12/05/2026
The Government is changing the rules for Negative Gearing and Capital Gains Tax (CGT) to make the housing market more accessible for first-home buyers.
The core of this reform is a shift toward favoring new housing supply over existing properties.
1. Negative Gearing Changes
The Old Rule: You could use losses from any rental property to lower the tax you pay on your salary.
The New Rule (Starting 1 July 2027):
New Builds: You can still use rental losses to lower your salary tax (no change).
Existing Homes: If you buy an existing home after May 12, 2026, you can only use rental losses to offset income from other rental properties. You can no longer use these losses to lower the tax on your salary.
Grandfathering: If you already own an investment property (bought before May 12, 2026), the old rules still apply to you until you sell it.
2. Capital Gains Tax (CGT) Changes
The current 50% discount (where you only pay tax on half your profit) is being replaced for assets held longer than 12 months.
Cost Base Indexation: Instead of a flat 50% discount, your profit will be adjusted for inflation (CPI). You only pay tax on the "real" gain above inflation.
If inflation is high or your profit is low, you might pay less tax than before.
If your profit is very high, you will likely pay more tax than before.
30% Minimum Tax: There is now a "floor." Capital gains will be taxed at a minimum of 30%.
Exemption: Pensioners and people on JobSeeker are exempt from this 30% minimum.
New Build Bonus: If you buy a newly built home, you get to choose whichever is better for you: the old 50% discount or the new indexation rules.
3. Timeline & Transition
May 12, 2026 (7:30pm): The "cutoff" date. Properties bought before this are "safe" from negative gearing changes.
July 1, 2027: The date the new CGT and negative gearing rules officially start.
Split Gains: If you own an asset before July 2027 but sell it after, your profit is split. The portion of the profit made before July 2027 gets the old 50% discount; the portion made after follows the new rules.
Summary: What is a "New Build"?
To encourage construction, the government is being specific about what qualifies for the "better" tax treatment:
YES: Apartments bought off-the-plan, houses built on vacant land, or a duplex that replaces a single house.
NO: Renovations, extensions, or "knock-down rebuilds" that result in the same number of houses (e.g., replacing one old house with one new house).
The Expected Impact
For Buyers: Treasury predicts 75,000 more people will become homeowners over the next decade.
For Investors: The system now rewards building new homes rather than trading existing ones.
There will always be opportunities in the market. As borrowing power may be impacted, it’s important to have both a short-term and long-term plan in place. If you’re unsure how these changes may affect you, feel free to contact our office for professional guidance.
