This is the most debated measure in this Budget. It’s worth setting out clearly what’s changing, what isn’t, and why.

What’s changing — negative gearing

From 1 July 2027, negative gearing on residential property is limited to new builds.

If you bought your investment property before Budget night (12 May 2026):

• Nothing changes

• You keep full negative gearing against wages and other income

• Your arrangement is fully protected for as long as you hold the property

If you buy an established property after Budget night:

• You can still deduct losses against residential property income (rent, capital gains)

• You can carry forward unused losses to future years

• You cannot deduct losses against wages or other income

If you buy a new build after Budget night:

• Full negative gearing continues — losses deductible against all income

What’s changing — capital gains tax

From 1 July 2027, the current 50 per cent flat CGT discount is replaced with inflation-adjusted indexation.

What this means:

• Investors pay tax only on real gains — gains above inflation

• A minimum 30 per cent tax rate applies to capital gains

• Investors with lower gains (close to inflation) will pay less tax than now

• Investors with large gains well above inflation will pay more

Protections:

• Applies only to gains arising after 1 July 2027

• Gains accrued on existing investments before that date retain the 50 per cent discount

• New builds: investors can choose the old or new arrangements

• Family home: not affected

• Superannuation: not affected

Why these changes

Right now, more than 80 per cent of new investor lending goes to existing homes, not new supply. These changes redirect the tax incentive toward construction — which is what the housing market needs.

The Government estimates the reforms will support around 75,000 additional homeowners over the next decade, equivalent to reversing about ten years of decline in the home ownership rate.

Read more at budget.gov.au