Treasurer Jim Chalmers handed down the Federal Budget 2026 at 7:30 PM tonight, and the big news for property is exactly what was leaked in the days leading up. Negative gearing is being restricted to new builds only from 1 July 2027. The 50 percent CGT discount is being scrapped. Existing investors are grandfathered.
This is the biggest change to property investment tax in Australia in 25 years. Here is what was actually announced, and what it means if you own property, are looking to buy, or are wondering whether to wait.
The three big property changes announced tonight
1. Negative gearing limited to new builds from 1 July 2027
This is the headline. From 1 July 2027, negative gearing on residential property is restricted to newly built homes. The new rules do not take effect until the 2027-28 financial year, giving everyone about 14 months to plan and act.
Three categories of investor are affected differently:
Properties you owned at 7:30 PM, 12 May 2026 — fully grandfathered for the life of that property. If you owned the investment at the moment Chalmers stood up, the existing negative gearing rules apply forever. No changes ever.
Properties bought after 7:30 PM tonight but before 1 July 2027 — get a one-year reprieve. You can claim negative gearing against your wage income until 30 June 2027. From 1 July 2027, if the property is established (not a new build), losses can only be deducted against rental income or capital gains on that property, not against wages. Unused losses carry forward to future years.
Properties bought from 1 July 2027 — new builds get full negative gearing against any income, with no cap on the number of properties. Established properties bought from this date face the restricted rules: losses only deductible against rental income.
The practical implication: if you are planning to invest in established property, the one-year reprieve gives you cash flow benefits this financial year and next. After 1 July 2027 those properties effectively lose their tax shield against your salary. For a long term investment strategy, new builds are now the only category that preserves full negative gearing.
Chalmers framed the change as redirecting investment toward supply: *"Reform the rules so the tax system encourages investment that increases the supply of new housing, rather than incentivising investors to pour money into pre-existing dwellings."*
#### Key dates at a glance
- 7:30 PM, 12 May 2026 — Budget night cutoff. Properties owned at this moment are grandfathered for life.
- Now to 30 June 2027 — One-year reprieve. Old rules continue for all assets.
- 1 July 2027 — New rules take effect. Start of FY 2027-28.
- 2029 financial year — When the changes start generating revenue for the Government.
2. CGT discount being replaced from 1 July 2027
The 50 percent capital gains tax discount that has existed since 1999 is being scrapped from 1 July 2027. It is being replaced with inflation indexation, the system Australia used before 1999.
What that means in practice: instead of paying tax on half of your capital gain after holding an asset for 12 months, you will pay tax on the full gain minus an inflation adjustment to the purchase price. A new minimum 30 percent tax rate also applies to gains above inflation.
There are three CGT paths depending on when you bought and sell:
Bought AND sold before 1 July 2027 — full 50 percent discount applies as today.
Bought before 1 July 2027 but sold after — hybrid model. The 50 percent discount applies to the gain that accrued before 1 July 2027 (based on the asset's value at that date). Indexation applies to gains after that. This protects investors mid-cycle.
Bought AND sold from 1 July 2027 — fully indexed model. No 50 percent discount. Minimum 30 percent tax on gains above inflation.
For long term holders in moderate inflation, the new system is similar to the old one. For shorter holding periods or low inflation environments, the new system results in more tax. Note: the four existing small business CGT concessions remain in place unchanged.
3. $2 billion housing infrastructure package
Beyond the tax changes, the government announced a $2 billion investment in housing infrastructure over four years. The money flows to councils and state governments to unlock land for new builds. Roads, sewage, water, schools, the supporting infrastructure that allows new estates to be developed and lived in.
The Treasury estimates this package will unlock approximately 65,000 additional homes nationally over the next decade. Combined with the tax reforms steering investor demand toward new builds, the government's stated goal is to help 75,000 young Australians onto the property ladder over the next four years.
This is structurally bullish for the new build category. Federal capital is expanding new housing supply at exactly the same time as the tax system is steering investor demand toward that same category.
What is NOT changing
For clarity, here is what was confirmed unchanged tonight:
- Existing investors are fully grandfathered. If you owned established investment properties at 7:30 PM tonight, the rules that applied yesterday continue to apply for those properties for life.
- First home buyer schemes continue (Home Guarantee Scheme, Help to Buy shared equity).
- Stamp duty stays as a state tax. The federal budget cannot directly change it. The Queensland first home concessions ($0 duty on new builds for first home buyers, $0 duty on established homes under $700K) remain in place.
- Foreign investor rules continue. Foreign residents are still banned from buying established dwellings until 31 March 2027. New builds and vacant land remain open to foreign investment.
- Small business CGT concessions remain in place unchanged.
Other measures worth noting
Tonight's budget also delivered some smaller wins that are not directly property related but will show up in your tax return:
- $250 permanent tax offset for all workers earning under a certain threshold
- $1,000 instant work-related deduction for individuals (no receipts required)
These add up to a few hundred dollars per year in the pocket for most working Australians. Modest, but real.
What this means for property investors in SEQ
The implications depend on where you sit on the buyer spectrum. Here is how it breaks down.
If you already own investment property
Relax. Properties you owned at 7:30 PM tonight are grandfathered for life. No changes to negative gearing eligibility, no changes to the CGT discount on those holdings. Whatever rules you bought under, you keep.
If you are planning to grow your portfolio, your strategy needs to consider whether the next property is bought before or after the July 2027 cutoff. Buying inside the transition window preserves the most flexibility.
If you are looking to buy your first investment
You have a clear 14 month window from now until 30 June 2027 where any property type you buy gets the full old rules. After that, only new builds qualify for negative gearing.
The practical implication: the cost of waiting just went up. If you buy an established investment property in 2028, you cannot offset losses against your salary income. That changes the after tax economics significantly for high income earners.
If you are looking at house and land packages
You just became the most tax-advantaged buyer category in Australia. New build property:
- Keeps negative gearing eligibility post 2027 (the only investor category that does)
- Gets first depreciation, around 15 to 25 thousand dollars per year in the first 10 years (existing properties have none thanks to the 2017 rules)
- Benefits from the $2 billion housing infrastructure spend
- Faces less competition from established property investors who are being squeezed out
The economic case for new builds was always strong on depreciation. With negative gearing now restricted to this category alone, the differential has widened sharply.
If you are a first home buyer
Mixed news. The investor squeeze on established property may reduce competition for you in the $600K to $1M bracket post 2027, which is helpful. But the transition window may produce a surge of investor buying activity over the next 14 months as people lock in the old rules, which is unhelpful in the short term.
The Queensland new home stamp duty exemption (first home buyers pay $0 duty on new builds regardless of price) is unchanged. That combined with the post 2027 restriction on investor competition for established stock should improve affordability over time.
If you are a foreign investor
The existing ban on buying established dwellings continues until 31 March 2027. New builds and vacant residential land remain open. The compliance regime on vacant land has been tightened. If you buy vacant land you must actually develop within the timeframe, or face penalties.
For foreign capital interested in Australian property exposure, new builds remain the only legitimate path. Tonight's changes do not affect that.
The strategic shift for investors
If you are an investor or considering becoming one, there are three reasonable strategies depending on your situation.
Strategy A: Pivot fully to new builds
If you are accumulating a portfolio for the long term, shift the focus to new builds now. They keep negative gearing eligibility post 2027, get strong depreciation benefits ($15K to $25K per year in the first 10 years), and benefit from the $2 billion infrastructure supply push. New builds are now the only investor category the government is actively supporting through the tax system.
This is the strategy that makes sense for most investors building wealth through property.
Strategy B: Use the one-year reprieve for cash flow purposes
If you buy an established property between now and 30 June 2027, you can claim negative gearing for the rest of this financial year and next. After 1 July 2027 you lose that ability on this property going forward. This strategy only makes sense if you have a specific established property you want to own for reasons other than tax (location, lifestyle, future redevelopment potential).
Do not buy an established investment property thinking you have "locked in" negative gearing forever. You have not. Only properties owned at 7:30 PM tonight are grandfathered for life.
Strategy C: Do nothing
Existing investors with no plans to expand do nothing. The rules that applied to your existing portfolio continue. There is no urgency for you specifically.
For most investors actively building wealth through property, Strategy A is the cleanest path forward. The math now genuinely favours new construction over established stock for any future purchase.
What this means for SEQ specifically
South East Queensland is the most relevant Australian property market for tonight's changes. Three reasons:
SEQ has the most active new build pipeline. Ipswich, Logan, Moreton Bay, and the Gold Coast all have major masterplanned communities under construction. Ripley Valley alone is planned for 131,000 residents and 48,750 new dwellings. The new build supply is here.
SEQ growth is structural, not cyclical. Interstate migration from Sydney and Melbourne continues. Population growth is running at 2.3 percent in Brisbane and over 3 percent in Ipswich and Logan. The 2032 Olympics is driving $19.5 billion in infrastructure spending. The underlying demand is real.
SEQ is the affordable end of new build investing. A $1M new build in Brisbane outer suburbs is genuinely investable. The equivalent in Sydney is $2M+ which prices most investors out. SEQ is where new build investment math actually works.
If you are sitting on the sidelines wondering whether to buy or wait, the structural argument for buying in SEQ has just strengthened.
What to do this week
If you are an existing client of ours, we will be in touch over the next few days to walk through your specific situation.
If you are not, here are three things worth doing in the next 7 days:
1. Map your current position. If you own investment property, confirm with your accountant which properties qualify as grandfathered. Get it in writing for your records.
2. Decide your strategy. Established, new build, or status quo. Make the call now while you have a 14 month window to act on it.
3. Get on a call with us if you want a second opinion. We are running free 30 minute strategy sessions this week specifically for investors trying to make sense of tonight's changes. No pitch, no obligation. We are talking to a lot of people, we are seeing what others are doing, and we will tell you honestly what we think makes sense for your situation.
You can book one here: reddoorpropertygroup.com.au/strategy-call
Or call us directly on 1800 843 990.
Frequently asked questions
When do the new negative gearing rules start?
The new rules take effect from 1 July 2027, the start of the 2027-28 financial year. From budget night (7:30 PM 12 May 2026) until 30 June 2027 the old rules continue to apply for all properties. You have approximately 14 months before anything changes.
Am I affected if I already own investment property?
No. If you owned investment property at 7:30 PM on 12 May 2026, those properties are fully grandfathered for life. Existing negative gearing and CGT discount rules continue to apply to them, even after 1 July 2027.
Can I still buy an investment property and use negative gearing?
Yes, but with caveats. Until 30 June 2027 you can buy any property type and claim full negative gearing against your wages. From 1 July 2027 only new builds qualify for full negative gearing. Established properties bought from 1 July 2027 can only deduct losses against rental income, not your salary.
What counts as a "new build"?
The federal government has yet to publish the formal definition, but it is expected to follow the standard ATO definition: a newly constructed dwelling that has not previously been lived in, or substantially renovated property that meets specific criteria. House and land packages, off-the-plan apartments, and new turnkey builds all qualify.
Is the 50% CGT discount completely gone?
For property bought from 1 July 2027, yes. The 50 percent capital gains tax discount is replaced with an inflation indexation model plus a minimum 30 percent tax rate on real gains above inflation. For property owned before 1 July 2027, the 50 percent discount continues to apply on gains accrued up to that date.
Are first home buyers helped by these changes?
The government claims yes. By reducing investor competition for established property after 1 July 2027, the goal is to help 75,000 young Australians onto the property ladder over the next four years. First home buyer schemes (Home Guarantee Scheme, Help to Buy) continue. Queensland first home buyers still pay zero stamp duty on new builds at any price point.
What about foreign investors?
Foreign investors are unaffected by the negative gearing changes (they generally cannot claim negative gearing in Australia anyway). The existing ban on foreign residents buying established dwellings continues until 31 March 2027. New builds and vacant residential land remain open to foreign investment with stricter compliance on land development conditions.
Should I rush to buy before the new rules?
Not necessarily. You have a 14 month window. Rushing into a poor property for the tax benefit is the textbook bad decision. The smart move is to clarify your strategy first — established with one-year benefit, new build for long term, or do nothing — then execute deliberately. If you want a second opinion on your specific situation, book a free 30 minute strategy session and we will walk you through your options.
How does this affect house and land packages in SEQ?
House and land becomes the most tax-efficient investor category in Australia from 1 July 2027. New builds retain full negative gearing rights, get strong depreciation benefits (about $15K to $25K per year in the first 10 years), and the $2 billion housing infrastructure package is putting government capital into unlocking land for exactly this category. SEQ has the deepest pipeline of new build packages in Australia, making it the most relevant market.
What about my SMSF property strategy?
SMSF rules are not directly changed by tonight's budget. SMSF property investing continues under existing rules. The small business CGT concessions remain in place unchanged. If you are running an SMSF property strategy, the same logic applies: future purchases inside SMSF should lean toward new builds for the same negative gearing reasons.
Where can I get personalised advice?
Book a free 30 minute strategy session with Red Door at reddoorpropertygroup.com.au/strategy-call or call us on 1800 843 990. We will look at your specific situation, current portfolio, income, and goals, then tell you honestly what makes sense over the next 14 months and beyond.
Final thought
The Australian property tax system has been broadly unchanged since 1999. Tonight that ended. The new system favours new construction, supports first home buyers, and grandfathers existing investors.
It is not the apocalypse some commentators predicted. But it is a meaningful shift, and the smart move for most investors is to act inside the 14 month transition window with their eyes open.
If you are unsure how it affects you specifically, that is exactly what we are here for.
Talk soon,
James Rolley
Head of Acquisitions and Sales
Red Door Property Group