The 2026-27 Federal Budget announced significant reforms to negative gearing and capital gains tax. Based on the ATO reform announcement and Budget factsheet.
What Changes?
From 1 July 2027:
- Negative gearing losses on existing residential investment properties purchased after 7:30pm AEST on 12 May 2026 will only be deductible against residential rental income
- Losses can no longer be offset against salary, business income, or other income sources
- Excess losses can be carried forward to offset against future residential rental income or a capital gain on the property
What Is NOT Affected?
- Existing properties: Properties purchased before 7:30pm AEST on 12 May 2026 are grandfathered
- New builds: Properties that are newly built or substantially renovated remain eligible for full negative gearing
- Commercial property: Commercial and industrial property investments are not affected
- Non-residential investments: Shares, managed funds, and other investments are not affected
CGT Discount Changes
The 50% CGT discount for individuals, trusts, and partnerships will be replaced with a 37.5% discount for properties acquired after 7:30pm AEST on 12 May 2026. The existing 50% discount continues for properties acquired before that date.
What Should Investors Do Now?
- Review your current property portfolio and acquisition dates
- Consider the impact on your tax position from 1 July 2027
- Evaluate whether new builds or commercial property suit your strategy
- Speak with your accountant about restructuring options
- Update your financial modelling to reflect the new rules
Note: These changes do not apply in the 2025-26 or 2026-27 income years. They take effect from 1 July 2027.