What the 2027 negative gearing & CGT changes mean for property investors

On Budget night, 12 May 2026, the Government announced major changes to two things every property investor cares about: negative gearing and the capital gains tax (CGT) discount. The headlines were dramatic, the group chats lit up, and I had a dozen clients message me that night asking whether they should rush to buy, rush to sell, or rip up their plans entirely.

Here's my honest take, in plain English — including the one detail most of the panic missed.

Update (3 July 2026): one late addition made in the Senate — the same Act also bans SMSFs from borrowing to buy residential property from 10 August 2026. If that affects you, read our SMSF borrowing ban explainer.

What's changing with negative gearing

Right now, if your investment property runs at a loss (the interest and costs are more than the rent), you can deduct that loss against your other income — including your salary. That's negative gearing, and it's been a cornerstone of Australian property investing for decades.

Under the proposal, from 1 July 2027:

• Negative gearing is kept for newly built homes. Buy a new build and you can still deduct rental losses against your wages, as now — the policy is deliberately steering investors toward new supply.
• For established homes bought after 7:30pm on 12 May 2026, losses get "quarantined." You can still claim them — but only against residential rental income or the capital gain when you eventually sell, not against your salary. Any unused loss carries forward to future years.
• Anything you already own (or had under contract) before Budget night is grandfathered — the current rules keep applying to it.

What's changing with capital gains tax

Today, if you hold an asset longer than 12 months, you only pay tax on half the capital gain — the 50% CGT discount. Under the proposal, for gains arising after 1 July 2027:

• The flat 50% discount is replaced by cost-base indexation — meaning you're taxed only on the real gain above inflation (CPI) — plus a minimum 30% tax rate on that real gain.
• Gains that accrued before 1 July 2027 keep the 50% discount — only the growth after that date falls under the new rules.
• New builds get a choice — investors can pick the old 50% discount or the new indexation-plus-30% method.

The pattern is clear: the rules now reward building new homes, and treat established-home investing less generously. Whether that's good policy is a debate for another day — what matters to you is timing and structure.

So who's actually affected?

• Already own an investment property? You're grandfathered. Carry on.
• Buying an established investment property now? Today's rules still apply right up until 1 July 2027 — but plan for the loss treatment to change after that if it isn't grandfathered to you.
• Buying or building new? You keep negative gearing and a CGT choice — the new rules are designed to favour you. (Full breakdown: why new builds are now the tax-favoured path.)
• First home buyer? None of this changes your path — and less investor competition for new stock may even help. (See the first home buyer hub.)

What I'm telling clients

Three things. First, don't panic — the rules are now certain, and certainty is easier to plan around: existing arrangements are grandfathered and nothing changes before 1 July 2027. Second, if you're buying to hold past 2027, structure and property type matter more than ever — new vs established, ownership name, and loan structure all interact with these rules. Third, get your broker and accountant in the same conversation: I handle the loan structure and serviceability; your accountant handles the tax treatment. Together we make sure the two line up before you sign, not after.

You can also model your current position on the investment tax-deduction calculator (it now models the legislated rules — showing your tax saving both before and from 1 July 2027), and read up on loan structure on the investment lending page.