The negative gearing and capital gains tax changes passed Parliament on 25 June 2026. The new rules apply from 1 July 2027, but only to properties purchased after 12 May 2026. Anything before that date is grandfathered.
The bill touches two things: how negative gearing works on new purchases, and what happens to CGT when you sell.
What negative gearing and CGT actually mean
Negative gearing is when the costs of owning an investment property (i.e. loan interest, rates, maintenance, etc.) exceed the rental income it generates. You can offset that shortfall against your other income, like wages, which reduces your overall tax bill. For most property investors, this is what makes the numbers work.
Capital gains tax applies when you sell an investment property for a profit. Under the current system, if you've held the property for more than 12 months, you're entitled to a 50% CGT discount on the taxable gain.
On a $200,000 gain, you'd only pay tax on $100,000. If you've held a property for years, that discount could mean tens of thousands of dollars less in tax when you sell.
Why the government is changing these rules
The Albanese government's stated rationale is housing affordability. The argument is that negative gearing on established homes puts investors and first home buyers in direct competition for the same properties, pushing prices up.
By limiting the benefit to new builds, the government wants to direct investment toward new supply rather than existing stock. The CGT changes follow the same logic.
Not everyone agrees it will work. Critics argue the changes will reduce rental supply and push rents higher. The bill ultimately passed with the support of the Australian Greens, who secured several concessions as part of the deal.
Negative gearing: new builds only
Under the legislation, negative gearing will only apply to newly built homes. If you buy an established property after 12 May 2026, you can still offset expenses against rental income from that property, but not against your wages.
A two-property cap will also apply. You'll only be able to claim negative gearing on a maximum of two properties at any one time, across your entire portfolio, not per financial year.
Capital gains tax: indexing instead of the discount
Under the legislation, the 50% discount will be scrapped and replaced with inflation indexing, the system that applied before 1999.
Under indexing, your capital gain is reduced by the rate of inflation over the period you owned the property before tax is applied. Whether this works in your favour depends on inflation levels and how long you hold the property.
The bill also includes a minimum tax rate of 30% on capital gains from investment property sales.
For properties purchased before 1 July 2027, any capital gain accrued up to that date may still be eligible for the 50% discount. For newly built properties purchased after 12 May 2026, you may be able to choose between the discount and indexing when you sell.
What passed and what's new
The bill passed the Senate on 25 June 2026 with the support of the Australian Greens. As part of the deal, new residential property borrowing through self-managed super funds (SMSFs) will be banned from August 2026. Existing SMSF loans are unaffected. If you have an SMSF loan in progress for a residential property, it's worth speaking to your accountant urgently.
A co-ownership issue also emerged during the process. Jointly owned properties where one owner dies or divorces risked losing grandfathered status under the bill as passed. The government has committed to addressing this in a second tranche of legislation later in 2026.
A further technical bill covering discretionary trusts will also be introduced later in the year.
What this means for your portfolio
If you're thinking about selling, gains accrued before 1 July 2027 may still attract the 50% discount. It's worth running the numbers with your accountant before deciding when to act.
If you're planning to buy, newly built properties look more favourable under the new rules. They may retain access to negative gearing, and you could have flexibility on CGT treatment when you sell.
But remember: rental yield and capital growth still matter. The tax treatment is one input, not the only one.
Talk to us about your investment finance
If you're looking at new builds as an investment, or reassessing an existing portfolio, talk to us about loan structures that suit your situation.
Disclaimer: This is general information only and not financial advice. Everyone's situation is different, so before making any decisions about your mortgage or finances, talk to a qualified professional who can look at your specific circumstances.