Federal Budget 2026: What It Means for You

The federal government has handed down its 2026-27 Budget, introducing some of the most significant property tax reforms in decades.

This Budget arrives at a pivotal moment. Housing affordability remains a key concern, with property prices rising by more than 400% since 1999, which is more than double the pace of wage growth. These conditions have made home ownership increasingly difficult for younger Australians, placing housing access firmly in the government’s spotlight.

A major focus of the Budget is housing policy, with several proposed tax changes aimed at property investors. The government expects these measures to gradually shift approximately 75,000 properties from investors to owner-occupiers over the next decade. It also anticipates the reforms will help moderate house price growth and, over time, contribute to lower rental costs following an initial period of adjustment.

According to Treasury modelling, the proposed changes may result in around 35,000 fewer homes being built over the next ten years due to reduced private investment. To offset this impact, the government has outlined plans to increase investment in infrastructure to support the development of new housing supply.

Beyond housing, the Budget included several announcements expected to affect most Australians. Below is a summary of some of the key proposals.

Investors

Negative gearing

From 1 July 2027, negative gearing on existing residential properties purchased after the Budget announcement (7:30pm AEST, 12 May 2026) will no longer be usable to reduce your other taxable income, such as salary and wages. Negative gearing is where rental expenses exceed rental income, and the losses are deducted from your income tax.

Importantly, this does not affect properties you already own. Any investment property held before the announcement can continue to be negatively geared as before, for as long as you hold it.

Investors purchasing new builds are fully exempt and retain full access to negative gearing under current rules, including the ability to offset rental losses against salary and other income.

Carrying forward losses: For existing properties purchased after the announcement, rental losses cannot reduce your salary income from 1 July 2027 onwards. Instead, those losses are carried forward and can be used to offset residential property income in future years..

Before 12 May 2026	Properties held at announcement can continue to be negatively geared indefinitely.
12 May - 30 June 2027	New purchases of existing properties can still be negatively geared during this transitional window, but not from 1 July 2027 onwards.
From 1 July 2027	No negative gearing against other income for existing residential properties purchased after the announcement. New builds remain fully exempt

Capital gains tax (CGT) discounts

The current 50% CGT discount for assets held more than 12 months will be replaced from 1 July 2027 with a cost base indexation model and a 30% minimum tax rate on real capital gains. This applies to all CGT assets held by individuals, partnerships and most trusts, including property and shares.

Under indexation, your cost base is adjusted for CPI inflation before calculating the taxable gain. If your property grew 7% in a year with 4% inflation, you are only taxed on the real 3% gain. The trade-off: if your asset grows significantly faster than inflation, you may pay more tax than under the previous 50% discount. 30% minimum tax:

A minimum 30% tax rate applies to real capital gains accruing after 1 July 2027. Pensioners and those receiving income support payments are exempt from this minimum rate in any financial year they receive such a payment.

Transitional rules: For assets you already own, gains accrued up to 1 July 2027 are still taxed under the existing 50% discount. Only gains that accrue after that date fall under the new regime. The ATO will provide tools to help you calculate the split at the time of sale.

New build flexibility: Investors in new-build residential properties retain the option to choose between the 50% discount or the new indexation model when they eventually sell, giving you the ability to use whichever method produces the better result.

Why SMSFs Are Clear Winners Under the 2026 Budget

The proposed changes to negative gearing and Capital Gains Tax (CGT) generally do not impact Self-Managed Superannuation Funds (SMSFs). SMSFs are largely excluded from the new restrictions, making them a potentially more attractive structure for property investment compared to individual ownership under the new rules.

Not a financial advise.

Homebuyers

A More Level Playing Field

One of the primary goals of the investor tax reforms is to shift around 75,000 properties from investors to owner-occupiers over the next decade, effectively reversing a decade of declining homeownership rates. With negative gearing no longer boosting investor borrowing capacity for existing properties, prospective owner-occupiers may find themselves competing more fairly at auction.

Treasury modelling projects a modest and temporary slowing in house price growth of around 2% over a couple of years relative to no policy change. While a short-term rental increase of less than $2 per week is anticipated for median renters, the government expects its broader housing supply measures to put downward pressure on rents over time.

$2 Billion for New Housing Infrastructure

The government has committed $2 billion toward infrastructure including sewerage, roads and utilities to open up new housing lots. This investment is expected to support an additional 65,000 new homes over the next four years.

Foreign Buyer Ban Extended

The ban on foreign buyers purchasing existing residential properties has been extended to mid-2029. This does not apply to new builds, which remain accessible to overseas purchasers.

AI Tool to Speed Up Development Approvals

Nearly $106 million is being invested to develop an AI tool that helps developers navigate environmental approval processes. The aim is to cut red tape and accelerate the approvals pipeline for new residential projects.

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Disclaimer: The information provided on this page is for illustrative and general discussion purposes only. It does not constitute financial, taxation or legal advice. Whilst all care has been taken in its preparation, any party seeking to rely on this content should make their own enquiries to ensure its relevance to their specific personal and business circumstances. Terms, conditions, fees and charges may apply. Normal lending criteria apply. Rates subject to change. Approved applicants only.