The 2026 Federal Budget: What It Means for Property Investors and Home Buyers
The 2026 Federal Budget proposed some of the most significant changes to property investment taxation in Australia in over a quarter of a century.
Before we look at the detail, here is the most important message.
If You Already Own Investment Property, the Government Has Announced You’ll Be Protected
If you owned investment property before 7:30pm AEST on 12 May 2026 — or had signed a contract before that time, even if settlement has not yet occurred — the government has announced that current tax arrangements will be grandfathered under the proposed legislation.
In practical terms, existing negative gearing and capital gains tax rules are expected to continue to apply to those properties.
These Measures Are Still Proposals
The announced changes are proposals only and will need to pass Parliament before becoming law. Final details may change.
Why These Changes Have Been Proposed
To understand the changes, it helps to understand the thinking behind them.
The government’s position is that the current tax settings — particularly the combination of negative gearing and the 50% CGT discount — have contributed to strong investor demand for existing homes, putting upward pressure on prices and making it harder for younger Australians to buy their first home. The data in the budget papers points to housing prices rising more than 400% since 1999, more than twice as fast as average incomes.
The argument is also that these concessions have disproportionately benefited higher income investors, and that the tax system should be rebalanced to better support those who are building new homes — which adds to housing supply — rather than competing for existing stock.
Whether you agree with that reasoning or not, it explains the shape of the changes. Established residential property is the target. New construction is deliberately protected and in many ways actively encouraged. That distinction runs through everything in this budget.
What’s Changing for Established Residential Properties
For established residential properties purchased after Budget night, two key changes are proposed to commence from 1 July 2027.
1) Negative Gearing
Currently, if your investment property runs at a loss — that is, your expenses (interest, rates, management fees, maintenance etc.) exceed your rental income — you can offset that loss against your wages in the same tax year. This reduces your taxable income and your tax bill immediately.
From 1 July 2027, for any **established** residential property purchased after Budget night (7:30pm AEST on 12 May 2026), that ability to offset losses against wages will be removed.
Losses from those properties will instead be quarantined and carried forward. They can then be used in two ways:
– Offset against net rental income in a future year when the property becomes positively geared
– Offset against the capital gain when you eventually sell
The deduction is not gone — it’s deferred. But the immediate annual cash flow benefit of offsetting against wages no longer applies to affected properties.
2) Capital Gains Tax
Under current rules, when you sell an asset held for more than 12 months — property, shares, or other investments — you pay tax on only half the gain. This is the 50% CGT discount.
From 1 July 2027, the 50% discount will be replaced with a system based on inflation-adjusted gains, with a minimum 30% tax applying to the real gain. This applies broadly — investment property, shares and other assets held by individuals, partnerships and trusts.
The full mechanics of how the new CGT calculations will work are still being finalised in legislation. The ATO will provide tools and further guidance. This is genuinely an area where your accountant’s advice will be essential before making any decisions.
New Builds Are Expected to Remain Favoured
Based on the budget announcement, newly constructed properties are proposed to be largely exempt from these changes.
This means:
– Full negative gearing is expected to continue.
– Investors may be able to choose the more favourable of the current or proposed CGT methods.
– New builds may also benefit from stronger depreciation deductions.
For investors, this significantly improves the relative attractiveness of a new construction.
What This Means for Existing Investors
If you already own investment property, the key message is reassurance.
The government has announced that existing holdings will be grandfathered, meaning current tax arrangements are expected to continue to apply.
What This Means for Prospective Investors
If you are considering buying an investment property after the proposed commencement date, the structure of your investment may become more important than ever.
New builds may offer:
– Continued access to full negative gearing
– Potential CGT flexibility
– Stronger depreciation benefits
What This Means for First Home Buyers
The government believes these reforms may improve affordability over time by reducing competition from investors in established homes.
The real-world impact on property prices will take time to unfold and may vary by location.
Our advice remains simple: focus on your own financial position and what you can comfortably afford.
The Bigger Picture for Investing in Bendigo
Bendigo property continues to offer attractive fundamentals, including relative affordability, strong rental demand and ongoing population growth.
If tax incentives increasingly favour new construction, regional centres like Bendigo may become even more appealing to investors.
What Should You Do Now?
If you’re an existing investor, your current holdings are protected. The most useful step between now and 1 July 2027 is a conversation with your accountant to review your longer-term strategy under the new rules.
We’re also here to review your loan structure and make sure it remains well-positioned — click here to book a free consultation with one of our experts.
If you’re considering your first investment property, new builds in particular remain well-supported under the new structure — and arguably more attractive than ever relative to established property.
Getting your borrowing capacity right and structuring your loans correctly from day one is critical — and that’s exactly where we can help. Click here to find more information about Property Investment.
If you’re a first home buyer, the same advice applies — understand your own position first. We can help you work out how much you can borrow, what deposit you need, and what government support might be available to you. Click here to find out more.
*Disclaimer: This article contains general information only and does not constitute tax, financial or investment advice. The proposed measures announced in the Federal Budget are subject to legislation and may change after the date it was written. Please seek advice from a qualified accountant or financial adviser regarding your personal circumstances.
