After the federal government announced some reforms to capital gains tax (CGT) and negative gearing in the 2026 federal budget, the Australia property market will grow. It is assumed that the reforms will help provide more affordable housing, reduce speculator purchases and encourage additional housing supply in all parts of Australia.
For decades, real estate investors have benefited from different tax concessions. This motivated them to buy multiple properties in Melbourne, Sydney, Perth, and other parts of the country. The latest budget reforms aim to wind back these expensive concessions to limit tax advantages on existing investment properties.
The major update in budget reform is the adjustment to negative gearing rules, which removes the current 50% CGT discount. But the properties purchased before the budget announcement can still claim negative gearing. Let’s understand more about how the budget reform will affect the property market in Australia.
Negative Gearing And The Capital Gains Tax Discount In The Budget 2026-27?
You pay the capital gains tax at the time of selling an asset, which can be your property or a share. This tax is paid on the gain in value between your buying and selling prices. Initially, there was a discount of 50%, meaning that half of the gain was untaxed, and the rest was added to your other income.And, if the asset was your own home, it is totally exempt. This is how many investors get profit by using negative gearing each year. In the new budget, the government has introduced a minimum 30% tax rate on capital gains starting from 1 July 2027.
What does it mean now?
As per the latest reforms, anybody who exchanges after 7:30 pm on 12 May 2026 (Tuesday) will not be able to use rental losses. The changes apply only to net rental losses from established residential propertyThe good news is that new builds are exempt from this limitation. This means the investors in newly built homes can continue to negatively gear their properties. Similarly, widely held trusts and superannuation funds are excluded, along with private investors supporting government housing programs and build-to-rent developments in the country.
What Will This Do To The Housing Market In Australia?
It is estimated that this new budget reform will benefit the housing market in Australia. Now there will be a shift in homes from investors to first-home buyers. Also, new homes will get added to this budget to balance the supply-demand chain. By encouraging investment in new housing supply, the government hopes to address Australia’s ongoing housing shortage.
Moreover, it is assumed that there will be an increase in rents. So, the coming year is a good year in Australia property market for investment to gain profits in the long term.
Can Negative Gearing Still Be Used for Rental Income?
Yes, rental losses incurred by the owner of an investment property purchased after the budget night may still be deductible against other residential rental property income. Rental losses can also be carried forward and will be able to offset other positive rental income in future years. Moreover, the rental losses can also be deducted from capital gains tax on sale.
Conclusion
With major shifts in taxation and Austrlia property market, staying up to date will benefit all property investors in Australia. You should build a property strategy on high-quality assets and a growth-based approach, rather than base it purely on a tax deduction. If you need any help with property location selection, paper work, or other formalities Property Buyers Australia has the team for every proprty related needs. Call us now!
