Policy
Federal Budget 2026: what property investors actually need to know
The 2026–27 Budget rewrites the rules around negative gearing and the CGT discount — but carves out new builds. Here is how we are reading it for clients.
Treasurer Jim Chalmers handed down the 2026–27 Federal Budget on 12 May 2026 and, for property investors, it is the most consequential housing budget in a generation. The headline is simple: the negative gearing regime and the 50% CGT discount are being narrowed on established dwellings, while newly built homes are quarantined from the changes to push private capital into supply.
The Government is not abolishing negative gearing. It is repricing it — and using the tax code as a planning tool to redirect investors toward new stock.
What actually changed
- Negative gearing on established dwellings — losses from new investment purchases of existing housing will only be deductible against other investment income (not wages), phased in from 1 July 2027. Existing portfolios are grandfathered.
- CGT discount on established dwellings — reduced from 50% to 35% for properties acquired after the cut-off date, again with a grandfathering window.
- New builds carved out. Full negative gearing and the full 50% CGT discount remain in place for any newly constructed dwelling held as an investment for at least the first held period.
- Build-to-rent incentives extended, with the withholding rate for foreign investors in qualifying BTR projects confirmed at 15%.
- First Home Buyers get an expanded 5% deposit scheme with no LMI for eligible buyers, plus targeted shared-equity support.
The numbers, in plain English
Modelling a $750,000 investment loan at a 6.2% rate, a typical investor on the 37% marginal bracket loses around $5,000–$8,000 per year in after-tax cashflow on a new established purchase from FY28 onward. The same purchase structured as a new build retains its full deduction profile.
Year-1 after-tax cashflow gap (est., $750k loan, 37% MTR)
$ p.a. after tax
What it means for strategy
| Buyer profile | Pre-Budget bias | Post-Budget bias | |
|---|---|---|---|
| PAYG income, high marginal rate | Established stock, deep deductions | Newer/turnkey stock, depreciation-led | |
| SMSF / long-hold | Either, LRBA dependent | Strong tilt to new — CGT impact smaller in pension phase | |
| Owner-occupier upgrader | Unaffected | Unaffected | |
| Rentvestor under 35 | Established outer-metro | New townhouse / H&L in supply corridor |
What it does not mean
- It does not abolish negative gearing. Existing investors keep what they have.
- It does not freeze the established market — owner-occupiers are 70%+ of buyers.
- It does not make every new build a good deal. Stock quality, land content and end value still drive returns.
The risk for investors is not the policy change itself. It is buying the wrong new build because the tax tail wagged the asset dog.
How NOVAQ is recalibrating client portfolios
For every active client we are re-running three scenarios: keep the existing portfolio under grandfathering, add a qualifying new build before FY28, and a hybrid where one established asset is divested and rotated into two new-build holdings. The right answer depends on income, debt position and timeline — not on the policy headline.
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FAQ
Frequently asked
- Did the 2026 Budget change negative gearing?
- No. Negative gearing remains available against salary income, and the 50% CGT discount on assets held over 12 months is unchanged for individuals and trusts.
- How does Help to Buy affect investors?
- By giving first home buyers up to 40% government equity on new builds, it slightly increases entry-level competition but also lifts the comparable sales floor for nearby investor stock.
Written & reviewed by
The NOVAQ founders
Every NOVAQ article is written or reviewed by our founders — both Chartered Accountants who actively invest in Australian property. Not journalists, not interns.
Shreyas Doshi
Co-Founder · Chartered Accountant
15+ yrs in international tax, compliance, structuring and advisory across Deloitte, PwC and a large multinational mining company. Multi-state personal portfolio under different structures.
Yuvraj Kapadia
Co-Founder · CA, CPA, SMSF Specialist
ASIC-registered SMSF Auditor, Tax Agent, licensed Finance & Mortgage Broker and Buyer's Agent. Multi-state personal portfolio under different structures.
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