Negative Gearing Overhaul Is Now Law: Key Dates Explained

Labor's landmark property tax reforms cleared Parliament 98-39 on Thursday, with major changes to negative gearing and CGT taking effect from July 2027.

Australia's property tax landscape shifted permanently on Thursday when Parliament passed the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 through both houses — 98 votes to 39 in the lower house — ending months of political debate and setting a clear path for investors, homeowners and brokers heading into 2027.

The Adviser reports that the final amended bill cleared the Senate before returning to the House of Representatives for a ratifying vote on 25 June, with Labor MPs cheering as Prime Minister Anthony Albanese and Treasurer Jim Chalmers walked from the chamber. Coalition members shouted "shame." Only independent Rebekah Sharkie and One Nation MP David Farley crossed the floor to vote with the opposition.

What the New Law Actually Does

The legislation overhauling Australia's investment property tax settings rests on two main pillars, both taking effect from **1 July 2027**:

**Negative gearing restricted to new builds.** From 1 July 2027, property investors can only claim negative gearing deductions on residential properties that are newly constructed. Investors who purchased established properties before the budget announcement on **12 May 2026** retain their negative gearing entitlements under grandfathering provisions. Anyone who bought an established investment property after that date will lose the ability to negatively gear it from mid-2027 onward.

**CGT discount replaced with cost-base indexation.** The existing 50 per cent capital gains tax discount for individuals, trusts and partnerships is replaced by cost-base indexation and a minimum 30 per cent tax rate on capital gains that accrue on or after 1 July 2027. This means gains on established properties held after that date will be taxed based on real, inflation-adjusted gains rather than receiving an automatic 50 per cent discount, with a floor rate of 30 per cent applying to net capital gains.

Treasury confirmed that approximately **85 per cent** of the estimated **$3.6 billion** in additional tax revenue over the forward estimates will come from restrictions on negative gearing, with the remaining 15 per cent attributable to CGT changes. Of that $3.6 billion, approximately **$3 billion** flows directly from restricting negative gearing to new builds. Over a decade, the combined CGT and negative gearing changes are each projected to raise more than **$40 billion**. A separate minimum 30 per cent tax on discretionary trust distributions is forecast to raise at least **$4.4 billion annually** from the 2029–30 financial year.

Personal income tax cuts, the instant work-related expense deduction of $1,000, and instant asset write-off changes will take effect from **1 July 2026**, while the CGT overhaul, negative gearing restrictions, and the Working Australians Tax Offset will commence from **1 July 2027**.

Major lenders including ANZ, NAB and Macquarie have already updated their serviceability policies, with negative gearing now recognised only on new builds or pre-budget established properties.

The SMSF Lending Ban That Caught the Industry Off-Guard

The legislation passed only after the Albanese government struck a deal with the Australian Greens, who demanded a ban on new limited recourse borrowing arrangements (LRBAs) for residential property inside self-managed super funds (SMSFs).

Under the agreement, new residential SMSF loans structured under an LRBA will be blocked **45 days after the legislation receives royal assent**. Existing facilities and loan contracts already in train will be grandfathered — meaning borrowers and brokers with settled deals are protected, as are refinancing arrangements that maintain or refinance pre-commencement borrowings.

Importantly, the ban applies only to **residential property**. SMSFs can still use LRBAs to acquire business real property and other eligible assets such as shares in a company or units in a unit trust, subject to the usual tests.

The surprise concession drew swift condemnation from non-bank lenders and brokers specialising in SMSF lending. The Adviser reported that many brokers found their pipelines significantly disrupted and clients unsettled, with fresh questions about who benefits from the reform.

The 'Widow's Tax' — and What the Government Has Promised

One unresolved issue emerged late in the process. Under the legislation as passed, the estimated **680,000 properties** held jointly by couples before the budget would lose their grandfathered CGT and negative gearing exemptions if one co-owner dies or the couple divorces — a provision crossbenchers dubbed the "widow's tax."

The government confirmed on 25 June that it will rectify this in a **second tranche of legislation** later in the year. Finance Minister Katy Gallagher told the Senate: "We were aware of some of the issues that Senator Pocock is raising around grandfathering and shared ownership, and we were working through them in the usual way, and we intend to address these, the arrangements for jointly owned assets in circumstances like inheritance, or divorce, in subsequent legislation."

The amendment to resolve the issue will ensure certain CGT and negative gearing concessions remain available where an asset is transferred because of a family law court order or the death of a joint tenant.

What Investors and Borrowers Should Do Now

The legislation sets clear transition rules, but the complexity means many investors will need to revisit their structures, loan facilities and tax plans well before 1 July 2027.

If you own an investment property purchased before **12 May 2026**, your negative gearing entitlements are grandfathered — provided you hold the property and don't trigger any event that could affect those entitlements, such as a change in ownership. The planned fix for jointly-owned properties is coming but has not yet passed.

The Mortgage & Finance Association of Australia (MFAA) said its priority is "ensuring mortgage and finance brokers have the clarity and certainty they need to continue supporting borrowers, investors and small-business owners through the transition." MFAA executive of policy Naveen Ahluwalia noted: "Mortgage and finance brokers facilitate more than 81 per cent of Australia's residential home lending and are already helping clients navigate an increasingly complex policy and economic environment... our focus turns to ensuring brokers and their clients have the certainty and clarity they need to move forward with confidence."

For investors considering a new purchase, the calculus has changed materially for established properties — the combination of restricted negative gearing and higher effective CGT means the after-tax returns on established investment properties will look very different from mid-2027. New builds retain full negative gearing entitlements and are worth exploring under the new settings. Check our [investor home loans](/home-loans/investor) guide for current financing options.

For SMSF investors, the window to enter new residential borrowing arrangements is short — the ban takes effect just 45 days after royal assent. If you're considering SMSF property investment, seeking specialist advice promptly is essential.

For first home buyers, Treasurer Chalmers described the reforms as "a victory for workers, first home buyers and future generations." The government's framing is that reducing investor demand on existing stock should, over time, improve affordability. Explore [first home buyer loan options](/home-loans/first-home-buyer) to understand what's available now. And if you're refinancing ahead of any structural changes to your portfolio, use our [refinance savings calculator](/calculators/refinance-savings) to see where you stand.

*Source: [The Adviser – Negative gearing, CGT reforms pass Parliament](https://www.theadviser.com.au/growth/48598-negative-gearing-cgt-reforms-pass-senate)*