CGT Negative Gearing Changes 2026Now Law, Your Next Move

7:30pm, 12 May 2026. That's the line Parliament drew through Australian property investing. Everything bought before that evening keeps its negative gearing for good, and everything bought after it plays by new rules. The CGT negative gearing changes 2026 have stopped being a debate: they passed as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, and the clock now runs to 1 July 2027. These reforms don't punish investors who already own. They punish investors who stall through the transition window.

The backdrop sharpens the timing. The RBA lifted the cash rate in February, March and May 2026, held it at 4.35% in June, and meets again on Tuesday 11 August 2026. Either way, this is a rising-rate market: auction clearance rates are sitting in the low 40s (Cotality, June 2026), bidders are thinner on the ground, and a prepared buyer holds more negotiating power than at any point in the past three years. Tax reform plus a quiet market is not a reason to freeze. It's a preparation window.

What are the CGT negative gearing changes 2026?

Two pillars, one hinge date. The first pillar restricts negative gearing: if you bought, or buy, an established property after 7:30pm AEST on 12 May 2026, its rental losses stop offsetting your salary from 1 July 2027. The losses don't vanish. They carry forward, ready to offset future rental profits or reduce the capital gain when you sell. New builds are carved out entirely, and anything you owned before budget night keeps its negative gearing untouched.

The second pillar retires the 50% CGT discount from 1 July 2027 and replaces it with two mechanisms: indexation of your cost base for inflation, and a 30% minimum tax rate on the gain. Gains attributable to the period before 1 July 2027 keep the old discount under the transitional rules, including on properties you already hold. Super funds keep their discount too. Your own home stays exempt, untouched.

Worth noting what didn't change. Deductions for interest, rates, insurance and repairs still exist on any investment property; the reform changes what the losses can offset, not whether the costs are deductible. If the mechanics are fuzzy, our refresher on how negative gearing works covers them in ten minutes.

Already own? You're now in a protected class

You've read the obituaries for property investing. Ignore them. If you held your properties before budget night, grandfathering means your negative gearing doesn't change: your rental losses keep offsetting your wages, exactly as they did in June, for as long as you hold. (The CGT side is the one exception, and the transitional rules below cover it.)

The second-order effect runs in your favour. Grandfathered, negatively-gearable established holdings are now a fixed pool, and nobody can buy into that pool again. A buyer who purchases your property starts under the new rules, losses quarantined from day one. Follow the chain: investor demand for established stock softens, new-build demand firms, and the tax treatment attached to your existing portfolio becomes something the market can no longer replicate at any price. Selling doesn't just realise a gain. It permanently retires a tax position.

That doesn't make holding automatic. It means the hold-versus-sell decision now carries a third variable beyond price and yield, and it deserves a proper spreadsheet before you sign an agency agreement. Mum and dad investors who rush a sale this spring because the headlines spooked them may hand away a treatment they can never buy back.

How does negative gearing work from 1 July 2027?

For established purchases made after budget night, the loss doesn't disappear; it waits. Each year's shortfall carries forward. It can offset future rental profits once rents outgrow your costs, or trim the capital gain at sale. What you lose is the yearly cash-flow top-up at tax time, and for a leveraged investor in a rising-rate market, that top-up is real money arriving at exactly the moment repayments bite hardest.

Same pharmacist. Two contracts.

Mei is a Townsville pharmacist on $118,000, comparing two $650,000 townhouses in Kirwan. Both would run at a $9,000 annual rental shortfall at today's costs.

Path A, the established townhouse (contract signed August 2026): her losses offset her wage only until 30 June 2027. From 1 July 2027 the $9,000 shortfall is quarantined. At her 32% marginal rate, including the Medicare levy, roughly $2,880 a year in tax relief stops landing in her refund and starts waiting inside the property instead.

Path B, the new build off the plan: negative gearing stays intact, so the $2,880 keeps arriving each tax time. Her construction loan is also exempt from APRA's new debt-to-income cap, which has limited lending at six-times income or more since 1 February 2026.

The gap: roughly $14,400 in cash flow over five years, before rent growth, on two otherwise comparable properties.

Based on typical scenarios. Individual outcomes vary.

There's also an interaction worth understanding before you buy. Carried-forward losses that never get absorbed by rental profits reduce your capital gain at sale, and that smaller gain is then taxed under the new indexation regime. In other words, the money isn't lost; it's deferred, sometimes for a decade, and a dollar of tax relief in 2035 is worth less to your cash flow than a dollar in next year's refund. Price that delay into your offer.

One thing we've watched from the broking side: credit teams re-run their investor serviceability models within weeks of a federal budget, and lending policy usually shifts before the ATO publishes its guidance notes. The tax rules changed on paper in May; lender appetite started moving almost immediately. If you're modelling a purchase that settles into the post-2027 regime, model it on current lender policy, not last year's. Our guide to your negative gearing options from 2027 walks through the structures that still work.

What replaces the 50% CGT discount?

From 1 July 2027, two mechanisms do the discount's old job: your cost base gets indexed for inflation, and the tax on your gain can't fall below a 30% rate. Run the numbers on a plausible hold.

Say you buy for $700,000 in 2028 and sell for $1,050,000 in 2035. That's a $350,000 gain. Under the old discount, half is tax-free: $175,000 taxable, roughly $68,000 in tax at a 39% marginal rate. Under indexation, with CPI averaging 3%, your cost base rises by roughly $160,000 over the hold, cutting the taxable gain to about $190,000 and the bill to roughly $74,000 at the same marginal rate. Close, but not identical, and the new 30% minimum sets a floor of about $57,000 on that gain even in a low-income year.

Based on typical scenarios. Individual outcomes vary.

The pattern inside the maths matters more than any single figure. Indexation rewards long holds through inflationary periods; the old discount rewarded speed, because a 13-month gain got the same 50% haircut as a 13-year one. Expect churn to fall and holding periods to stretch, which tightens listings further in cities already running hot. Cotality's June 2026 Home Value Index has Perth up 23.9% and Brisbane up 17.4% over the year, against a national median of $937,722.

If you hold assets today, timing is the live question. Gains attributable to the period before 1 July 2027 keep the discount under the transitional rules, and how that applies to your specific holdings is a conversation for your accountant with real numbers on the table, well before June 2027, not the week the rules flip. The full budget picture, including the measures beyond tax, is in our Federal Budget 2026 property breakdown.

Why do the new rules point straight at new builds?

Look at the settings side by side. Negative gearing against wages survives only on new builds. APRA's debt-to-income cap, the first it has ever activated, exempts construction loans and new builds. Foreign buyers are banned from existing homes until mid-2029 but can still buy new stock. Three separate levers, one direction: Canberra and the regulators want investor capital building supply, not bidding up what already exists.

The rental market supports the same case. Rents rose 5.9% nationally over the year to June 2026 and vacancy sits at 1.6% (Cotality), so a completed new build in a growth corridor is renting fast, at a rent that carries more of the mortgage than it did two years ago.

For investors, that's a signpost, not a command. New builds carry their own risks: valuation shortfalls at completion, builder solvency, and off-the-plan contracts that settle into a different market from the one you signed in. But the after-tax arithmetic now tilts their way, and in a market with clearance rates in the low 40s, developers negotiate on price and inclusions in ways they wouldn't in 2024.

Does a knockdown rebuild count as new?

Short answer: probably, but don't rely on "probably". The Act carves out newly constructed dwellings, and the practical boundary for knockdown rebuilds, house-and-land packages and substantial renovations will be settled by ATO guidance over the coming year. If your strategy hinges on a rebuild qualifying for the new-build carve-out, get that position confirmed in writing by your accountant before you exchange, not after. The construction-loan exemption from APRA's debt-to-income cap is a separate test again, applied by the lender rather than the tax office.

Capacity is the constraint to check first. A new lender assesses you at your actual rate plus APRA's 3% serviceability buffer, so the rate you're tested at sits a full three percentage points above the rate you'd pay. The Wity Borrowing Power Assessment models your capacity across 45+ lenders, not one bank's calculator, and shows which lenders' debt-to-income and new-build policies leave you the most room. That's often the difference between "priced out" and "pre-approved with headroom". If this would be your first purchase, start with our first investment property guide, then look at how we structure investment loans around the new settings.

What should you do before 30 June 2027?

Four moves, in order.

1. Map your grandfathered position. List everything you held before 12 May 2026 and confirm with your accountant that the negative gearing on those holdings doesn't change. That's your protected base, and it's worth knowing precisely.
2. If a sale was already planned, examine the timing. The pre-1 July 2027 discount treatment could move your after-tax result by tens of thousands of dollars. Get specific advice before you list, not after.
3. If a purchase is coming, run it after-tax. An established property and a new build at the same price are no longer the same investment. Compare them on post-2027 cash flow, not on the listing photos.
4. Check your equity and capacity now, not next autumn. Releasing equity for the next deposit usually stalls at the new lender's assessment, not at your ambition: most lenders want you back under 80% LVR or charge LMI on the release. Under specialist lending policies available through Wity, any borrower can go to 85% with no LMI; allied health professionals, nurses and midwives, and senior professionals to 90%; doctors and dentists to 95%. Paired with a debt recycling structure, that headroom could fund a new-build deposit without draining your offset.

The reforms rewarded investors who owned before 12 May 2026. The transition rewards investors who act before 1 July 2027. The old rules stop on 30 June 2027 — start the Wity questionnaire → (free, no credit check, two minutes) and we'll model your position while the current settings still apply to it.