Reforms to negative gearing and capital gains tax have been unveiled in the latest national budget. Here’s what they could mean for investors, first home buyers and home owners.
The Albanese Government has tabled its budget for 2026-27, and tax reforms for property investors are top of the agenda.
Treasurer Jim Chalmers says these reforms are all about getting more Australians into a first home of their own. But, as with any federal budget, there are winners and losers.
We break down the key aspects of the budget to see how it could affect your property plans.
Negative gearing has long appealed to many property investors.
It allows investors to offset ongoing property expenses (such as home loan interest and rates) against income (such as rental income and wages). In this way, negative gearing can make owning a rental property tax-friendly, potentially giving investors greater tax advantages than home owners.
But in what the Labor Government describes as a move to “level the playing field”, from 1 July 2027, negative gearing will be restricted to newly built homes.
Investors who buy established homes after 12 May 2026 (budget night) won’t be able to use negative gearing to offset property expenses against other income.
For investors who already own a rental property, negative gearing can continue to be used as normal.
The budget also made capital gains tax (CGT) concession changes that will impact sellers.
At present, investors can claim a 50% CGT discount on profits made via property sales, as long as they have owned the place for at least 12 months.
This will change from 1 July 2027. The 50% discount will be scrapped and replaced with a discount based on inflation – a system that was in place pre-1999.
The change will be prospective, meaning gains accrued on existing investments prior to the start date will retain the 50% discount.
In addition, a minimum tax rate of 30% will apply to capital gains on investment property sales. This is meant to align the tax paid on capital gains with the average tax rate paid by workers.
Investors who opt for newly built properties will be able to choose between the 50% CGT discount, or index gains for inflation, with a 30% minimum tax.
Now, let’s break it all down to see what the changes could mean depending on your type of property ownership.
Cotality points out that investor numbers have been rising across the more affordable end of the property market. This has meant increased competition for first home buyers.
By reducing the CGT discount and scrapping negative gearing on purchases of established properties, the government is hoping to take some of the heat out of the investor market. It estimates this may help 75,000 Australians buy a first home.
The government has also committed $2 billion to the infrastructure needed to build new homes. This is expected to see an extra 65,000 homes constructed over the next decade.
Long story short, the government is hoping that first home buyers will benefit from the latest budget reforms. If you’re ready to buy, call us to find out your current borrowing capacity.
The latest reforms could see newly constructed homes become more popular among investors.
For some investors, new constructions have always held appeal. The maintenance costs may be lower, and the tax deductions for depreciation may be higher (this is something to speak to your tax adviser about).
While the budget doesn’t directly impact current home owners, Treasury estimates suggest a cooling of investor demand may see home prices grow by around 2% less over the next few years.
That could make now the ideal time to think about upgrading to your next home.
Home values nationally have risen 40.2% over the last five years, giving many home owners plenty of equity to climb the property ladder.
Major changes can bring uncertainty, especially when they involve tax reforms. If you’re an investor, it may be worth speaking with your tax professional.
Contact us for support to help find a home loan that allows you to achieve your property goals.
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.
Paul da Silva
Director & Senior Mortgage Advisor
