What did the 2026 Federal Budget change for property investors?
An answer-first guide to the negative gearing quarantine, the CGT change, and the structure deadlines under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, reviewed by Dr Prabath Morawakage, PhD.
Author and reviewer: Dr Prabath Morawakage, PhD, Head of Property Economics & Intelligence · Ramsey Advantage® · $900M+ in client property wealth under management
Last reviewed: 4 August 2026 by Dr Prabath Morawakage
What did the 2026 Federal Budget change for property investors?
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. From 1 July 2027 it quarantines negative gearing on established residential property acquired after 7:30pm AEST on 12 May 2026, and replaces the 50% CGT discount with cost-base indexation plus a 30% minimum tax on net capital gains. A 9 August 2026 bare trust deadline and a 10 August 2026 SMSF change also apply.
The reform reshapes the after-tax economics of holding property. Two dates matter for the loss and CGT changes: the 12 May 2026 acquisition cutoff decides which established properties are affected, and 1 July 2027 is when the changes take effect. The near-term deadlines (9 and 10 August 2026) concern structures being put in place now. The disciplined response is sequencing, not urgency.
Is negative gearing being abolished in Australia?
No. Negative gearing is not abolished. From 1 July 2027 it is quarantined on established residential property acquired after 7:30pm AEST on 12 May 2026: rental losses on that property can offset rental income or capital gains, but not salary or other income. New builds, and established property acquired before that cutoff, are not subject to the quarantine.
The mechanism is narrowed for a defined category of property, not removed. Which properties fall inside the quarantine is set by the 12 May 2026 acquisition cutoff; when it bites is 1 July 2027.
What happens to negative gearing on established properties after 1 July 2027?
From 1 July 2027, negative gearing is quarantined on established residential property acquired after 7:30pm AEST on 12 May 2026. Rental losses on that property can offset rental income or capital gains, but not salary or other income. Established property acquired before that cutoff, and new builds, are not subject to the quarantine.
The 1 July 2027 date is when the quarantine takes effect; the 12 May 2026 cutoff decides which established properties fall inside it. An investor holding established property bought before the cutoff keeps the more favourable treatment. One bought after it moves to rental-only loss offsetting from 1 July 2027.
Am I grandfathered if I already own an investment property?
If you acquired established residential property before 7:30pm AEST on 12 May 2026, it is not subject to the negative gearing quarantine that starts on 1 July 2027. Property acquired after that cutoff is. The favourable treatment is tied to the acquisition date, so a holding bought before the cutoff keeps it.
Being grandfathered is not the same as being optimally structured. The after-tax economics of holding property have shifted, and a structure built under the old rules still warrants review against the new framework and the current credit environment.
Does selling my investment property lose my grandfathered status?
The favourable treatment is tied to property acquired before 7:30pm AEST on 12 May 2026, so it does not transfer to a replacement. If you sell a pre-cutoff established property and buy another established property after that cutoff, the new one is subject to the 1 July 2027 negative gearing quarantine. The sale itself is a CGT event under the rules applying at the time.
Grandfathering attaches to the specific pre-cutoff acquisition, not to you as an investor. A disposal on or after 1 July 2027 is assessed under the new CGT method (indexation plus a 30% minimum tax). This answer derives from the acquisition-cutoff and CGT provisions of the Act; confirm any specific rollover or anti-avoidance provision before relying on it for a transaction.
What replaced the 50% CGT discount?
From 1 July 2027, the 50% capital gains tax discount is replaced by two mechanisms: cost-base indexation, and a 30% minimum tax on net capital gains for individuals, trusts and partnerships. The change applies to gains arising on or after 1 July 2027. Gains realised before that date keep the existing discount treatment.
Indexation adjusts the asset's cost base for inflation, so tax applies to the real gain rather than the nominal gain. The 30% minimum tax sets a floor on the effective rate applied to net capital gains for those entities.
How does CGT indexation work under the 2026 changes?
From 1 July 2027, capital gains are calculated by indexing the asset's cost base for inflation instead of applying the 50% discount. Tax is assessed on the real, inflation-adjusted gain, and a 30% minimum tax applies to net capital gains for individuals, trusts and partnerships.
Indexation favours assets held long enough for inflation to lift the cost base materially. A shorter hold with a strong nominal gain may see less benefit than the old flat 50% discount gave. Modelling a disposal under both the old and new methods is the way to see the difference for a specific asset.
When does the SMSF borrowing window close?
Self-managed super funds using limited recourse borrowing arrangements to acquire property face a change commencing on or around 10 August 2026. Trustees with an LRBA acquisition in progress need financing and structure resolved ahead of that date. Trustees who have been meaning to get to it now have a fixed date, not an open-ended intention.
The SMSF LRBA change sits alongside the 9 August 2026 bare trust deadline. Both reward trustees who confirm structure and financing early rather than close to the date.
Why do new builds keep negative gearing?
New builds are not subject to the negative gearing quarantine that applies to established residential property from 1 July 2027. The reform treats new builds, and established property acquired before 7:30pm AEST on 12 May 2026, more favourably, keeping investment directed toward new housing supply rather than existing stock.
For an established property acquired after the cutoff, rental losses can only offset rental income or capital gains from 1 July 2027. For a new build, the pre-reform negative gearing treatment continues. That gap changes the after-tax comparison between buying new versus established.
How do the 2026 changes affect my borrowing capacity?
The reform does not set borrowing limits, but it changes the after-tax cash flow that supports a loan. From 1 July 2027, quarantined losses on affected established property no longer reduce tax on other income, and a tightening credit market compounds this. At mortgage rates around 6.4%, only 0.8% of suburbs are cash-flow positive.
Demand for credit fell from $155.5 billion (September quarter) to $142.4 billion (December) to $140.0 billion (March quarter), per ABS Finance and Wealth data, leading the Cotality price peak by a full quarter. Serviceability, not the tax change alone, governs what an investor can hold.
Should I restructure my property portfolio before 1 July 2027?
The negative gearing and CGT changes take effect on 1 July 2027, so there is a defined window to review before then. The disciplined approach is sequencing, not urgency: confirm whether current structures still work, action what the 9 August 2026 bare trust deadline requires, assess what the credit environment makes serviceable, then review the portfolio, in that order.
A disposal timed before 1 July 2027 is assessed under the existing 50% discount; one after falls under indexation plus the 30% minimum tax. That timing choice is portfolio-specific and should be modelled, not assumed.
How can I stress test my property portfolio?
The Ramsey Portfolio Stress Tester runs a residential property portfolio against five scenarios and returns a Survival Score, showing how current holdings and structures perform under changed tax, rate, and credit conditions. It is the starting point for deciding which reform decisions apply to a specific portfolio.
The Ramsey Portfolio Stress Tester aggregate is refreshed monthly by the Digital Performance team. Speak to Ramsey to see how a specific portfolio performs against the five scenarios.
General advice only. This content does not take into account your personal objectives, financial situation or needs. Ramsey Property Wealth Pty Ltd is a Credit Representative under Australian Credit Licence 389087. Legislative measures are drawn from the Treasury Laws Amendment (Tax Reform No. 1) Act 2026; ABS and Cotality figures are subject to revision. Seek personalised advice before acting on any structuring, CGT, or SMSF decision.