What changed for property investors
The 2026-27 Federal Budget introduced two significant changes to property investment tax rules — both effective July 2027. New residential builds are explicitly carved out from both changes to encourage housing supply.
From July 2027, losses on established properties can no longer be offset against your salary income (negative gearing is quarantined), and the 50% CGT discount is removed. New builds keep both benefits — this is government policy to incentivise construction of new housing stock.
Change 1 — Negative gearing
Negative gearing means your rental property runs at a loss — the rent you collect is less than the interest and costs you pay. That loss can currently be deducted against your salary income, reducing your tax bill.
Deducting rental losses against salary income
If your investment property ran at a $10,000 loss, you could deduct that against your salary and reduce your income tax by $3,000–$4,700 depending on your tax bracket.
For established properties (settled before July 2027), losses are quarantined — they can only offset future rental profits, not your salary. No immediate tax relief.
Residential properties that are new builds (first sale of a newly constructed dwelling) retain full negative gearing deductibility indefinitely. A $10,000 annual rental loss still saves you $3,000–$4,700 per year in tax — same as today.
Change 2 — Capital gains tax discount
When you sell an investment property held for more than 12 months, currently only half of the capital gain is taxable (the 50% CGT discount). The 2026-27 budget changes how this works for established properties.
Tax treatment of capital gains at sale
Sell a property after 12+ months: only 50% of the capital gain is included in your taxable income. On a $300k gain at 39% effective rate, CGT is $58,500.
For established properties: the 50% discount is removed. A 30% flat rate applies to the inflation-adjusted gain (indexed cost base). On the same $300k gain, CGT increases significantly.
New builds can choose whichever is lower: the 50% discount method OR the new 30% flat rate on the inflation-adjusted gain. This typically results in less CGT at sale than an established property, and the same or better outcome than the current rules.