Blog · Property & Investment Tax
Negative gearing and CGT changes from 1 July 2027: what property investors need to know
The biggest change to property investment tax in a generation is now law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and its property measures start on 1 July 2027.
If you own, or plan to buy, an investment property on the Sunshine Coast or elsewhere, here's what has changed and how to get ready.
The changes at a glance
From 1 July 2027:
- Negative gearing is limited to new builds. Rental losses on established homes bought after 7:30pm AEST on 12 May 2026 (Budget night) can only be used against residential property income and gains. Any excess is carried forward.
- The 50% CGT discount is removed for individuals, trusts and partnerships, replaced by cost base indexation and a 30% minimum tax on capital gains.
- Existing investors are largely protected. Properties held at 7:30pm on Budget night keep negative gearing until sold. The CGT changes only apply to gains that accrue from 1 July 2027.
Negative gearing changes: who keeps it and who doesn't
Grandfathered properties
If you held a residential property at 7:30pm AEST on 12 May 2026, you can keep negatively gearing it in future years until you sell it. The Act treats you as owning a property from the date you signed the contract, so a property under contract at that time (but not yet settled) is also protected.
Once you sell, the protection ends. The buyer is a new owner under the new rules.
Established property bought after Budget night
For established homes bought from 7:30pm on 12 May 2026:
- Losses in the 2026–27 year can still be claimed against your other income, such as salary.
- From 1 July 2027, net rental losses are quarantined. They can only reduce rental income from residential property or capital gains from residential property. Unused losses carry forward to future years.
- Quarantined losses can't also be added to the CGT cost base.
What counts as a "new build"?
New builds can still be negatively geared before and after 1 July 2027. Under the government's tax explainer, a new build must genuinely add to housing supply, for example:
| Generally an eligible new build | Generally not eligible |
|---|---|
| Off-the-plan apartment, newly built | Established home extended to add bedrooms |
| Any home built on previously vacant land | Knock-down rebuild of one house replaced by one house |
| Duplex replacing a single house (knock-down rebuild) | Granny flat built next to an established property that isn't eligible |
| Newly built home occupied for less than 12 months before first sale | Newly built home occupied for more than 12 months before sale to a later investor |
The legal definition is still being finalised. Draft legislation from August 2026 proposes a property is generally "new" if bought within 24 months of the certificate of occupancy, up from 12 months in the Budget. Check the final rules before relying on new-build status, especially for knock-down rebuilds and dual occupancies, which are common on the Sunshine Coast.
The quarantine rules apply to individuals, partnerships, companies and most trusts, but not to super funds (including SMSFs) or most managed investment trusts. Commercial property and shares aren't affected.
Capital gains tax changes 2027: the CGT discount removed
Indexation replaces the 50% discount
For assets held at least 12 months, individuals, trusts and partnerships will increase their cost base by the Consumer Price Index (CPI) instead of halving the gain, so only the "real" gain above inflation is taxed. Holding costs such as interest and rates aren't indexed. Government figures show indexation can mean less tax on low-growth assets and more on high-growth assets.
How pre-2027 gains are measured
Assets you hold at 30 June 2027 are treated as sold and bought back at that date, with no tax payable until you actually sell. Then:
- The gain up to 30 June 2027 is taxed under the old rules, including the 50% discount if you qualify.
- The gain from 1 July 2027 is taxed under the new rules, with indexation and the minimum tax.
To split the gain you'll need the property's value at the end of 30 June 2027. You can either:
- get a market valuation as at that date, or
- use an apportionment formula, which assumes the property grew at a steady compounding rate over your whole ownership period.
You choose when you lodge the return for the year you sell. Treasury released the draft formula for consultation in August 2026.
New builds: a choice of methods
Investors who sell an eligible new build can choose either the 50% CGT discount or indexation with the minimum tax, whichever gives the better result. If you choose the discount, the deemed sale at 1 July 2027 and the minimum tax don't apply.
How the 30% minimum tax works
The minimum tax ensures the real gain accruing from 1 July 2027 is taxed at no less than 30% (before offsets). If your marginal rate already achieves that, nothing extra is payable. Otherwise, you pay a top-up.
It mainly affects people who sell in a low-income year, such as early retirement. Anyone receiving means-tested income support, such as the Age Pension or JobSeeker, in the year of sale is exempt.
The government's example: Jack has $25,000 of other taxable income in 2029–30 and makes a $10,000 capital gain on an asset bought in 2027–28. The tax on his gain is $1,400 (14%, excluding Medicare levy). He pays an extra $1,600 to bring it up to $3,000, or 30%.
Worked examples
These simplified examples ignore selling costs and assume 2.5% annual inflation. Actual indexation uses official CPI figures.
Example 1: Grandfathered unit, sold in 2030
Sarah bought an established unit in Maroochydore in 2018 for a cost base of $500,000. It is worth $850,000 at 30 June 2027 (supported by a valuation). She sells on 30 June 2030 for $1,000,000.
| Step | Amount |
|---|---|
| Pre-2027 gain ($850,000 − $500,000) | $350,000 |
| After 50% discount | $175,000 |
| Indexed cost base ($850,000 × 1.025³) | $915,357 |
| Post-2027 gain ($1,000,000 − $915,357) | $84,643 |
| Total taxable gain | $259,643 |
| Under the old rules (50% of $500,000) | $250,000 |
Sarah's taxable gain is about $9,600 higher than under the old rules, but she keeps negative gearing until the sale.
Example 2: Valuation or formula?
Tom bought a house for $500,000 on 1 July 2017 and sells it on 30 June 2032 for $1,200,000 (15 years: 10 before and 5 after 1 July 2027).
| Formula | Valuation of $950,000 | |
|---|---|---|
| Value at 30 June 2027 | about $896,000 | $950,000 |
| Pre-2027 taxable gain (after 50% discount) | about $198,000 | $225,000 |
| Post-2027 taxable gain (after indexation) | about $186,000 | about $125,000 |
| Total taxable gain | about $384,000 | about $350,000 |
If a property grew faster before 1 July 2027 than the formula assumes, a valuation may give a better result. If growth was slower, the formula may be better.
Example 3: Established home bought after Budget night
Liam earns $120,000 and buys an established house in Buderim in August 2026. In 2027–28 it makes a net rental loss of $15,000.
- Old rules: the loss cuts his tax by about $4,800 that year (32% including Medicare levy).
- New rules: no deduction against salary. The $15,000 carries forward against future rental profits or residential capital gains. His 2026–27 loss is still deductible as normal.
Who is affected and who isn't
| Situation | Negative gearing | CGT |
|---|---|---|
| Property held (or under contract) at 7:30pm 12 May 2026 | Unchanged until sold | Old rules to 30 June 2027, new rules after |
| Established property bought from 12 May 2026 to 30 June 2027 | Allowed for 2026–27 only, then quarantined | Old rules to 30 June 2027, new rules after |
| Established property bought from 1 July 2027 | Quarantined | New rules only |
| Eligible new build | Allowed | Choose 50% discount or indexation |
| Main residence | Not applicable | Still exempt |
| Company | Quarantine applies to established property | No discount before or after; pre-1985 assets brought into CGT |
| SMSF | Not affected | Existing super CGT rules continue |
| Commercial property or shares | Not affected | Indexation and minimum tax apply (individuals, trusts, partnerships) |
Trusts, companies and SMSFs
Family trusts. Trusts move to indexation, and the minimum tax applies to individual beneficiaries who receive capital gains. A separate 30% minimum tax on discretionary trust income from 1 July 2028 has been announced. See family trusts explained.
Companies. Companies never had the discount, but the quarantine rules apply to them, and pre-1985 assets come into CGT from 1 July 2027.
SMSFs. Super funds are excluded from the negative gearing changes and keep existing CGT settings. But from 10 August 2026, SMSFs can't enter new limited recourse borrowing arrangements to buy residential property (existing ones are grandfathered). Our SMSF accountant team can review your fund.
What's still being finalised (Tax Reform No. 3)
Treasury consulted on draft Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 in August 2026. It covers the final new-build definition, property passing from a spouse on death or relationship breakdown, exemptions for affordable, NDIS and build-to-rent housing, and excluding testamentary trusts and deceased estates from the minimum tax. These are drafts, not law. We'll update this article as they progress.
Practical steps for property investors
- Keep your contracts. The contract date proves grandfathering, especially for purchases near 12 May 2026.
- Consider a 30 June 2027 valuation for properties likely to be sold with a large gain. It keeps your options open.
- Keep cost base records, including stamp duty, legal fees and capital improvements.
- Confirm new-build status before you buy, including the certificate of occupancy date.
- Track quarantined losses year by year.
- Think about timing, including your likely income in the year you sell.
For a refresher on what you can claim now, see our guide to rental property tax deductions and CGT.
How we help
We help Sunshine Coast property investors work through changes like these in plain English. We can confirm which properties are grandfathered, model your CGT under the old and new rules, help you decide whether a valuation makes sense, track quarantined losses, and prepare your tax return with rental schedules done properly. We don't give financial product advice, but we can help you understand the tax side before you decide.
Frequently asked questions
Is negative gearing being abolished?
No. From 1 July 2027, negative gearing on residential property is limited to new builds. Properties held at 7:30pm AEST on 12 May 2026 keep negative gearing until sold. Losses on established homes bought after that time are carried forward against residential property income and gains.
Do I lose the 50% CGT discount on a property I already own?
Not for gains made up to 30 June 2027. When you sell, the gain to that date gets the 50% discount if you qualify. Gains from 1 July 2027 are taxed under indexation and the 30% minimum tax.
Do I need a valuation at 30 June 2027?
It isn't compulsory. You can use a valuation or a government apportionment formula, and you choose when you lodge the return for the year you sell. A valuation may give a better result if most of your growth happened before 1 July 2027.
What if I signed a contract before Budget night but settled afterwards?
The law treats you as owning the property from the contract date. If you entered into the contract before 7:30pm AEST on 12 May 2026, the property is grandfathered for negative gearing.
Does the 30% minimum tax apply to everyone?
It applies to Australian resident individuals, including beneficiaries of trusts, on real gains accruing from 1 July 2027. It only adds tax if your gain would otherwise be taxed below 30%. People receiving payments such as the Age Pension or JobSeeker in the year of sale are exempt.
Are SMSFs affected?
SMSFs are excluded from the negative gearing changes and keep existing super CGT rules. However, since 10 August 2026 an SMSF can't enter a new borrowing arrangement to buy residential property. * ---