The Federal Budget has delivered some of the biggest changes to Australia’s property tax settings in decades. Negative gearing has been wound back, the long‑standing capital gains tax (CGT) discount is being reshaped, and investors are asking what this means for them.
From our perspective as property valuation and advisory specialists, these changes make timing, structure and valuation certainty crucial, particularly for anyone holding investment property or planning a sale in the coming years.
Key takeaways
- Negative gearing will be limited to new residential builds from 1 July 2027
- Existing investment properties are grandfathered meaning no change unless you buy after Budget night (Tuesday 12 May 2026)
- The 50% CGT discount will be replaced with an inflation‑based model and a 30% minimum tax rate from 1 July 2027
- Main residences remain CGT‑exempt
- SMSFs and property assets held within them are excluded from the CGT changes, existing super fund settings remain unchanged
- Property valuations will be critical for CGT calculations and transition points
What’s changing with negative gearing?
Negative gearing, the ability to offset rental losses against salary income, will be restricted to new residential builds only from 1 July 2027. The policy intent is to encourage investors to back new housing supply rather than competing with owner‑occupiers for established homes.
Importantly, existing investment properties purchased before Budget night (12 May 2026) are fully grandfathered. If you already own an investment property - either a new build or established property, nothing changes unless you choose to sell or buy an additional established property in the future.
For investors who purchase established properties after Budget night, rental losses will no longer be deducted against wage income. Instead, those losses can only be offset against future rental income or property capital gains.
What’s changing with capital gains tax (CGT)?
The long‑standing 50% CGT discount for assets held longer than 12 months will be replaced from 1 July 2027.
Under the new approach:
- Capital gains will be adjusted for inflation (cost base indexation)
- A minimum effective tax rate of 30% will apply to real gains
- Gains accrued before 1 July 2027 remain subject to the current rules
- The main residence exemption stays in place
This means many property owners will effectively be operating across two CGT systems, depending on when gains were accrued, which is where valuations become especially important.
Why the government is making these changes
The government has been clear about its motivation: restoring fairness to the housing market and helping make the Australian dream of home ownership feel attainable again.
For many Australians, particularly younger buyers, owning a home has felt increasingly out of reach. Treasury data shows house prices have grown far faster than wages, and tax settings like negative gearing and the CGT discount have, over time, disproportionately benefited higher‑income investors rather than aspiring owner‑occupiers.
The reforms are designed to help rebalance things by:
- Slowing investor demand for existing homes
- Supporting first‑home buyers
- Redirecting investment toward new housing supply
- Reducing investment decisions driven purely by tax outcomes rather than property fundamentals
What impact could this have on the property market?
Housing was a centrepiece of the 2026 Federal Budget, with changes to negative gearing and CGT forming part of a broader package aimed at stabilising a market under pressure from chronic supply shortages.
In the short term, we expect the policy settings to influence behaviour rather than trigger abrupt market shifts. In particular:
- Greater investor focus on new residential builds, supported by targeted tax incentives
- A clearer distinction between tax‑driven investment and decisions grounded in property fundamentals
- Increased attention on holding periods, ownership structures and sale timing, especially as CGT transition dates approach
Over the longer term, the government hopes the changes will:
- Improving access and affordability for first‑home buyers
- Encouraging new housing supply, particularly in growth corridors
- Moderating long‑term price growth rather than driving sharp market corrections
These tax reforms sit alongside significant direct investment to help unlock new housing supply, recognising that affordability can’t be addressed through tax settings alone. The Budget includes:
- $2 billion in funding for “last‑mile” infrastructure — roads, water, power and sewerage, expected to unlock up to 65,000 new homes
- A $500 million package to speed up environmental approvals for housing, energy and critical infrastructure projects, helping remove development bottlenecks
From a valuation perspective, we’ve been seeing increased enquiries around CGT planning and market value assessments and expect this to continue where property owners want clarity on value at key transition dates.
A crucial point for SMSF property holders
For trustees and advisers, one key reassurance in the Budget is that CGT settings for superannuation, including SMSFs, remain unchanged.
SMSFs will retain their existing CGT treatment, including:
- The one‑third CGT discount on assets held longer than 12 months in accumulation phase
- CGT exemptions for assets supporting retirement‑phase income streams
In short: these CGT changes do not apply on assets including property inside super.
Why valuations matter more than ever
With transitional rules, grandfathering provisions and multiple CGT regimes in play, property valuations will be a key planning tool to:
- Establish market value at key dates (such as 1 July 2027)
- Support CGT calculations
- Substantiate positions taken with the ATO
- Manage SMSF compliance and audit requirements
If you’re considering selling, restructuring, or simply want certainty under the new CGT rules, talk to an Acumentis property specialist today to understand your position and plan ahead.