Negative gearing changes in Australia after the 2026 budget: new homes and property investors

From 1 July 2027, negative gearing for residential property is limited to new builds¹. The changes also replace the 50 per cent capital gains tax (CGT) discount for individuals, trusts and partnerships with a system that adjusts the property's purchase cost for inflation (cost base indexation) and applies a 30 per cent minimum tax on capital gains accruing from that date.

Under the new rules, rental losses from an established residential property bought from 7:30pm AEST on 12 May 2026 can only be deducted from other residential property income, including capital gains from residential property, rather than income such as salary or wages¹. Any remaining losses can be carried forward and deducted from residential property income in future years².

The Australian Government announced both measures in the 2026–27 Budget on 12 May 2026³. They became law on 26 June 2026². The negative gearing limit applies from the 2027–28 income year onwards.

Treasury estimated that the reforms would raise $3.6 billion in government revenue over the budget forecast period³.

About 1 per cent of taxpayers buy negatively geared properties each year, equivalent to about 230,000 individuals in 2022–23¹.

The limit applies only to residential property. Commercial property and shares remain under the existing rules¹. Certain investment trusts and superannuation funds are also excluded².

Treasury estimated in the 2026–27 Budget that changes to negative gearing and capital gains tax would lead to about 75,000 additional owner-occupiers over the following decade, but also about 35,000 fewer dwellings than if the tax rules had remained unchanged³.

The estimated reduction of about 35,000 dwellings is equivalent to about 0.25 per cent of Australia's total housing stock at the time of the 2026–27 Budget³. Treasury expects this reduction to be more than offset by up to 65,000 new homes supported by the Local Infrastructure Fund over the same decade, together with other housing supply measures in the budget. The fund adds $2 billion to the Australian Government's Homes for Australia plan to support infrastructure needed for new housing.

Treasury estimated that the additional 75,000 owner-occupiers would offset about 10 years of decline in the home ownership rate³.

Treasury also estimated that housing prices would rise by about 2 per cent less over approximately two years than if the tax rules had remained unchanged³. This would save a buyer about $19,000 at the national median price at the time of the budget. Rents are expected to increase by less than $2 a week for a household paying the median rent at the time of the budget¹.

From 1 July 2027, an investor who buys an eligible new dwelling can continue to claim negative gearing benefits and choose the 50 per cent capital gains tax (CGT) discount when selling the property¹. However, investors who buy the same property later will not qualify for these exemptions.

The legislation allows the government to set detailed rules for what qualifies as a new dwelling. These rules must support the aim of increasing Australia's housing supply². The 2026–27 Budget factsheet indicates that a property may qualify if it is built on vacant land or replaces demolished homes with a greater number of new dwellings¹.

A dwelling generally qualifies only on its first sale, although a dwelling first owned by its builder can still qualify if it was occupied for no more than 12 months¹.