Pillar guide · Updated 2026-07-09
The 2026 Negative Gearing & CGT Changes Explained
Australia's tax treatment of residential investment property is changing. Here's what passed, what commences on 1 July 2027, who is affected, and what stays the same — sourced and reviewed 2026-07-09.
What passed
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026 (C2026A00049)) received royal assent on 2026-06-26. It is enacted law. The substantive changes — negative-gearing quarantining and the capital-gains-tax overhaul — commence on 2027-07-01 (the start of the 2027–28 income year).
What changes from 1 July 2027
Negative gearing is quarantined for new established purchases
From 1 July 2027, net rental losses on residential dwellings acquired after the cutoff can no longer be deducted against non-rental income such as wages. Losses are quarantined and carried forward.
After commencement, quarantined rental losses may still be deducted against:
- residential rental income (including from the taxpayer's other rental properties)
- capital gains on the sale of a rental property
CGT: indexation + 30% minimum replaces the 50% discount
From 1 July 2027 the flat 50% CGT discount is replaced by cost-base indexation: the cost base of an asset held 12+ months is uplifted for CPI inflation, so only the real (inflation-adjusted) gain is taxed.
A minimum tax rate of 30% applies to the resulting indexed real gain regardless of marginal rate. Recipients of prescribed income-support payments (e.g. pensioners) are excluded and keep ordinary marginal-rate treatment.
What is grandfathered
Property acquired before the cutoff keeps the old rules
Residential property acquired before 7:30pm AEST on 12 May 2026 (including property under contract at that time) keeps unrestricted negative gearing indefinitely, for as long as it is held.
This applies to both negative gearing and capital gains: the old 50% CGT discount continues to apply to gains on grandfathered properties.
Pre-2027 capital gains are protected
Gains that accrued before 1 July 2027 are protected via a transitional deemed-disposal: assets are notionally sold at market value just before 1 July 2027; the pre-cutover gain keeps old 50%-discount treatment, only post-cutover growth uses the new regime.
New-build exemption & choice
Eligible new residential dwellings are permanently exempt from quarantining — investors keep full negative gearing and may still choose the old 50% CGT discount.
Investors in eligible new residential dwellings can elect between the old 50% discount and the new indexation + 30%-minimum regime.
Who is affected
| Investor group | Effect |
|---|---|
| Existing investors (acquired before 7:30pm AEST 12 May 2026) | Grandfathered — no change to negative gearing; old CGT treatment continues for gains, subject to the transitional deemed-disposal mechanic from 1 July 2027. |
| Investors buying ESTABLISHED property after 12 May 2026, held past 1 July 2027 | Negative gearing quarantined (losses offset rental income/gains, not wages); new CGT indexation + 30% minimum tax applies to post-1 July 2027 gains. |
| Investors buying eligible NEW-BUILD property (any date) | Keep unrestricted negative gearing; may choose old 50% CGT discount or the new regime. |
| First home buyers | Not directly subject to NG/CGT rules — the intended beneficiaries via increased supply and affordability measures. |
| Rentvestors (BRICKWISE's core wedge) | Buying ESTABLISHED investment property after 12 May 2026 falls into the restricted bucket — a materially different case than under old rules. Buying NEW-BUILD retains the old flexibility. A meaningful strategy fork. |
Worked examples (illustrative only)
These examples show how the rules apply; they are not projections of any real outcome. Confirm your position with a registered tax professional.
Example 1 — an existing investor, grandfathered
Priya bought her investment property in 2022, well before the cutoff. She keeps unrestricted negative gearing: if her property runs a taxable loss, that loss continues to offset her salary income. On sale, the old 50% CGT discount applies to her accrued gain, with the transitional deemed-disposal protecting the pre-1 July 2027 portion.
Example 2 — buying established after the cutoff
Marcus is buying an established investment property right now. If he holds it past 1 July 2027, his rental losses are quarantined: they can only offset rental income or a future capital gain, not his wages. From 1 July 2027, his cost base is uplifted for CPI and the real gain is taxed at the 30% minimum rate. Compared with the same purchase made before the cutoff, his after-tax cashflow case is materially weaker — a key factor in serviceability and hold decisions.
Example 3 — buying a new-build
Sam is buying a qualifying new-build. She keeps full negative gearing regardless of purchase date, and she may choose between the old 50% CGT discount and the new indexation regime. The new-build path preserves the flexibility that established purchases lose.
Frequently asked questions
Has the 2026 negative gearing / CGT reform already taken effect?
Most changes commence 1 July 2027. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received royal assent on 26 June 2026, but the negative-gearing quarantining and the CGT indexation regime become operative on 1 July 2027.
Do I keep old rules if I already own an investment property?
Yes, if you acquired the property before 7:30pm AEST on 12 May 2026 (including property under contract at that time). That property is grandfathered — it keeps unrestricted negative gearing and the old CGT treatment for gains, subject to a transitional deemed-disposal mechanic from 1 July 2027.
What changes for investors buying established property after 12 May 2026?
Net rental losses on the property are quarantined: they can only offset rental income or capital gains on sale, not wages. New CGT indexation applies to gains that accrue after 1 July 2027 — the cost base is uplifted for CPI, and the real gain is taxed at a minimum 30% rate.
Are new-build properties treated differently?
Yes. Eligible new residential dwellings are permanently exempt from negative-gearing quarantining and may also elect between the old 50% CGT discount and the new indexation regime.
Does this affect first home buyers?
First home buyers are not directly subject to the negative-gearing or CGT quarantine rules. The reform's stated intent is to improve affordability and supply, which would benefit owner-occupiers including first home buyers.
What should I do with this information?
Treat it as general information only. Your position depends on when you buy, what you buy, and your personal circumstances. Confirm any decision with a registered tax professional and a licensed financial adviser.
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Sources
- https://www.legislation.gov.au/C2026A00049
- https://budget.gov.au/content/04-tax-reform.htm
- https://www.corrs.com.au/insights/capital-gains-tax-and-negative-gearing-amendments-key-changes-and-implications
- https://williambuck.com/tools/federal-budget-2026/negative-gearing/
- https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/tax-reform-boosting-home-ownership-reforming-negative-gearing-and-capital-gains-tax
As reviewed 2026-07-09. Most provisions commence 1 July 2027 — re-verify against the Act and regulator guidance before acting.
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