever works better for your situation.
A Quick Reference: What Rules Are Proposed to Apply to You
The following is based on proposed budget measures as announced on 12 May 2026. All changes remain subject to parliamentary approval.
| Property type | Negative gearing | Capital gains tax |
|---|---|---|
| Owned before 20 September 1985 (pre-CGT assets) | Fully grandfathered. No change. | Exempt from CGT until 1 July 2027. Gains from that date are subject to cost base indexation and a 30% minimum tax rate on capital gains. |
| Owned before Budget night (before 7:30pm 12 May 2026) |
Fully grandfathered. No change. | 50% discount applies to gains up to 30 June 2027. Gains from that date are subject to cost base indexation and a 30% minimum tax rate on capital gains. |
| Established property purchased from 1 July 2027 | Not available. Losses can only be carried forward against future residential property income. | Cost base indexation and a 30% minimum tax rate on capital gains apply to all gains. |
| New build purchased after Budget night | Full negative gearing retained. Losses can still offset wages. | Choice of 50% CGT discount or cost base indexation and a 30% minimum tax rate on capital gains at the time of sale. |
What This Means for Investors in South East Queensland
The proposed tax changes shift things for investors buying established properties, particularly those who have relied on offsetting losses against their salary income. For investors focused on long-term growth and rental returns, the picture is more nuanced.
New builds still carry the full tax concessions under the proposed model, which may make them a more attractive option depending on your goals.
The underlying fundamentals of the South East Queensland market remain strong regardless. Brisbane remains one of the strongest performing property markets in the country, rental vacancy is near record lows, and population growth shows no signs of slowing. The market conditions haven’t changed. The proposed tax settings around investing have.
What to Do Now
These proposed changes don’t take effect until 1 July 2027, but understanding them now means you’re making decisions with the full picture in front of you.
A qualified accountant or financial adviser is the right person to talk through how these changes may apply to your specific situation. Tax strategy is personal and the right approach will look different for everyone.
With changes on the horizon, knowing exactly what your property is worth right now is a sensible first step. If you’d like an appraisal or a conversation about what the current market looks like in your area, the team at Image Property is here to help.
This article is based on proposed budget announcements made on 12 May 2026. These measures are not yet legislated and are subject to change. This article is for informational purposes only and does not constitute financial or investment advice. Please seek advice from a qualified professional based on your individual circumstances.
