Negative Gearing Ends for Established Homes -- Budget 2026

From tonight, established homes lose negative gearing -- and the 50% CGT discount is replaced with inflation indexation from July 2027.

The Two Big Changes, Explained

Treasurer Jim Chalmers handed down the 2026-27 federal budget on 12 May, delivering what he called the most significant tax reform package in more than a quarter of a century. For borrowers, investors, and first home buyers, two reforms define the landscape.

**Negative gearing** changes take effect from 7:30PM AEST tonight. If you buy an established investment property after this point, you can no longer offset the property's losses against your general taxable income. Losses will still be deductible against rental income from residential properties, and any excess can be carried forward -- but the broader income tax offset is gone for new established-property purchases.

Properties purchased before tonight, including contracts entered into but not yet settled, are grandfathered. New builds -- dwellings on vacant land, or where an existing property was demolished and replaced with more dwellings -- remain fully eligible for negative gearing. Properties in widely held trusts and superannuation funds are excluded from the changes.

**Capital gains tax (CGT)** changes from 1 July 2027. The 50% CGT discount is replaced with cost base indexation -- meaning you pay tax only on real gains above inflation -- with a 30% minimum tax rate applying to all net capital gains. Transitional arrangements protect existing investments: gains accruing before 1 July 2027 on assets you hold today will still be taxed under the old discount rules.

Investors in new residential properties will be able to choose between the 50% discount or the new indexation method -- a deliberate carve-out to preserve incentives for new housing supply.

The Adviser reports that Treasury modelling suggests these reforms will temporarily slow house price growth by around 2 per cent over a couple of years, equivalent to a saving of approximately $19,000 on a home at the current national median price.

What It Means for Investors

If you currently own investment properties, grandfathering means you are largely protected in the short term. The changes only bite on established property purchased after tonight, and on capital gains arising after July 2027.

But the medium-term direction matters. According to The Adviser, Treasury modelling forecasts a net 75,000 properties moving from investors to owner-occupiers over the next decade. The negative gearing change alone is expected to reduce new housing supply by about 35,000 dwellings over 10 years -- a figure the government says will be more than offset by $2 billion in infrastructure funding designed to unlock 65,000 new homes.

For new-build investors, the budget largely preserves your position: new builds retain both CGT discount choice and full negative gearing eligibility. If you are considering [building a property investment portfolio](/home-loans/investor), discuss how the new rules affect your borrowing and holding structure before committing. Note that APRA already limits lenders to no more than 20% of new quarterly lending to high debt-to-income loans for investors, where debt exceeds six times income.

From July 2028, a 30% minimum tax will also apply to capital gains distributed through discretionary trusts. Investors using family trust structures should seek specific tax advice well ahead of that date.

On rents, Treasury forecasts a short-term increase of $2 per week to median rents -- around $100 per year. The government expects longer-term supply measures to eventually put downward pressure on rents, though this projection remains contested.

What It Means for First Home Buyers

The Adviser notes that since 1999, housing prices have risen more than twice as fast as average full-time earnings. Among 25 to 34-year-olds, the home ownership rate has fallen by 7 percentage points since 2001 -- by 2021, only around 44 per cent of that age group owned their home. The average age of a first home buyer has jumped from 27 years in 1981 to 35 years in 2020.

The government is targeting 75,000 additional owner-occupiers over ten years, arguing that reduced investor competition for established properties will gradually shift the ownership mix back toward buyers. Total government investment in housing rises to a record $47 billion, with $2 billion committed to infrastructure that could unlock 65,000 new homes. The existing 5% Deposit Scheme and Help to Buy initiatives continue alongside these new measures.

If you are working through your options as a first home buyer, [compare home loans for first buyers](/home-loans/first-home-buyer) or [check your borrowing power](/calculators/borrowing-power) to understand where you stand under current lending conditions.

What to Do Right Now

**If you own investment properties:** Grandfathering protects existing assets. If you are planning further purchases of established properties, anything bought after tonight sits under a materially different tax regime -- speak with a tax professional and a mortgage broker before proceeding.

**If you are a new-build investor:** Your position is largely preserved. Review your borrowing structure with a broker to confirm it still works under the new settings.

**If you are a first home buyer:** The policy is explicitly designed to make your path easier. Start by [checking your borrowing power](/calculators/borrowing-power) and reviewing your deposit position against current lending criteria.

As Treasurer Chalmers put it: "It's too hard for too many Australians to buy their own home and get ahead." Whether these reforms deliver on that promise will depend on supply outcomes and market response over the coming years -- but the tax rules have changed, and understanding the new landscape is the essential first step.

[Read the full budget tax reform detail at The Adviser.](https://www.theadviser.com.au/borrower/48423-government-to-reform-housing-tax)