The 2026 Budget Changed the Rules. Here's What it Means for Your Property.
On the night of 12 May 2026, the government announced the biggest changes to property tax in Australia since 1999. If you own investment property, or are thinking about buying, this affects you directly. Here's the plain-English version of what changed - and what you should do about it.
7:30pm AEST on 12 May 2026. Everything in the budget hinges on whether you owned or bought property before or after this exact moment. Read on to understand why.
First, the Quick Version
The government has done two main things that affect property investors:
Negative gearing - the tax benefit of owning a property that costs more than it earns - is being cut back for existing properties bought after budget night.
Capital gains tax - what you pay when you sell a property for a profit - is changing from July 2027 for new purchases.
If you already own investment property, you're largely protected. If you're thinking about buying, the rules are now very different depending on whether you buy a new or existing property.
Negative Gearing: What Changed
The simple explanation
Negative gearing is when your investment property costs you more than it earns. For example: your rental income is $24,000 a year, but your mortgage, rates, and repairs cost $30,000. You're "losing" $6,000. Under the old rules, you could use that $6,000 loss to reduce the tax on your regular wages - effectively getting a tax refund on part of it.
"From 1 July 2027, this benefit only applies to brand new properties - not existing ones bought after budget night."
If you buy an existing property after budget night and it runs at a loss, that loss can only be used to offset income from other properties - not your wages. Any leftover loss carries forward to future years. It's not gone forever, but it's no longer as immediately useful at tax time.
Who is and isn't affected
Already own an investment property? Nothing changes. Your negative gearing is fully protected.
Buying a new build? Nothing changes. New builds keep full negative gearing.
Buying an existing property after budget night? From July 2027, your loss can only offset other property income - not your salary.
Own commercial property or an SMSF? These are not affected by the changes at all. The new rules only apply to residential property.
Capital Gains Tax: What Changed
The simple explanation
When you sell an investment property for more than you paid, the profit is taxed. Under the rules that have applied since 1999, if you held the property for more than a year, you only paid tax on half the profit. That "50% discount" is being replaced.
From 1 July 2027, the profit is adjusted for inflation first (so you're not taxed on growth that just kept pace with rising prices), and then a minimum 30% tax applies to whatever genuine profit remains.
In practical terms: if you buy a property now and sell it in 10 years for a significant gain, you'll pay more tax than if you'd bought it before budget night.
If you owned your property before budget night, the gain is split at the July 2027 date when you eventually sell. Profit that built up before 1 July 2027 is taxed under the old 50% discount. Profit that builds up after 1 July 2027 is taxed under the new system. This means you'll likely need a formal property valuation done at the July 2027 transition point so the two portions can be calculated correctly. Talk to your accountant about getting this organised before the deadline.
Pre-1985 Properties: An Old Exemption Is Ending
For decades, properties built before 1985 have been completely exempt from capital gains tax. That exemption ends on 1 July 2027.
If you own a pre-1985 investment property and are considering selling in the next few years, this changes your numbers significantly. Selling before the July 2027 deadline could save you a meaningful amount of tax - and it's worth sitting down with your accountant to run those numbers now.
Family Trusts: The Tax Advantage Is Shrinking
Many property investors hold their assets through a family trust, which has allowed profits to be distributed across family members and taxed at lower individual rates. From 1 July 2028, all discretionary (family) trusts will face a minimum 30% tax on income at the trust level - before it's distributed to anyone.
This doesn't destroy the trust structure, but it does reduce the tax advantage significantly. The government is providing a restructure window from July 2027 - three years to reorganise your affairs if needed. The key is not to leave it until the last minute; these things take months to set up properly.
Income Tax Cuts: A Genuine Positive
Not everything in the budget is bad news for buyers. Workers are getting real tax relief:
The tax rate on income between $18,201–$45,000 drops from 16% to 15% from 1 July 2026, and to 14% from 1 July 2027
A new $1,000 standard tax deduction with no receipts required from 2026–27
A new $250/year offset for all workers from 2027–28
Combined with previous cuts, someone on average wages will be up to $2,496/year better off from 2027–28. That directly improves borrowing capacity - which is good news if you're trying to enter the market.
What About the Housing Market Overall?
The government is also investing a record $47 billion into housing supply, including $10 billion specifically for 100,000 new homes sold exclusively to first home buyers at below-market prices.
The government's own modelling projects house price growth will be around 2% lower over a couple of years as a result of the negative gearing changes - modest, not dramatic. Rental impact is estimated at less than $2/week on median rent.
What's clear is that new builds are the winners in this budget - they keep full negative gearing, CGT flexibility, and are where most of the government housing investment is going.
So What Should You Do Right Now?
| Your Situation | Recommended Action |
|---|---|
| Already own investment property | Confirm your purchase date is pre-budget night. Arrange a property valuation at the July 2027 transition point so your capital gain can be split correctly when you eventually sell. Review your selling plan and trust structure with your accountant. |
| Thinking of buying an investment property | Run your numbers under the new rules before committing. The case for acting sooner rather than later is strong. |
| Own a pre-1985 investment property | Get your accountant to model a sale before July 2027. The tax saving could be significant. |
| Use a family trust to hold property | Start restructure planning well before July 2027. Don't wait until the deadline is close. |
| Interested in new builds | These now have a clear tax advantage. Worth exploring if it fits your investment strategy. |
The budget hasn't made property investment unviable - but it has made strategy more important. What you buy, when you buy it, and how you hold it matters more now than it did 48 hours ago. If you're in the market or thinking about getting into it, the time to get clarity on your position is now - not in six months when the dust settles.
Not Sure How This Affects You?
Book a free call with David and get a clear picture of your situation under the new rules.
Book a Free Call Email DavidThis article is for general information only and does not constitute financial, tax, or legal advice. Budget measures are subject to parliamentary approval and may change. Please consult your accountant or financial adviser before making any investment decisions. Market projections cited are government estimates as at 12 May 2026.
