Federal Budget 2026–27:What It Means for Property Investors

The 2026–27 Federal Budget has introduced proposed tax changes that could reshape the way property investors approach negative gearing, Capital Gains Tax and future buying decisions.

For investors across Melbourne and regional Victoria, the key message is that the changes are targeted, not universal. Existing investment properties, new residential builds and established homes purchased after Budget night may all be treated differently.

Negative gearing changes

From 1 July 2027, the proposed negative gearing reform would limit deductions for some established residential investment properties. For affected properties, rental losses would no longer be used to reduce salary, wage or business income. Instead, those losses would be quarantined and carried forward to offset future residential property income, including rental income or capital gains.

Importantly, properties under contract before 7:30pm AEST on 12 May 2026 are expected to be grandfathered. This means current negative gearing rules would continue to apply while the property is held. Eligible new residential builds would also continue to receive full negative gearing treatment, supporting investment in additional housing supply.

Commercial, industrial and non-residential property are outside the proposed negative gearing reform, while super funds, including SMSFs, and widely held trusts are also excluded.

Capital Gains Tax changes

The Budget also proposes changes to Capital Gains Tax from 1 July 2027. Under the proposal, the current 50 per cent CGT discount would be replaced for most assets with cost base indexation, designed to tax the real capital gain after inflation. A minimum 30 per cent tax rate would also apply to real gains from 1 July 2027.

For existing investment properties, the reform is prospective. Gains accrued before 1 July 2027 would continue under current CGT arrangements, while gains after that date would be assessed under the new framework. This means record keeping, valuations and cost base information will become increasingly important for long-term property investors.

The main residence exemption remains unchanged, and the existing 60 per cent CGT discount for qualifying affordable housing is retained.

What investors should do now

Property investors should review whether their property is grandfathered, transitional, an eligible new build or an affected established residential property. Contract dates, settlement records, purchase details, improvement costs and ownership documents should be kept clearly.