The 2026 Budget: A Practical Guide for Property Investors
- Lenny Briffa
- 2 days ago
- 3 min read
Navigating the new tax rules around Negative Gearing, CGT, and Trusts.
1. Negative Gearing: The "New Build" Pivot
The Change: From 1 July 2027, the ability to negatively gear a residential investment property will be restricted exclusively to new builds. You will no longer be able to offset rental losses from an established property against your personal PAYG salary.
The Grandfather Clause: If you held an investment property prior to 7:30 PM (AEST) on 12 May 2026, it is fully exempt. You can continue to negatively gear that specific property for as long as you own it.
How it works in practice
Let's say you earn $120,000 and buy an established apartment in August 2027. The property runs at a $15,000 loss for the year after paying mortgage interest, rates, and strata.
Under the old rules: You would deduct that $15,000 from your salary, generating a substantial tax refund at the end of the year to help cover holding costs.
Under the new rules: That $15,000 loss is "trapped." You cannot deduct it from your $120,000 salary. You will pay tax on your full income, and the loss can only be carried forward to offset future profits from that specific property. However, if you had purchased a brand-new off-the-plan property instead, the old rules would still apply.
2. Capital Gains Tax (CGT): The Split Calculation
The Change: The traditional 50% CGT discount is being abolished for capital gains arising on or after 1 July 2027. After this date the ATO will instead adjust your purchase price for inflation (the "real gain") and apply a minimum 30% tax rate to that profit.
The Transition: Existing properties are not fully grandfathered upon sale. Instead, when you sell, the ATO will split the gain. The growth achieved before 1 July 2027 gets the old 50% discount. The growth achieved after that date gets hit with the new indexation and 30% minimum tax.
Pre-September 1985 Properties: If you own a property purchased before 20 September 1985, any capital increase in the property value will be CGT free, however growth achieved after that date gets hit with the new indexation and 30% minimum tax.
How it works in practice
You bought a house in July 2023. You decide to sell it in June 2028, making a total profit of $500,000.
When calculating your tax, the ATO will assess the property's value as of 30 June 2027. Let's say $400,000 of your profit occurred before July 2027, and $100,000 of the profit occurred after.
You will apply the generous 50% discount to the first $400,000. But for the final $100,000 generated under the new rules, you will face the stricter inflation-adjusted 30% minimum tax. The longer you hold the property past 2027, the heavier the blended tax burden becomes.
3. Discretionary Trusts: The 30% Tax Floor
The Change: Starting 1 July 2028, the government is placing a minimum 30% tax rate on distributions from Discretionary (Family) Trusts. This is designed to stop "income splitting"—the practice of distributing property profits to family members in lower tax brackets.
How it works in practice
Your trust holds a debt-free property generating $40,000 in pure rental profit this year. You distribute this entirely to your 18-year-old child who is studying and has no other income.
Under the old rules: Because your child's income sits mostly in the tax-free threshold and lowest brackets, they pay virtually zero tax. The family keeps the cash.
Under the new rules: Even though the child earns no other money, the ATO applies the mandatory 30% floor. That $40,000 distribution is instantly hit with a $12,000 tax bill.
The Playbook: Should you Buy, Hold, or Sell?
If you are Buying
If you intend to rely heavily on negative gearing to manage cash flow for future property purchase, your could consider pivoting toward "New Builds" (off-the-plan, house and land, new houses).
If you are Holding
Do not panic. If you secured your property before Budget Night, your existing negative gearing deductions are safely grandfathered. However, you need to monitor your capital growth closely. Any equity gained after 1 July 2027 will be taxed at a significantly higher rate when you eventually sell.
If you are Selling
Timing is now critical. If you were already planning to offload an investment property in the near future, executing the sale and settling prior to 1 July 2027 ensures that 100% of your capital gain is treated under the favourable 50% discount rules.
Free Investor's Pack
Visit the below link to receive your free Investor's pack for the 2026 Budget.
Free inclusions:
The Investment Property Strategy Matrix
A Personalised Premium Property or Suburb report
The Investment Property Federal Budget 2026 breakdown
A 'Portfolio Structure' Strategy Session
Ready to review your numbers?
Book a 1-on-1 Portfolio Strategy Session today to ensure your next move is a strategically smart and profitable one.
Comments