If you own an investment property, the next twelve months are worth your attention. The 2026 Budget proposed some of the most significant changes to property tax in decades, and the legislation is now moving through Parliament. There is a planning window before 1 July 2027 that most investors have not thought about yet.
None of this is a reason to panic. It is a reason to get across the facts early, so the decisions you make are deliberate rather than reactive. For most people, that starts with understanding how the changes sit against the rest of their financial position, not just the property on its own.
What the Budget proposed for property investors
Two changes matter most if you own or are planning to buy an investment property.
The first is capital gains tax. From 1 July 2027, the 50 per cent CGT discount is proposed to be replaced for individuals, trusts and partnerships. In its place is a system that indexes your cost base for inflation, with a minimum tax rate of 30 per cent applied to the gain. This would apply to all assets held for more than twelve months, not only property, though property is where many investors will feel it most.
The second is negative gearing, which is proposed to tighten for established residential property bought after Budget night.
There is also a separate and faster-moving change for anyone using borrowing inside an SMSF to buy residential property. We cover that in its own article, because the timeline there is much shorter.
Capital gains tax: the window before 1 July 2027
This is the part most investors have not heard yet.
The new rules would only apply to gains that build from 1 July 2027 onwards. Any gain on a property you already own, accrued up to 30 June 2027, would keep the current 50 per cent discount treatment. The way this works is that the property is treated as sold and immediately bought back at its market value on 1 July 2027, and that value becomes the starting point for the new system. So the split is not based on how long you have held the property. For most properties held for a while, it means the bulk of the gain you have already built sits under the old rules.
Even if you have no plans to sell, knowing roughly where you stand across your portfolio is useful. It informs decisions you might not be facing yet, and it often changes how you think about the rest of your assets, not just the property.
There is also an angle worth considering around improvements. If your property would benefit from work you have been putting off, the timing matters. Renovations or upgrades completed before 1 July 2027 lift the property’s value while the more favourable rules still apply, so any increase they create is captured before the reset. It does not need to be a major job. Whether it makes sense at all depends on your property and your plans, which is a conversation for your adviser.
New builds and established property have been separated
The clearest divide in the proposed rules is how new builds are treated.
Investors buying newly built dwellings would be able to choose between the 50 per cent discount and the new indexation method, whichever produces the better result. That choice would not exist for established property. Over a long hold, the difference can be meaningful.
If you have been weighing a new build against an established property, the tax treatment is no longer neutral. It has become a real factor in the decision rather than a footnote, and it is worth looking at alongside the rest of your investment mix rather than in isolation.
Negative gearing on established homes
Negative gearing lets you offset a rental loss against your other income, including your salary. From 1 July 2027, that is proposed to change for established residential properties bought after 7.30pm on 12 May 2026. Losses on those properties could still be claimed, but only against rental income or capital gains from residential property, with any unused amount carried forward to future years rather than reducing your salary or wages.
Two things soften the impact. If you bought before Budget night, or had a contract in place by then, nothing changes for you and your property stays under the current rules. And the restriction would not take effect until 1 July 2027, so even a recent purchase can be negatively geared in the usual way until then. New builds are exempt as well, part of the same push to direct investment toward new supply.
A separate, urgent change for SMSF investors
If you use a self-managed super fund and borrow to buy residential property, there is a separate change that moves much faster than anything above. New borrowing arrangements for residential property inside an SMSF are proposed to be banned, with the change expected to take effect around mid-August 2026. If that is your situation, the window to act is short.
What is worth doing before 30 June 2027
You do not need to make any big decisions today. A few steps are worth working through while the window is open.
- Know your numbers. Get a rough estimate of the unrealised gain on each property, your purchase date, and an approximate current value. Surprisingly few investors have this to hand.
- If selling has been on your mind, model it now. Your adviser can compare a sale before 1 July 2027 against continuing to hold, and weigh it against what else is happening in your portfolio.
- Weigh up improvements. Work that lifts value before the reset is captured under the current rules. Ask your adviser whether it stacks up for your property.
- Check your structures. If you hold property through a trust or company, the interaction with the new rules gets complicated, so make sure your accountant is across it.
- If you are buying, look again at new versus established. The tax treatment has pulled them apart.
The longer view
Tax rules change. The fundamentals of good property investing do not. Strong locations, real rental demand, limited supply and a sensible holding period still drive most of the outcome over time. What these changes affect is the strategy around them, which type of property to buy, when to sell, and how to hold it efficiently within your wider financial plan.
The property investors who come through this period well will not be the ones who rushed, or the ones who ignored it. They will be the ones who got a clear picture of where they stood and made considered moves with a sound financial strategy behind them.
Frequently asked questions
Does the proposed change to negative gearing affect my existing investment properties?
No. The negative gearing change would only apply to established residential property bought after 7.30pm on 12 May 2026. If you bought before then, or had a contract exchanged by then, your existing arrangements continue as they are.
When does the CGT change happen, and does it affect property I already own?
The 50 per cent CGT discount is proposed to be replaced from 1 July 2027 for individuals, trusts and partnerships, across all assets rather than just property. It would affect property you already own, but only for the gain that builds from 1 July 2027 onwards. The gain accrued up to 30 June 2027 keeps the current discount treatment, based on the property’s market value at that date. If you hold a property that has grown well, that transition point is worth modelling with your adviser.
What would replace the 50 per cent discount?
A system based on indexing your cost base for inflation, with a minimum tax rate of 30 per cent applied to the gain. Investors in new builds would be able to choose between this method and the existing 50 per cent discount, whichever works out better for them.
Can improvements or renovations before 1 July 2027 make a difference?
Potentially. Improvements completed before 1 July 2027 lift the property’s value while the current rules still apply, so that uplift is captured before the reset. Whether a particular renovation is worth doing depends on the likely impact on value and your broader plans, which your adviser can help you weigh up.
Why are new builds treated differently?
The aim is to encourage new housing supply. Investors buying newly built dwellings would keep the choice between the 50 per cent discount and the new indexation method, while established property would not get that choice. Over a long hold, that makes new builds more tax-efficient for many investors.
Does any of this change the case for property investment generally?
Not in a fundamental way. Rental demand, supply constraints in good locations and capital growth over time still underpin property as a long-term investment. What changes is the tax efficiency of certain strategies and property types, which affects the buying decision at the margin rather than the underlying case. Where it fits in your overall plan is the more useful question, and that is worth talking through with an adviser.