Negative Gearing & CGT Changes 2026-27: What's Changing and When
Australia has legislated the biggest change to property investment tax in a generation. Here is a plain-English explanation of what is changing, the dates that matter, and who is actually affected.
The three dates that matter
- 25 Jun 2026The reforms passed the Senate and became law.
- 12 May 2026Budget night, 7:30pm AEST. Anything you owned or were under contract for at this moment is grandfathered under the old rules.
- 1 Jul 2027The date both reforms actually start. Until then, the current rules still apply.
The most important thing first: nothing changes until 1 July 2027
The reforms are law, but they are not in force yet. For the entire 2026-27 financial year the current rules continue exactly as before. You can still negatively gear against your salary, and the 50% capital gains tax discount still applies to a property you sell before 1 July 2027. If you are doing your sums for this year, nothing about the tax treatment has moved.
What has changed is the future, and in particular the treatment of properties you buy from Budget night onwards. That is why the purchase decision you make today is worth thinking about carefully.
Negative gearing: what is changing
From 1 July 2027 the ability to deduct a rental loss against your wages depends on two things: when you bought, and whether the property is an established dwelling or a new build.
The important nuance is that nobody actually loses a deduction. A loss on an established property bought after Budget night is still deductible, it is simply quarantined so that it reduces your future property income rather than your salary. If you own several properties, or expect the property to become positively geared over time, the practical effect can be modest. If this is your only property and you were relying on the salary offset, the effect is more significant.
Capital gains tax: what is changing
For assets sold from 1 July 2027, the familiar 50% discount for individuals, trusts and partnerships is replaced by two mechanisms working together.
Cost base indexation
Instead of halving the gain, your purchase price is lifted in line with inflation before the gain is calculated. In a low-inflation environment this generally shelters less of the gain than the old 50% discount did.
30% minimum tax rate
A floor of 30% applies to the gain regardless of your marginal rate. Low-income earners and pensioners are exempt and continue to pay at their ordinary rates.
If you bought before 1 July 2027 and sell afterwards, a blended approach applies. The growth up to 1 July 2027 keeps the old 50% discount, and only the growth after that date uses indexation and the 30% floor. You establish the value at 1 July 2027 either with a valuation or with an ATO apportionment formula based on how long you have held the asset.
As with negative gearing, new builds are treated more generously. Their owners can choose whichever method produces the lower tax, so the 50% discount remains available to them on the whole gain.
What this means for your next purchase
The reform tilts the field towards new housing. If you buy an established property after Budget night, plan on the salary offset disappearing from 1 July 2027 and model your holding costs on that basis. If you buy a new build, you keep both the full negative gearing and a choice of capital gains tax method. Either way, run the numbers for the years before and after 1 July 2027 separately, because the after-tax position is no longer the same across the life of the investment.
This is general information rather than advice for your circumstances. Before you commit to a purchase or a sale that straddles 1 July 2027, it is worth a short conversation with your accountant.
Model your position for 2026-27
Our calculators use the current rules that apply for the 2026-27 financial year. Use them to see your tax benefit, cash flow and estimated capital gains tax, then plan for the 1 July 2027 changes.
Frequently Asked Questions
Yes. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed the Senate on 25 June 2026, so the reforms are legislated rather than merely proposed. However, the substantive changes to both negative gearing and the capital gains tax discount do not commence until 1 July 2027. For the whole of the 2026-27 financial year the current rules still apply.
Both the negative gearing and the capital gains tax reforms commence on 1 July 2027. The key earlier date to remember is 7:30pm AEST on 12 May 2026 (Budget night), which is the cut-off that decides whether a property is grandfathered under the old rules.
If you held the property (or were under contract) at 7:30pm AEST on 12 May 2026, you are grandfathered. You can continue to negatively gear it against your other income, including your salary, for as long as you own it, and nothing about your negative gearing changes. The capital gains tax reform still touches the portion of your gain that accrues after 1 July 2027, but your negative gearing is untouched.
If you buy an established (existing) residential property after 7:30pm on 12 May 2026, then from 1 July 2027 any net rental loss can only be deducted against income from residential property, not against your wages or other income. You do not lose the deduction. Unused losses are carried forward and can be used against future property income. In the meantime, for the 2026-27 year, you can still deduct the loss against all of your income.
From 1 July 2027 the 50% capital gains tax discount for individuals, trusts and partnerships is replaced by cost base indexation, which lifts your purchase price in line with inflation before the gain is worked out. A minimum tax rate of 30% then applies to the gain, regardless of your marginal rate, with low-income earners and pensioners exempt. For assets bought before 1 July 2027 and sold afterwards, a blended approach applies: the growth up to 1 July 2027 keeps the 50% discount, and only the growth after that date uses the new method.
Yes, and this is deliberate policy to encourage new housing supply. New residential dwellings keep full negative gearing against all income, and their owners can elect to apply either the 50% CGT discount or the new indexation method to the entire gain, whichever is better for them.
No. Because the reforms commence on 1 July 2027, our negative gearing and capital gains tax calculators reflect the rules that apply for the 2026-27 financial year, which are the current rules. If you are modelling a sale or a full year of ownership that falls on or after 1 July 2027, treat the tax benefit and CGT figures as the pre-reform position and speak to your accountant about how the new method applies to your situation.
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Disclaimer
This guide is for general information only and does not constitute financial or tax advice. It reflects the reforms as legislated in the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and current guidance as at July 2026. Always consult a qualified accountant or financial adviser before making property investment decisions.