NEGATIVE GEARING AND CAPITAL GAINS TAX (CGT) CHANGES – WHAT THE 2026 BUDGET MEANS FOR PROPERTY ACROSS AUSTRALIA

BUDGET UPDATE: 29 JUNE 2026

Further superannuation-related property changes have been announced since the 2026 Budget, with potential implications for buyers intending to purchase residential investment property through a self-managed superannuation fund (SMSF).

On 23 June 2026, the Federal Government agreed to support a Greens amendment restricting the ability of SMSFs to enter into new limited recourse borrowing arrangements (LRBAs) for the acquisition of residential property. The bill has passed both Houses of Parliament and is awaiting Royal Assent. The changes are proposed to commence 45 days after Royal Assent, which may place commencement around mid-August 2026, depending on timing.

Once in force, the changes will prevent SMSFs from entering into new LRBAs to fund residential property acquisitions. The proposed transitional arrangements appear to preserve:

Existing SMSF borrowing arrangements already on foot;
Refinancing of existing arrangements;
Acquisitions where the contract was entered into before commencement, even if settlement occurs after commencement.

SMSFs will still be entitled to borrow for property purchases that satisfy the statutory definition of “business real property” under the Superannuation Industry (Supervision) Act 1993. This is a specific statutory concept, and it should not be assumed that every non-residential or commercial-style property will qualify.

The changes also do not prevent SMSFs from owning or purchasing residential property outright, where an LRBA is not required.

For buyers, this further change adds another timing issue to the 2026 property tax reforms. Where an SMSF buyer is relying on an LRBA to purchase residential property, contract timing and lender availability for relevant loan products will now be critical.

If you have been considering purchasing property via your SMSF, time is running out. You should speak with your accountant, financial adviser or SMSF adviser now to understand your options.

Please note the position remains subject to Royal Assent, the final form of the legislation and any further regulatory guidance.

The Federal Government has announced major changes to negative gearing and capital gains tax (CGT) as part of the 2026 Budget.

The changes are not immediate. The two key dates are:

7:30pm AEST on 12 May 2026 — the Budget announcement time; and
1 July 2027 — when the main changes are due to start.

For property owners, buyers, sellers and agents, the transition rules matter.

NEGATIVE GEARING: THE BIG SHIFT

Negative gearing lets investors use rental losses to reduce other taxable income, such as wages.

From 1 July 2027, that will generally change for established residential investment properties bought after the Budget announcement. Losses from those properties will usually only be able to offset other residential property income, or be carried forward.

But new builds remain favoured. Investors in eligible new residential properties can continue to negatively gear.

A new build generally means a property that genuinely adds to housing supply — for example, an off-the-plan apartment, a new dwelling on vacant land, or a duplex replacing a single house. A renovation or knock-down rebuild that does not increase housing supply generally will not qualify.

Capital Gains Tax (CGT): GOODBYE 50% DISCOUNT, HELLO INDEXATION

At present, many individuals, trusts and partnerships can reduce a capital gain by 50% if they hold the asset for at least 12 months.

From 1 July 2027, that discount will generally be replaced by cost base indexation. This means the purchase cost is adjusted for inflation, and tax is paid on the real gain.

There will also be a 30% minimum tax rate on real capital gains, although some exemptions will apply.

Importantly, the CGT changes only apply to gains accruing after 1 July 2027. There is no tax until the asset is sold.

THE TRANSITION PERIOD: WHY TIMING MATTERS

The Government has tried to avoid a rush to buy or sell by grandfathering some existing arrangements.

For negative gearing, the critical time is 7:30pm AEST on 12 May 2026.

If an established investment property was already held at that time – including where a contract had been signed but not yet settled – the investor can continue to negatively gear that property until it is sold.

If an established investment property is bought after that time but before 1 July 2027, negative gearing may still be available until 30 June 2027, but not after that.

For CGT, the key date is 1 July 2027. Gains before that date remain under the current rules. Gains after that date fall under the new rules.

CLOSING COMMENTS

These reforms do not end property investment tax concessions, but they do change where the benefits sit.

The winners are likely to be:

existing investors who are grandfathered;
investors buying eligible new builds; and
buyers competing against fewer tax-driven investors for established homes.

The transition period will be critical. Contract timing, property type and records will all matter.

Should you have any queries please do not hesitate to contact us on 1300 680 584 or contact@maplawyers.com.au

DISCLAIMER

This article is provided for general information only and is not formal legal, financial or tax advice. It is based on the information available in the Federal Government’s Budget fact sheet on negative gearing and capital gains tax reform published by Treasury following the 12 May 2026 Budget announcement.

The proposed changes may be subject to further consultation, legislative drafting, parliamentary approval and ATO guidance. The final form and operation of the reforms may differ from the summary provided.

Readers should not rely on this article as a substitute for advice about their particular circumstances. Tax outcomes may vary depending on matters such as ownership structure, acquisition date, contract terms, property type, use of the property, income position, residency status and future legislative changes.