Negative Gearing and CGT Changes: What Property Investors Need to Know
Negative Gearing and CGT Changes: What Property Investors Need to Know
Written by
Darren Venter
The 2026 Federal Budget has left many property investors asking fair question about the negative gearing and CGT changes, and what they mean in practice.
Will this affect the property I already own?
Should I hold, sell, refinance, or keep buying?
Do established properties still stack up against new builds?
Are new builds now more attractive? Could this change borrowing capacity, rents, yields, or future capital gains tax?
Should I buy now or wait 12 months?
The changes are affect more than tax. They affect cash flow, serviceability, asset selection, selling decisions and how investors plan their next purchase.
This article explains what changed, what it may mean, and how investors can think through the next step clearly.
Key takeaways
Understand whether the changes affect properties you already own or only future purchases.
Assess whether holding, selling, refinancing, or buying again still supports your property portfolio.
Review how Capital Gains Tax (CGT) changes may affect your exit plan before making a sell decision.
Check whether borrowing capacity, cash flow, and rental yield now carry more weight.
Compare established property and new builds on fundamentals, not tax treatment alone.
Revisit your property investment strategy to confirm whether the next move still makes sense.
What changed for property investors?
The Budget introduced three tax changes that matter for property investors.
First, negative gearing will be limited to new builds from 1 July 2027. Existing arrangements remain in place for properties held before Budget night. For established residential properties acquired after 7:30pm AEST on 12 May 2026, losses will only be deductible against rental income or capital gains from residential properties. Excess losses carry forward to future years.
Second, the 50% capital gains tax discount will be replaced by an inflation-based model, with a minimum 30% tax on future gains from 1 July 2027. These CGT reforms only apply to gains accruing after that date. Investors in new builds can choose between the current 50% discount or the new arrangements, however subsequent purchasers of a new build do not inherit the exemption
Third, discretionary trusts will face a 30% minimum tax from 1 July 2028, designed to align taxes on trust income more closely with taxes on wages. Unlike the negative gearing and CGT changes, the trust measure has no broad grandfathering for existing discretionary trusts. Existing discretionary trust structures are subject to the 30% minimum tax from that date. Investors currently holding property inside a discretionary trust should review their structure before 2028, particularly given rollover relief will be available for those who choose to restructure out of a trust before the measure takes effect.
What do the negative gearing changes mean?
Negative gearing affects the yearly cost of holding an investment property.
From 1 July 2027, investors who buy an established residential investment property after Budget night will no longer be able to use rental losses to reduce tax on their wages or salary.
Instead, those losses can be carried forward and used later against residential property income or future capital gains from residential property.
Example:
An investor buys an established property and records a $10,000 rental loss in year one after interest, rates, insurance, and maintenance.
Under the new rules, that $10,000 loss does not reduce the tax they pay on salary that year. It carries forward.
In year two, the property produces $6,000 in net rental income. The investor can apply $6,000 of the carried-forward loss against that income. The remaining $4,000 continues to carry forward.
The loss has not disappeared, it just does not help cash flow as quickly as it used to.
That is the key shift, some investors previously used the tax benefit to soften the annual cost of holding a negatively geared property. Under the new rules, future established property purchases need to be assessed more carefully on rental income, holding costs, and long-term fundamentals, not on the tax outcome.
For any established property, the questions now are:
What is the rental income, and does it support the holding costs?
What is the cash flow gap, and is it manageable without short-term tax relief?
Does the local rental market have the vacancy pressure and demand to support yields?
Does this purchase strengthen or reduce future borrowing capacity?
Does the property asset have the scarcity, land value, and owner-occupier appeal to compound over time?
Established property still makes sense where the rental income, holding cost and growth case stand up on their own. This means the property needs to be assessed on its full investment case.
What if a property is heavily negatively geared?
The impact depends on one thing first: was the property owned before Budget night?
If it was, the current negative gearing treatment may remain in place for that asset. But grandfathering one property does not mean the broader portfolio is unaffected. Future purchases, borrowing capacity, and serviceability all still operate under the new settings.
If the property was purchased after the cut-off, the carrying cost changes. A property already running a $10,000 annual loss no longer offsets that loss against wage income in the same year. The loss carries forward. Month to month, the property costs the same to hold but the tax relief that used to soften that cost arrives later, not now.
That gap matters most for investors with tight cash flow buffers. The property needs to be tested against rental yield, vacancy risk, serviceability, and expected growth, not just on the assumption that the tax benefit will keep it manageable.
What do the CGT changes mean?
CGT influences whether an investor holds, sells, refinances, or restructures.
Under the proposed changes, the current 50% discount is replaced with an inflation-adjusted model and a 30% minimum tax on future gains from 1 July 2027. The aim is to tax real gains rather than gains produced by inflation alone. Note: for assets held before 1 July 2027, the 50% discount still applies to gains accrued up to that date. Indexation and the 30% minimum apply only to the gains accruing from 1 July 2027 onwards.
For established property investors, this makes exit planning more important.
Selling can make sense if a property is underperforming, has weak rental demand, or is limiting future borrowing capacity. Holding also makes sense if the asset remains strong, continues to support rental income, and fits the investor's longer-term plan.
Each option affects tax, rental income, borrowing capacity, equity access, and the next step in the portfolio. The CGT decision should be assessed through the full portfolio impact:
What tax could be triggered?
Does the property still have genuine growth potential?
Does selling improve borrowing capacity?
Could released equity be deployed more effectively elsewhere?
Does the decision support the investor's longer-term position?
CGT does not sit in isolation. It sits alongside cash flow, lending capacity, asset quality, rental demand, and what the portfolio needs to do next.
What could this mean for the property market?
The impact is unlikely to be the same across every market.
In the short term, price growth may slow in parts of the established property market, especially in higher-priced capital city areas where investor demand has been stronger. This does not necessarily mean prices fall. It may simply mean growth becomes more moderate while investors and lenders adjust to the new rules.
Rental markets may feel more pressure. If fewer investors buy established rental properties, the supply of available rental homes could tighten over time. In areas already dealing with low vacancy rates and population growth, this could place upward pressure on rents and make rental yield more important.
Investor behaviour may also become more segmented. Existing investors with grandfathered properties may be more likely to hold if their current tax position remains protected. New investors may need to assess established properties more carefully because the numbers need to work without the same negative gearing benefit.
New builds may attract more attention because of their tax treatment. But investors still need to assess the full risk profile, including supply levels, construction timelines, land value, rental demand and valuation risk at completion.
Lending may also become more detailed. If rental losses can no longer reduce wage income for new established property purchases, lenders may place more focus on cash flow and serviceability. This could affect how some investors plan their next purchase.
For investors, policy changes may shift how different assets are compared, but the fundamentals still matter. Supply, demand, rental pressure, affordability, infrastructure, asset quality and borrowing capacity will continue to shape long-term outcomes.
How should investors think about the next move?
A change in tax settings does not mean property investing stops working. It means the numbers need to be tested more carefully before committing.
Established property still makes sense where the fundamentals are strong. New builds look more attractive on tax grounds, but they carry the same real risk - supply levels, land value, construction timelines, rental competition, and long-term growth all need to be assessed before tax treatment becomes the deciding factor.
For investors considering their next move, these questions frame the review:
Does the property work without relying heavily on tax benefits?
Does the rental income support the holding costs?
Will this purchase improve or reduce future borrowing capacity?
Is the market supported by rental demand, affordability, and infrastructure?
Does the asset have enough scarcity and owner-occupier appeal?
Does this decision support the next step in the 30-year RoadMap?
The impact is not the same for every investor. For investors with strong cash flow and equity, these changes shift the selection criteria but don't change the fundamental strategy. For investors with tighter serviceability margins, the removal of the wage-income offset makes cash flow assessment more important - rental yield, vacancy risk, and borrowing headroom all need more scrutiny before the next purchase.
Conclusion
For investors who already own property, the focus is not just whether an asset is protected under grandfathering. It is also how future decisions, such as holding, selling, refinancing, or buying again, could affect the broader portfolio.
For investors planning their next purchase, the numbers matter more than ever. The property still needs to make sense on its own fundamentals, including cash flow, rental demand, market strength, borrowing position, and long-term growth potential.
At TIA, every recommended purchase is assessed against the client’s personalised 30-year RoadMap. That includes borrowing position, cash flow, property portfolio timing, and long-term goals. Market selection is also checked through Crystal AI, TIA’s predictive market tool that scans more than 15,000 suburbs each month, across 178 indicators.
If these changes have made you question your next move, book a strategy call with TIA today. We’ll review your position and help you understand whether your next property decision still supports your long-term plan.
FAQs
Do the new negative gearing rules affect the properties I already bought through TIA?
Properties bought before Budget night are expected to keep their current negative gearing treatment. The bigger review is what happens next. If you plan to buy again, refinance, sell, or use equity, the new rules may affect the next decision, even if your existing property is protected.
What happens if my current property is negatively geared?
If your existing property is grandfathered, the current treatment may remain in place for that asset. The key question is whether the cash flow gap is still manageable and whether the property supports the next step in your portfolio. A heavily negatively geared property may still need a RoadMap review.
Can I still use equity from an existing property to buy again?
Yes, equity may still be used to buy again if lending capacity, cash flow, and the portfolio position support it. The tax changes do not tax unrealised equity gains. However, the next purchase may be assessed under the new rules, so the cash flow and serviceability position matters more.
Does this mean I should avoid established property now?
The fundamentals of buying property are still unchanged, capital appreciation will be led by broad economic factors including suburb growth, and demand. Established property remains a strong play where the fundamentals support it - rental income, land value, scarcity, tenant demand and growth potential. . It needs to be assessed more carefully on rental income, holding costs, land value, scarcity, tenant demand, and future growth. A strong established asset may still outperform a tax-friendly new build in the wrong market.
Should I switch to a new build because negative gearing still applies there?
New builds may have a tax advantage, but that does not make them automatically better. Construction delays, oversupply, weaker land value, valuation risk, and rental competition can affect returns. TIA investors need to compare the full investment case, not just the tax treatment.
Could these changes affect my ability to buy my next property?
Yes, they could affect some investors’ ability to buy again. If future rental losses from established properties no longer reduce wage income in the same year, the property’s cash flow may carry more weight. This can affect serviceability, borrowing headroom, buffers, and the timing of the next purchase.
The 2026 Federal Budget has left many property investors asking fair question about the negative gearing and CGT changes, and what they mean in practice.
Will this affect the property I already own?
Should I hold, sell, refinance, or keep buying?
Do established properties still stack up against new builds?
Are new builds now more attractive? Could this change borrowing capacity, rents, yields, or future capital gains tax?
Should I buy now or wait 12 months?
The changes are affect more than tax. They affect cash flow, serviceability, asset selection, selling decisions and how investors plan their next purchase.
This article explains what changed, what it may mean, and how investors can think through the next step clearly.
Key takeaways
Understand whether the changes affect properties you already own or only future purchases.
Assess whether holding, selling, refinancing, or buying again still supports your property portfolio.
Review how Capital Gains Tax (CGT) changes may affect your exit plan before making a sell decision.
Check whether borrowing capacity, cash flow, and rental yield now carry more weight.
Compare established property and new builds on fundamentals, not tax treatment alone.
Revisit your property investment strategy to confirm whether the next move still makes sense.
What changed for property investors?
The Budget introduced three tax changes that matter for property investors.
First, negative gearing will be limited to new builds from 1 July 2027. Existing arrangements remain in place for properties held before Budget night. For established residential properties acquired after 7:30pm AEST on 12 May 2026, losses will only be deductible against rental income or capital gains from residential properties. Excess losses carry forward to future years.
Second, the 50% capital gains tax discount will be replaced by an inflation-based model, with a minimum 30% tax on future gains from 1 July 2027. These CGT reforms only apply to gains accruing after that date. Investors in new builds can choose between the current 50% discount or the new arrangements, however subsequent purchasers of a new build do not inherit the exemption
Third, discretionary trusts will face a 30% minimum tax from 1 July 2028, designed to align taxes on trust income more closely with taxes on wages. Unlike the negative gearing and CGT changes, the trust measure has no broad grandfathering for existing discretionary trusts. Existing discretionary trust structures are subject to the 30% minimum tax from that date. Investors currently holding property inside a discretionary trust should review their structure before 2028, particularly given rollover relief will be available for those who choose to restructure out of a trust before the measure takes effect.
What do the negative gearing changes mean?
Negative gearing affects the yearly cost of holding an investment property.
From 1 July 2027, investors who buy an established residential investment property after Budget night will no longer be able to use rental losses to reduce tax on their wages or salary.
Instead, those losses can be carried forward and used later against residential property income or future capital gains from residential property.
Example:
An investor buys an established property and records a $10,000 rental loss in year one after interest, rates, insurance, and maintenance.
Under the new rules, that $10,000 loss does not reduce the tax they pay on salary that year. It carries forward.
In year two, the property produces $6,000 in net rental income. The investor can apply $6,000 of the carried-forward loss against that income. The remaining $4,000 continues to carry forward.
The loss has not disappeared, it just does not help cash flow as quickly as it used to.
That is the key shift, some investors previously used the tax benefit to soften the annual cost of holding a negatively geared property. Under the new rules, future established property purchases need to be assessed more carefully on rental income, holding costs, and long-term fundamentals, not on the tax outcome.
For any established property, the questions now are:
What is the rental income, and does it support the holding costs?
What is the cash flow gap, and is it manageable without short-term tax relief?
Does the local rental market have the vacancy pressure and demand to support yields?
Does this purchase strengthen or reduce future borrowing capacity?
Does the property asset have the scarcity, land value, and owner-occupier appeal to compound over time?
Established property still makes sense where the rental income, holding cost and growth case stand up on their own. This means the property needs to be assessed on its full investment case.
What if a property is heavily negatively geared?
The impact depends on one thing first: was the property owned before Budget night?
If it was, the current negative gearing treatment may remain in place for that asset. But grandfathering one property does not mean the broader portfolio is unaffected. Future purchases, borrowing capacity, and serviceability all still operate under the new settings.
If the property was purchased after the cut-off, the carrying cost changes. A property already running a $10,000 annual loss no longer offsets that loss against wage income in the same year. The loss carries forward. Month to month, the property costs the same to hold but the tax relief that used to soften that cost arrives later, not now.
That gap matters most for investors with tight cash flow buffers. The property needs to be tested against rental yield, vacancy risk, serviceability, and expected growth, not just on the assumption that the tax benefit will keep it manageable.
What do the CGT changes mean?
CGT influences whether an investor holds, sells, refinances, or restructures.
Under the proposed changes, the current 50% discount is replaced with an inflation-adjusted model and a 30% minimum tax on future gains from 1 July 2027. The aim is to tax real gains rather than gains produced by inflation alone. Note: for assets held before 1 July 2027, the 50% discount still applies to gains accrued up to that date. Indexation and the 30% minimum apply only to the gains accruing from 1 July 2027 onwards.
For established property investors, this makes exit planning more important.
Selling can make sense if a property is underperforming, has weak rental demand, or is limiting future borrowing capacity. Holding also makes sense if the asset remains strong, continues to support rental income, and fits the investor's longer-term plan.
Each option affects tax, rental income, borrowing capacity, equity access, and the next step in the portfolio. The CGT decision should be assessed through the full portfolio impact:
What tax could be triggered?
Does the property still have genuine growth potential?
Does selling improve borrowing capacity?
Could released equity be deployed more effectively elsewhere?
Does the decision support the investor's longer-term position?
CGT does not sit in isolation. It sits alongside cash flow, lending capacity, asset quality, rental demand, and what the portfolio needs to do next.
What could this mean for the property market?
The impact is unlikely to be the same across every market.
In the short term, price growth may slow in parts of the established property market, especially in higher-priced capital city areas where investor demand has been stronger. This does not necessarily mean prices fall. It may simply mean growth becomes more moderate while investors and lenders adjust to the new rules.
Rental markets may feel more pressure. If fewer investors buy established rental properties, the supply of available rental homes could tighten over time. In areas already dealing with low vacancy rates and population growth, this could place upward pressure on rents and make rental yield more important.
Investor behaviour may also become more segmented. Existing investors with grandfathered properties may be more likely to hold if their current tax position remains protected. New investors may need to assess established properties more carefully because the numbers need to work without the same negative gearing benefit.
New builds may attract more attention because of their tax treatment. But investors still need to assess the full risk profile, including supply levels, construction timelines, land value, rental demand and valuation risk at completion.
Lending may also become more detailed. If rental losses can no longer reduce wage income for new established property purchases, lenders may place more focus on cash flow and serviceability. This could affect how some investors plan their next purchase.
For investors, policy changes may shift how different assets are compared, but the fundamentals still matter. Supply, demand, rental pressure, affordability, infrastructure, asset quality and borrowing capacity will continue to shape long-term outcomes.
How should investors think about the next move?
A change in tax settings does not mean property investing stops working. It means the numbers need to be tested more carefully before committing.
Established property still makes sense where the fundamentals are strong. New builds look more attractive on tax grounds, but they carry the same real risk - supply levels, land value, construction timelines, rental competition, and long-term growth all need to be assessed before tax treatment becomes the deciding factor.
For investors considering their next move, these questions frame the review:
Does the property work without relying heavily on tax benefits?
Does the rental income support the holding costs?
Will this purchase improve or reduce future borrowing capacity?
Is the market supported by rental demand, affordability, and infrastructure?
Does the asset have enough scarcity and owner-occupier appeal?
Does this decision support the next step in the 30-year RoadMap?
The impact is not the same for every investor. For investors with strong cash flow and equity, these changes shift the selection criteria but don't change the fundamental strategy. For investors with tighter serviceability margins, the removal of the wage-income offset makes cash flow assessment more important - rental yield, vacancy risk, and borrowing headroom all need more scrutiny before the next purchase.
Conclusion
For investors who already own property, the focus is not just whether an asset is protected under grandfathering. It is also how future decisions, such as holding, selling, refinancing, or buying again, could affect the broader portfolio.
For investors planning their next purchase, the numbers matter more than ever. The property still needs to make sense on its own fundamentals, including cash flow, rental demand, market strength, borrowing position, and long-term growth potential.
At TIA, every recommended purchase is assessed against the client’s personalised 30-year RoadMap. That includes borrowing position, cash flow, property portfolio timing, and long-term goals. Market selection is also checked through Crystal AI, TIA’s predictive market tool that scans more than 15,000 suburbs each month, across 178 indicators.
If these changes have made you question your next move, book a strategy call with TIA today. We’ll review your position and help you understand whether your next property decision still supports your long-term plan.
FAQs
Do the new negative gearing rules affect the properties I already bought through TIA?
Properties bought before Budget night are expected to keep their current negative gearing treatment. The bigger review is what happens next. If you plan to buy again, refinance, sell, or use equity, the new rules may affect the next decision, even if your existing property is protected.
What happens if my current property is negatively geared?
If your existing property is grandfathered, the current treatment may remain in place for that asset. The key question is whether the cash flow gap is still manageable and whether the property supports the next step in your portfolio. A heavily negatively geared property may still need a RoadMap review.
Can I still use equity from an existing property to buy again?
Yes, equity may still be used to buy again if lending capacity, cash flow, and the portfolio position support it. The tax changes do not tax unrealised equity gains. However, the next purchase may be assessed under the new rules, so the cash flow and serviceability position matters more.
Does this mean I should avoid established property now?
The fundamentals of buying property are still unchanged, capital appreciation will be led by broad economic factors including suburb growth, and demand. Established property remains a strong play where the fundamentals support it - rental income, land value, scarcity, tenant demand and growth potential. . It needs to be assessed more carefully on rental income, holding costs, land value, scarcity, tenant demand, and future growth. A strong established asset may still outperform a tax-friendly new build in the wrong market.
Should I switch to a new build because negative gearing still applies there?
New builds may have a tax advantage, but that does not make them automatically better. Construction delays, oversupply, weaker land value, valuation risk, and rental competition can affect returns. TIA investors need to compare the full investment case, not just the tax treatment.
Could these changes affect my ability to buy my next property?
Yes, they could affect some investors’ ability to buy again. If future rental losses from established properties no longer reduce wage income in the same year, the property’s cash flow may carry more weight. This can affect serviceability, borrowing headroom, buffers, and the timing of the next purchase.
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