What the 2026 Federal Budget Could Mean for Property Investors

The 2026 Federal Budget has proposed the most significant changes to property investment tax settings in decades. If you own investment property, are thinking about buying, or are watching the market closely, here is what has been announced and what it could mean for you if the changes pass into law.

Why the Government is proposing these changes

Australia has a housing supply problem, and the Government has decided the tax system is part of it. The argument is straightforward: around 85% of investment lending currently goes to existing properties rather than new builds, which means most investor activity is competing for the same stock as first home buyers rather than adding to it. These changes are designed to shift that, pushing investment incentives toward new construction. The grandfathering provisions are there specifically to protect existing investors. This proposal is about changing behaviour going forward, not penalising decisions already made.

What is proposed for negative gearing

From 1 July 2027, if the legislation passes, negative gearing deductions for residential property investors would be limited to newly built homes. If you were to buy an established investment property from now on, you would no longer be able to offset rental losses against your other income, such as wages or salary. You could, however, carry those losses forward and use them against future rental income from the same property.

What does this mean if you already own investment property

If you were already holding investment property before budget night on 12 May 2026, the proposed changes do not affect you. This includes properties already under contract at the time. Your current negative gearing arrangements stay in place, your tax structure stays in place, and nothing about your existing portfolio needs to change. The proposal is forward-looking only.

What is proposed for capital gains tax

The 50% CGT discount investors currently receive when selling a property held for more than 12 months would be replaced with an inflation-indexed model for established properties purchased after budget night. In simple terms, you would only be taxed on the real gain above inflation, rather than getting a flat 50% reduction. A separate 30% minimum tax on capital gains is also proposed across all asset classes from July 2027. New build investors get more flexibility here. They would be able to choose between the existing 50% discount or the new indexation approach, whichever produces the better outcome for them.

The new build opportunity

Under the proposed rules, new build investors would retain full access to both negative gearing and the 50% CGT discount. The Government is keeping incentives in place for new construction because this is where housing supply needs to grow. Eligible new builds are proposed to include:

• A newly constructed apartment bought off-the-plan

• A duplex constructed through a knock-down rebuild that results in a net increase in the number of dwellings

• Any residential construction on previously vacant land

• A newly built property occupied for less than 12 months before its first sale

If you are considering property investment, new builds would carry the full suite of tax incentives under the proposed incoming rules.

What this could mean for first home buyers

If investors do shift toward new builds as the Government expects, there should be less competition for established homes at auction. This is the theory. Whether it moves the needle enough to make a real difference to affordability is a separate question, and one the market will answer over time.

The timeline

The proposed changes would not take effect until 1 July 2027, and only if they pass parliament. There is still a window to act under the current rules if you are weighing up your options. Anyone considering buying an investment property has time to think carefully and get the right advice in place.

Talk to the right people

Tax and investment decisions of this scale are not ones to make based on a budget announcement alone. Before you do anything, get your accountant across the detail and understand what the proposed changes actually mean for your specific situation.

What I can help with is the finance side. If you're wondering what you can borrow, whether now is the right time to act, or how to position yourself ahead of these changes, let's have a conversation. Give me a call or send me a message and we'll work through it together.

Important: The changes outlined in this article were announced in the 2026 Federal Budget on 12 May 2026. They are not yet law. All measures must pass through parliament before they take effect. We will update this article as legislation progresses. This article is general information only and does not constitute financial or tax advice.