2026 Federal Budget: negative gearing, capital gains tax and the new-build carve-out, explained

Every date and rule below is taken from the Australian Government's Budget 2026-27 papers or Australian Taxation Office guidance; any other source is named where it is used. Last reviewed 23 September 2026.

In one paragraph: On 12 May 2026 the Australian Government announced that negative gearing on residential property will be limited to eligible new builds, and that the 50 per cent capital gains tax (CGT) discount will be replaced with cost base indexation and a minimum 30 per cent tax rate on gains, both from 1 July 2027. Established residential property bought after the announcement at 7:30pm AEST on 12 May 2026 loses negative gearing from 1 July 2027. Property held at that time is exempt from the negative gearing changes. Investors in eligible new builds keep negative gearing and can choose between the 50 per cent discount and the new arrangements. The Australian Taxation Office describes the measures as now law (ATO; Budget 2026-27).

What did the 2026-27 Federal Budget change for property investors?

Three things, all announced on 12 May 2026 and set out in the Budget papers and on the ATO's new legislation page.

1. Negative gearing is limited to new builds. From 1 July 2027, losses on established residential investment property purchased from 7:30pm AEST on 12 May 2026 can only be deducted against income from residential property, including capital gains. They can no longer be deducted against wages or other income. Unused losses can be carried forward to offset residential property income in future years (Budget 2026-27 negative gearing and CGT explainer).
2. The 50 per cent CGT discount is replaced. From 1 July 2027, the 50 per cent discount for individuals, trusts and partnerships is replaced with cost base indexation for inflation and a minimum tax rate of 30 per cent on gains. The Government describes the aim as restoring the taxation of real gains. The change applies only to gains that accrue after 1 July 2027 (Budget 2026-27; ATO).
3. Eligible new builds are carved out. Negative gearing continues for eligible new builds, and investors in new builds can choose the 50 per cent CGT discount or the new arrangements (Budget 2026-27).

When do the changes start?

• Cut-off: the announcement at 7:30pm AEST on 12 May 2026 (ATO).
• Negative gearing restriction on established property: 1 July 2027. Established property purchased between the announcement and 30 June 2027 may be negatively geared during that period, but not from 1 July 2027 (Budget 2026-27 explainer).
• CGT changes: 1 July 2027, on gains accruing from that date (Budget 2026-27 explainer).

Who is grandfathered?

Properties held at the announcement, including where a contract had been entered into but not yet settled, can continue to be negatively geared in future years (Budget 2026-27 explainer). The ATO states that the impact of the changes on existing investments will be limited, and that the CGT reforms will only apply to gains that accrue after 1 July 2027 (ATO). For CGT, assets owned before 1 July 2027 and sold after that date are treated under current arrangements on the gains made before 1 July 2027 (Budget 2026-27 explainer).

Other exclusions and exemptions in the Budget papers: properties in widely held trusts (for example, most managed investment trusts) and superannuation funds, including SMSFs, are excluded from the negative gearing changes; build-to-rent developments and private investors supporting government housing programs, for example through the provision of affordable housing, have targeted exemptions (Budget Paper No. 2, 2026-27; Budget 2026-27 explainer). Confirm the treatment of any structure with a tax adviser.

What counts as a new build?

This is the definition that decides which side of the line a property sits on, and it is narrower than the headline. From the Budget 2026-27 negative gearing and CGT explainer:

• A new build includes a dwelling constructed on vacant land, and dwellings created where an existing property is demolished and replaced with a greater number of dwellings.
• Knock-down rebuilds or substantial renovations that do not increase supply are not eligible. A granny flat built next to an established property is not eligible.
• A new build cannot have been previously sold, unless it was first owned by the builder and not occupied for more than 12 months. Subsequent purchasers of the dwelling cannot access the 50 per cent CGT discount or negative gearing in relation to that property.
• The Government notes this is similar to how stamp duty exemptions apply to new builds under some state-based arrangements.

The practical effect: "new property" is now a tax category with edges. Two similar dwellings on the same street can sit on opposite sides of the line depending on whether the buyer is the first purchaser after the builder.

What happens to the CGT discount for new-build investors?

Investors who buy new builds can choose either the 50 per cent CGT discount or indexation and the minimum tax when they sell the property (Budget 2026-27 explainer). For other CGT assets held by individuals, partnerships and trusts for at least 12 months, the new arrangements apply to gains accruing from 1 July 2027.

Does this apply to commercial property, shares or superannuation?

The negative gearing changes apply only to residential property. Commercial property and other asset classes, such as shares, remain subject to the existing negative gearing arrangements. The CGT changes apply to all CGT assets, including property and shares, held by individuals, partnerships and trusts for at least 12 months (Budget 2026-27 explainer). Superannuation funds are excluded from the negative gearing changes (Budget 2026-27 explainer). Seek advice on your own circumstances.

What are the risks the concession does not remove?

The tax setting does not change the nature of buying property before it is built. Buyers of new builds still carry completion risk (the developer must finish), timing risk (settlement dates move, and finance approvals may not come through), and valuation risk at settlement (the lender values what was built, not what was drawn).

Tax is also only one input into prices. After the Budget, the Commonwealth Bank's economics team lowered its dwelling price growth forecast for the year to December 2026 from 5 per cent to 3 per cent. CBA's Senior Economist Trent Saunders said the slowdown primarily reflects higher mortgage rates, and estimated the policy changes would subtract 0.6 percentage points from 2026 price growth (CBA, 13 May 2026). That is one bank's forecast, not a fact about the future.

What does this mean for Investing Platform users?

Investing Platform lists brand-new residential property across New South Wales and Victoria, open to all investors. The Budget has made the difference between brand-new and established property a matter of tax law. We do not provide personal advice and we do not recommend any property. What we can do is put the information about a new development in one place, with the sources behind it.

Frequently asked questions

Is negative gearing being abolished? No. It is being limited. From 1 July 2027 it is not available against other income for established residential property bought from 7:30pm AEST on 12 May 2026. It remains available for eligible new builds and for property held at the announcement (Budget 2026-27; ATO).

What about an established investment property bought in June 2026? Under the Budget explainer, it may be negatively geared until 30 June 2027. From 1 July 2027, losses on it can only be deducted against residential property income, including capital gains, and any excess carried forward.

What if a contract was signed before 7:30pm AEST on 12 May 2026 but settled after? The Budget explainer states that properties held at the announcement include those where a contract had been entered into but not yet settled. Confirm with a tax adviser.

Is a new build bought from a previous owner still a new build for tax? Generally no. A new build cannot have been previously sold, unless it was first owned by the builder and not occupied for more than 12 months. Subsequent purchasers cannot access the 50 per cent CGT discount or negative gearing on it (Budget 2026-27 explainer).

Do new-build investors lose the 50 per cent CGT discount? No. They can choose between the 50 per cent discount and indexation with the minimum tax (Budget 2026-27).

Is this law yet? The ATO's new legislation page describes the measures as now law. Always check the ATO page for the current status.

Sources

1. Australian Taxation Office — Tax reform: boosting home ownership, reforming negative gearing and capital gains tax — https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/tax-reform-boosting-home-ownership-reforming-negative-gearing-and-capital-gains-tax
2. Australian Government, Budget 2026-27 — Tax reform — https://budget.gov.au/content/04-tax-reform.htm
3. Australian Government, Budget 2026-27 — Tax explainer: Negative Gearing and Capital Gains Tax Reform — https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf
4. Australian Government, Budget Paper No. 2: Budget Measures 2026-27 — https://budget.gov.au/content/bp2/download/bp2_2026-27.pdf
5. Commonwealth Bank of Australia — 2026 Budget: updated housing outlook (13 May 2026) — https://www.commbank.com.au/articles/newsroom/2026/05/2026-budget-updated-housing-outlook.html