Quick Summary
- Effective date: 1 July 2027
- Negative gearing: Restricted on new established property purchases — you can no longer offset rental losses against your salary for properties bought after budget night (12 May 2026). New builds remain exempt.
- Grandfathered: Properties held before 7:30pm AEST on 12 May 2026 keep the old rules indefinitely.
- CGT discount replaced: The 50% CGT discount is replaced with CPI indexation of your cost base plus a 30% minimum tax rate on the net gain — for new acquisitions from 1 July 2027.
- Shares: Shares and ETFs bought before 1 July 2027 keep the 50% discount. New purchases after that date use the CPI + 30% minimum tax method.
What Is Changing and When?
The Australian Government announced significant changes to negative gearing and Capital Gains Tax (CGT) in the 2026 Federal Budget on 12 May 2026. These changes take effect from 1 July 2027. The key changes are:
- Negative gearing on established residential investment properties is restricted — losses can no longer be offset against other income (like your salary) for new purchases.
- The 50% CGT discount is replaced for new asset acquisitions with a CPI (inflation) indexation method plus a 30% minimum tax on the net capital gain.
These are the most significant changes to Australia's investment tax settings since the CGT discount was introduced in 1999.
Negative Gearing Changes
Under current rules, if your rental income is less than your interest and other property costs, you can deduct that loss from your salary or other income — reducing your tax bill. This is called negative gearing.
From 1 July 2027, this deduction is no longer available for new established property purchases. If you buy an established investment property after budget night and it runs at a loss, that loss can only be carried forward and offset against future rental income or capital gains from that property — not your salary.
Grandfathering: Properties Held Before Budget Night
If you owned an investment property before 7:30pm AEST on 12 May 2026 (budget night), you are grandfathered under the old rules — indefinitely. This means:
- You can continue to offset rental losses against your salary as you do today.
- When you sell, you can still use the 50% CGT discount (if held over 12 months).
- These grandfathering rules apply for as long as you hold the property — there is no sunset date.
New Builds Are Exempt
New residential construction is fully exempt from the negative gearing restrictions. If you purchase a newly built property after 1 July 2027, you can still negatively gear it and offset losses against your salary. The Government's stated rationale is to encourage new housing supply while reducing demand pressure on the established property market.
CGT Changes: CPI Indexation + 30% Minimum Tax
For assets acquired from 1 July 2027, the 50% CGT discount is replaced with a two-part approach:
- CPI indexation of your cost base: Your original purchase price is adjusted for inflation (using the Consumer Price Index) to calculate a real gain rather than a nominal one.
- 30% minimum tax rate: You pay at least 30% tax on whatever net capital gain remains after indexation. This means even if your marginal rate is lower than 30%, you still pay 30% on the gain.
Who is exempt from the 30% minimum tax? Age Pension recipients and JobSeeker recipients are exempt. Small business CGT concessions are unchanged, the affordable housing 60% CGT discount remains, pre-1985 assets retain their exemption, and superannuation fund rules remain as-is.
Scenario Overview
| Scenario | Negative Gearing | CGT Treatment | Outcome |
|---|
| Investment property held before 12 May 2026 |
Unchanged (offset against salary) |
50% discount applies on sale |
Grandfathered |
| New established property purchased after 12 May 2026 |
Restricted (no salary offset) |
CPI indexation + 30% minimum tax |
New rules apply |
| New residential build purchased after 12 May 2026 |
Unchanged (offset against salary) |
CPI indexation + 30% minimum tax |
Partially exempt |
| Shares / ETFs held before 1 July 2027 |
N/A |
50% discount applies on sale |
Grandfathered |
What If I Own Shares or ETFs?
Shares and ETFs receive split treatment based on when they were acquired:
- Held before 1 July 2027: Grandfathered. When you sell, the 50% CGT discount still applies, regardless of when you sell.
- Purchased on or after 1 July 2027: The new CPI indexation + 30% minimum tax rules apply when you sell.
There is no reason to panic-sell shares before 1 July 2027. Selling early could trigger a CGT event unnecessarily. Shares you hold are grandfathered — you keep the 50% discount whenever you eventually sell them.
What Stays the Same?
- Main residence exemption: Selling your primary home remains fully CGT-exempt.
- Small business CGT concessions: Unchanged.
- Affordable housing CGT discount: The 60% discount for qualifying affordable housing providers is unchanged.
- Pre-1985 assets: Assets acquired before CGT was introduced in September 1985 retain their full exemption.
- Superannuation: Super fund tax rules are unchanged by these measures.
Expected Policy Impact
Treasury modelling cited in the budget papers projects the changes will result in approximately 75,000 additional owner-occupier property purchases over 10 years as investors compete less aggressively for established homes. Rental price impacts are expected to be modest — Treasury modelled less than $2 per week in additional rent on average nationally, though this is contested by industry groups.
Frequently Asked Questions
1 July 2027. The grandfathering cut-off for negative gearing is budget night — 7:30pm AEST 12 May 2026. The grandfathering cut-off for CGT on shares is 1 July 2027.
Yes, if you owned the property before 7:30pm AEST on 12 May 2026. You keep negative gearing and the 50% CGT discount for that property indefinitely — there is no sunset date on grandfathering.
Yes. New residential construction is fully exempt from the negative gearing restrictions. You can offset rental losses from a new build against your salary income even after 1 July 2027.
It depends on how long you hold the asset and the inflation rate over that period. For short holding periods in a high-inflation environment, CPI indexation may reduce the gain more than the 50% discount would. For long-term holdings in a low-inflation environment, the 50% discount is typically more favourable. The 30% minimum tax rate is an additional consideration — it catches investors whose marginal rate is below 30%.
No — shares held before 1 July 2027 are grandfathered and keep the 50% discount regardless of when you sell them. Selling before the date just triggers a CGT event now rather than later. There is no benefit to selling early.
No. The main residence exemption is completely unchanged. Selling the home you live in remains fully CGT-exempt under these changes.
Age Pension and JobSeeker recipients are exempt from the 30% minimum rate. Small business CGT concessions and the 60% affordable housing discount are also unchanged and continue to apply.
Disclaimer: This article is based on budget announcements and proposed legislation as of May 2026. Final legislation may differ. This is general information only — not financial or tax advice. Consult a qualified tax adviser for guidance specific to your situation.
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