Negative Gearing and CGT Reform: Now Law for Property Investors

Negative gearing and capital gains tax reform, first announced in the May 2026 Federal Budget, has now passed into law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and its property measures take effect from 1 July 2027. For property investors, understanding exactly what changed, and what has not, matters more than the headlines that followed the Budget announcement.

What Passed, and When It Takes Effect

The reform began as the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, introduced into the House of Representatives on 28 May 2026. It passed both Houses on 25 June 2026 and received Royal Assent the following day, becoming Act No. 49 of 2026. The ATO now describes these measures as law, not a proposal.

The substantive changes do not start immediately. Both commence from 1 July 2027, giving investors a defined window to work out how the reform applies to property they already hold or are considering buying.

The Capital Gains Tax Change

From 1 July 2027, the 50 per cent capital gains tax discount for individuals, trusts and partnerships is replaced with cost base indexation using the Consumer Price Index, alongside a 30 per cent minimum tax rate on capital gains. Instead of halving the taxable gain, the cost base is adjusted for inflation, so tax applies to the real gain rather than the nominal one, subject to that 30 per cent floor.

The change is not retrospective. Gains accruing before 1 July 2027 keep the existing 50 per cent discount treatment, and only gains accruing after that date fall under the new rules. A property bought years ago and sold after the reform starts will have its gain split between a pre-reform period and a post-reform period, each taxed under its own rules.

The Negative Gearing Change

From the same date, negative gearing for residential property is limited to new builds. The transition depends on exactly when a property was purchased:

• Properties held at 7:30pm AEST on 12 May 2026, including where a contract had been signed but not yet settled, can be negatively geared indefinitely under the current rules.
• Established properties bought between the Budget announcement and 30 June 2027 can be negatively geared up to that date, but lose that access from 1 July 2027.
• Established properties bought from 1 July 2027 cannot be negatively geared against other income at all, though the resulting loss can still be carried forward.
• New builds can be negatively geared in full, against any income, both before and after 1 July 2027.

What Existing Investors Keep

The changes are prospective, and existing investors are the group most insulated from them. A carried-forward loss on an established property is not lost outright: it applies against future rental income or a capital gain on that property once the offset against other income ends.

Our overview of how negative gearing works explains the underlying mechanics this reform sits on top of, and is still the right starting point for the base rules.

Why New Builds Are Treated Differently

New residential builds sit apart from the rest of the reform. An eligible new build broadly means a dwelling built on vacant land, or one created by demolishing an existing property and replacing it with more dwellings, and it cannot have been previously sold as a home. Its owner keeps negative gearing indefinitely and can choose between the old 50 per cent discount or the new indexation and minimum tax arrangements on sale.

That concession does not carry over to whoever buys the property next. A subsequent purchaser of an already-established new build cannot access negative gearing or the choice of CGT treatment on it, one reason the reform is expected to shift investor demand toward new construction, a dynamic covered in our piece on how the reforms affect rentvesting.

What to Check Before 1 July 2027

With close to a year before the substantive changes start, these questions are worth working through now:

• Confirm when your existing property was purchased, or when the contract was signed, relative to 7:30pm AEST on 12 May 2026.
• Work out whether a property bought since the announcement, or being considered now, meets the new build definition.
• Arrange a valuation for any asset you expect to hold across 1 July 2027, since a gain on sale will need to be split between pre and post-reform periods.
• Review how losing negative gearing on an established property bought after Budget night would affect your cash flow and borrowing capacity.

Our property investor services page has more on how we support clients through decisions like these.

Talk to Us About Your Position

This reform is now settled law, which moves the conversation from whether it will happen to how it applies to your own portfolio. Because so much depends on exact purchase dates and whether a property qualifies as a new build, it is worth checking your position well before 1 July 2027 rather than at tax time. We cannot give advice on an individual's circumstances in an article, but we can work through what the reform means for your properties directly. Get in touch to talk it through.

Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.