Negative Gearing and Capital Gains Tax Are Changing in 2027: What Property Investors Need to Know
The Federal Budget handed down on 12 May 2026 changed two of the biggest tax rules property investors rely on: negative gearing and the capital gains tax discount. If you own an investment property, or you're thinking about buying one, the rules you plan around today are not the same ones your parents used.
What does this actually mean for your next home loan?
Here's a plain English breakdown of what's changing, what's grandfathered, and what to think about before your next purchase.
A note before we start: tax rules are complex and every investor's situation is different. This article explains the changes in general terms. For advice specific to your circumstances, talk to a registered tax agent or accountant. We can help with the lending side.
What's actually changing
Two separate changes are coming from 1 July 2027.
Negative gearing on established (existing) residential properties is being phased out. Properties bought after 7:30pm on Budget night, 12 May 2026, will no longer let investors deduct losses against their other income, like their salary.
The 50% capital gains tax discount is being replaced with a discount based on inflation, alongside a new minimum 30% tax on gains. This only applies to gains that build up after 1 July 2027, not gains investors have already made.
New builds are treated differently, and that's the detail catching a lot of investors out.
What's grandfathered and what's not
If you already own an investment property, or you were under contract before 7:30pm on 12 May 2026, you keep access to the old rules. Nothing changes for you.
If you buy an established property after that cut off, here's where it gets tighter:
You can still deduct a loss against the rental income from that same property.
You can carry forward any unused losses to offset future years.
You can no longer deduct those losses against your wages or other income, which is the part that made negative gearing so attractive for a lot of investors.
New builds are the exception. Buy a new build and you can still access full negative gearing against your other income, plus a choice between the old 50% CGT discount and the new indexation method when you eventually sell.
Why this is pushing investors toward new builds
The gap between established property and new builds just got a lot wider. An investor buying a new build after 1 July 2027 keeps most of the tax benefits that made property investment attractive in the first place. An investor buying an established property loses a meaningful chunk of them.
This is already showing up in the questions we're getting from investor clients. A few are re-thinking whether an established house in an established suburb still stacks up against a new townhouse or apartment once the tax treatment is factored in. There's no universal right answer here. It depends on your income, your goals, and how the numbers work with and without the deduction.
What this means for your borrowing power
Lenders assess negative gearing benefits differently depending on how a property is taxed, so these changes can flow through to how much you can borrow.
A few things worth checking before you commit to a purchase:
Ask your broker how a lender will treat the rental loss on the specific property you're looking at, established versus new build makes a real difference now.
Get an updated borrowing capacity estimate rather than relying on an old pre-approval, especially if your plan was built around negative gearing an established property.
If APRA's debt-to-income limits already have you close to a cap, this change can tighten things further. Our guide on APRA's new debt-to-income limits covers how those limits work.
If you're not sure where your borrowing capacity sits under the new settings, it's worth getting it checked properly rather than guessing. Our guide on how to increase your borrowing capacity walks through the levers you can actually pull.
What to do if you're planning your next purchase
A few practical steps if you're weighing up an investment purchase over the next year or two:
Talk to your accountant about how the change affects your personal tax position, not just the general rule.
Compare the numbers on an established property against a new build for the same budget, the after-tax return can look very different now.
If you're close to exchanging on an established property, check exactly where the 12 May 2026 cut off leaves you.
Get your finance pre-approved early. Lender policies on rental income and negative gearing are still being updated, and turnaround times can vary while that happens.
None of this means investing in property just got worse. It means the calculation looks different depending on what you buy and when. Investors who plan ahead of the 1 July 2027 start date have more options than those who wait.
Ready to plan your next investment purchase?
If you're weighing up an investment property under the new rules, or you just want a clear read on how it changes your borrowing power, get in touch. We'll walk you through the numbers so you can make the call with confidence.
And on a personal note, a portion of every deal we settle goes to the Australian Wildlife Conservancy, supporting the recovery of native species right here at home. It's a small way we try to leave things a little better than we found them, on top of helping you get into the right loan.