The 2026 Federal Budget has introduced some of the most significant changes to residential property investment policy in recent years, fundamentally reshaping negative gearing and capital gains tax treatment for future property investment. While the objective of these reforms is to improve housing affordability and encourage investment into new housing supply, there are widespread concerns around the longer-term impacts these changes will have on investor confidence, rental supply and housing availability, particularly in already undersupplied markets. Importantly, the changes do not alter the current tax treatment of established investment properties acquired before Budget night, with those properties grandfathered until sold. However, established properties acquired after Budget night will be subject to the new rules from 1 July 2027, materially changing the way future investment property decisions, acquisitions and portfolio strategies will need to be approached. FEDERAL BUDGET 2026 Negative gearing Negative gearing allows property investors to reduce the tax they pay personally by claiming investment property losses against their normal income. From 1 July 2027, negative gearing will be limited to new builds. Existing arrangements will remain unchanged for all properties held before Budget night, and investors who purchase new builds will still be able to deduct losses from other income. Investors who buy established housing after Budget night will still be able to deduct losses against residential property income and carry forward unused losses to future years, but they will no longer be able to deduct those losses against other income, such as wages or salary.
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