Negative Gearing and CGT Changes From 1 July 2027: What Property Investors Need to Know

The negative gearing and capital gains tax (CGT) changes announced in the May 2026 Budget are now law. From 1 July 2027, negative gearing is limited for established residential property bought after Budget night, and the 50% CGT discount is replaced with indexation and a 30% minimum tax for gains made from that date. If you already own an investment property, much less changes than the headlines suggest. If you are buying, it changes the numbers. Here is what the new rules mean for you.

The short answer

• Bought before 7:30pm (AEST) on 12 May 2026: negative gearing is unchanged for that property. The date you signed the contract is what counts.
• Established home or unit bought after that time: from the 2027–28 income year, rental losses can no longer reduce tax on your wages or business income. They carry forward instead.
• New builds: keep negative gearing, and when you sell you can choose the 50% discount or indexation.
• Growth up to 30 June 2027: keeps the 50% CGT discount, even if you sell years later. You do not need to sell before 1 July 2027 to lock it in.
• Growth from 1 July 2027: your cost base is indexed for inflation instead, with no discount, and resident individuals pay at least 30% tax on that gain.
• Your own home: the main residence exemption is unchanged.

Is this law yet?

Yes. The changes are in Schedules 1 and 2 of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which passed the Senate on 25 June 2026 and received Royal Assent on 26 June 2026. The ATO confirms the measures are law on its reform page.

Two details are left to the Minister to set by legislative instrument: exactly what counts as a new residential dwelling, and an optional apportioning method for valuing assets at 1 July 2027. Treasury consulted on both in 2026, so check the final rules before you sign a contract that depends on them.

Negative gearing changes

Negative gearing means deducting a net rental loss (rent less interest, rates, insurance, strata, repairs and depreciation) against your other income, such as your salary. Our guide to negative gearing covers how it works. The new rules limit it for some properties from 1 July 2027.

Which properties are affected

The limit applies to a residential dwelling you acquired after 7:30pm (AEST) on 12 May 2026 that is not a new residential dwelling. For a property bought under a contract, you are treated as owning it from the day you entered into the contract, not from settlement.

These are not affected:

• residential property you acquired before 7:30pm (AEST) on 12 May 2026
• new residential dwellings (new builds), as defined by the Minister
• commercial property, shares and other investments
• complying super funds (including SMSFs) and widely held unit trusts
• caravans and mobile homes, hotels, motels and boarding houses, student accommodation, and boats

The test uses the date you last acquired the property. Transferring a property to a new owner, such as a family member or a trust, can mean the new owner acquires it after the cut-off. Talk to us before moving a property between owners.

What happens to the losses

From the 2027–28 income year, if the deductions for your affected properties are more than the rent they earn, the excess is not deductible that year. Instead it becomes a quarantined amount:

1. If you have net rental profit from your unaffected properties (pre-cut-off or new builds) that year, it absorbs the loss first.
2. Any remaining loss reduces capital gains you make that year from selling residential property.
3. Anything left over carries forward and is treated as a rental expense in the next income year.

The losses are not lost, but they no longer produce a tax refund in the year you make them. Quarantined expenses also cannot be added to the property's cost base.

Example: Mia buys an established unit in September 2026. In 2027–28 the rent is $30,000 and her deductions are $42,000. Under the old rules, the $12,000 loss would have cut her tax by about $3,840 (at a 30% marginal rate plus the 2% Medicare levy). Under the new rules she gets no refund for it. The $12,000 carries forward, and is used once the unit makes a profit or when she sells it for a capital gain.

If you have a PAYG withholding variation so that less tax comes out of your pay because of rental losses, it will need to be reviewed for any affected property from 1 July 2027.

CGT changes

The CGT changes apply to individuals, trusts and partnerships, for all CGT assets: property, shares, crypto and business assets. Companies and super funds are treated differently and are not covered here.

Gains up to 30 June 2027 keep the 50% discount

If you hold an asset on 30 June 2027, the law treats you as selling it just before 1 July 2027 for its market value and buying it back straight away. No tax is payable then. The gain (or loss) up to that point is deferred until you actually sell, and that part of the gain still gets the 50% discount, as long as you meet the usual 12-month rule.

Gains from 1 July 2027: indexation instead of the discount

For the period you own an asset from 1 July 2027, your cost base is indexed in line with the consumer price index (CPI), and the 50% discount no longer applies. You are taxed on the real gain, after inflation, at your marginal rate. Indexation is only available to Australian residents. Foreign and temporary residents do not get it.

The 30% minimum tax

If you are an Australian resident individual, the capital gains you make from 1 July 2027 (after indexation and any losses) must be taxed at 30% or more, before offsets. If the tax those gains actually add to your bill is less than 30% of them, you pay the difference as extra tax.

This mostly affects people with a low income in the year they sell, such as someone who has retired or stopped work. Selling in a low-income year will save much less tax than it used to. The minimum tax does not apply to:

• the part of the gain that built up before 1 July 2027
• new residential dwellings where you keep the 50% discount, and affordable housing
• anyone who received certain income support payments during the year, including the Age Pension, JobSeeker Payment, Disability Support Pension, Carer Payment, Parenting Payment, Youth Allowance, Austudy, Family Tax Benefit and Parental Leave Pay, and some veterans' payments

Valuing your assets at 1 July 2027

To split the gain, you need each asset's market value just before 1 July 2027. For listed shares that is the market price. For property, a valuation from a qualified valuer as close as possible to 30 June 2027 is the strongest evidence. Instead of a valuation, you can choose an apportioning method set by the Minister, and you do not have to choose until you lodge the tax return for the year you sell.

New builds

If you sell a new residential dwelling on or after 1 July 2027, you can keep the 50% discount or choose indexation, whichever suits you. The final definition of a new residential dwelling will decide which properties qualify, for example whether a knock-down rebuild or a substantial renovation counts.

Worked example: selling in 2029

Alex, an Australian resident, bought an established investment unit in July 2020 with a cost base of $600,000. It is worth $800,000 on 30 June 2027. Alex sells in July 2029 for $880,000, after selling costs.

1. Gain to 30 June 2027: $800,000 − $600,000 = $200,000. After the 50% discount, $100,000 is taxable.
2. Gain from 1 July 2027: the $800,000 value is indexed. If prices rise 6% over the two years, the indexed cost base is $848,000, so the taxable gain is $880,000 − $848,000 = $32,000.
3. Total added to taxable income: $132,000. Under the old rules it would have been half of $280,000, or $140,000.
4. Minimum tax: the $32,000 post-2027 gain must bear at least $9,600 in tax (30%). If Alex earns a salary in the 30% bracket or higher, there is no extra tax. If Alex has retired with little other income, extra tax may be payable.

Alex bought before Budget night, so the unit can still be negatively geared while Alex owns it.

Whether the new rules cost you more depends on how fast your property grows compared with inflation, and on your income in the year you sell. A property that grows faster than inflation will generally pay more tax than it would have under the 50% discount.

Should you sell before 1 July 2027?

Not just to keep the discount. The growth up to 30 June 2027 keeps the 50% discount automatically, whenever you sell. Selling earlier only changes how the growth after that date is taxed. Weigh up:

• Negative gearing: if you bought before Budget night, your property keeps negative gearing. A replacement established property would not.
• Transaction costs: agent fees, stamp duty on a replacement property and lost rent can outweigh the tax difference.
• Expected growth: the more your property is likely to grow above inflation, the more the new rules will cost on that growth.
• Your income when you sell: with the 30% minimum tax, timing a sale for a low-income year saves less than it used to.

For CGT, a property sale generally happens when you sign the contract, not at settlement. A contract signed before 1 July 2027 is taxed entirely under the old rules.

What about your home?

The main residence exemption is unchanged. Days a property is your main residence, including under the 6-year rule while you rent it out, are left out when working out the post-2027 gain. Negative gearing is not relevant while you live in the property, because there is no rental loss to deduct.

What to do now

• Check the contract date and time for each investment property against 7:30pm (AEST) on 12 May 2026.
• If you are buying, confirm whether the property will count as a new residential dwelling before you sign.
• Plan a market valuation of each investment property for 30 June 2027, and keep records of unlisted shares and business interests too.
• Keep your cost base records (purchase costs, stamp duty, capital improvements). You need them for both parts of the gain.
• Budget for the cash flow of affected properties, since rental losses will no longer produce a refund each year.
• Talk to us before transferring a property between family members, into a trust, or out of one.

Our rental property tax returns team can check which of your properties are affected and set up your records, and our capital gains tax service can model a sale under the old and new rules before you decide. See also our guide to capital gains tax on property.