Capital Gains Tax & Negative Gearing Reforms: What Property Investors Need to Know
The Government has announced significant changes to the taxation of residential investment properties.
While the new rules generally will come into effect from 1 July 2027, an important date for investors is 12 May 2026 (Budget night), as this determines whether an existing property may continue to receive the current tax treatment.
If you are thinking about buying, selling or investing in property, please read below of how these changes may impact you.
Negative Gearing – Can I negatively gear?
Under the current rules, losses can generally be claimed as a tax deduction against your other income.
Under the new reform changes may apply to you depending on whether the owned the property as at 12th May 2026.
You can generally continue to negatively gear after 1 July 2027 if:
• You owned your investment property before 7:30 pm AEST on 12 May 2026. These properties are protected under transitional rules, meaning the existing negative gearing arrangements will generally continue to apply.
• You purchase an eligible newly built residential property. The Government has retained negative gearing for eligible new builds to encourage the construction of additional housing.
The rules can be complex, so it is worth seeking professional advice before acquiring an investment property.
You are generally not able to negatively gear after 1 July 2027 if:
• You purchase an established residential property after 7:30 pm AEST on 12 May 2026.
Instead of claiming rental losses against your salary or other income each year, those losses will be carried forward and can only be used to offset future rental income or eligible capital gains.
Capital Gains Tax – What are these changes?
Capital Gains Tax (CGT) applies when you sell an asset, such as an investment property, for more than you paid for it.
In simple terms:
Sale proceeds – cost base = capital gain
The cost base generally includes the original purchase price plus certain costs associated with buying, owning and selling the asset, and subject to any further reliefs that you may be eligible for.
Previously, individuals and trusts who held an asset for more than 12 months can generally reduce their capital gain by 50% before calculating the tax payable.
From 1 July 2027, this will change.
The 50% CGT discount will be replaced with a new system based on inflation-adjusted indexation, together with a minimum effective tax rate of 30%.
Under the new indexation method, the property’s cost base will be adjusted to reflect inflation over the period it has been owned.
If you already held an investment property before 1 July 2027, you will not lose the benefit of the 50% CGT discount on the growth in value that occurred before that date.
When the property is eventually sold, the capital gain will be split into two periods:
• Growth up to 30 June 2027: generally eligible for the existing 50% CGT discount.
• Growth from 1 July 2027 onwards: calculated under the new rules, with the cost base adjusted for inflation and the new minimum tax rules applying where relevant.
No 50% discount will apply to this portion of the gain.
For properties acquired after 1 July 2027, the entire capital gain will be calculated under the new CGT rules.
Please note: Investors who buy eligible new builds will be able to choose either the 50 per cent CGT discount or the indexation and the minimum tax method when they sell the property.
How GM Tax Can Help
The recent changes to negative gearing and Capital Gains Tax will affect property investors differently depending on when a property was acquired, whether it is a new or established dwelling, and your individual tax circumstances.
At GM Tax, we can help you:
• Understand how the new rules apply to your investment property.
• Determine whether your property is covered by the transitional arrangements.
• Calculate the potential tax implications of buying or selling an investment property.
• Ensure you remain compliant with your Australian tax obligations.
Whether you’re an existing property investor or considering purchasing your first investment property, our experienced tax advisers can help you make informed decisions with confidence.
Please note that the information in this article is general in nature and is based on the legislation and guidance available at the time of writing. It does not constitute taxation or financial advice. Individual circumstances vary, and you should seek professional advice before making investment decisions.
