What changes from 1 July 2027
The 2026-27 Federal Budget reforms limit negative gearing for residential property to eligible new builds from 1 July 2027. Existing arrangements are preserved for properties held before 7:30 pm AEST on 12 May 2026. For established housing acquired after that time, relevant losses can still be applied against residential property income and carried forward, but not generally deducted from wages or other unrelated income.
The general 50 per cent CGT discount for individuals, trusts and partnerships is to be replaced for relevant gains with cost-base indexation and a 30 per cent minimum tax. The reforms apply prospectively to gains arising from 1 July 2027, with specific treatment retained for eligible new and affordable housing and other exclusions.
Why I support the direction
I worked in business finance and mortgage broking when the interaction of negative gearing and the CGT discount encouraged many investors to move capital from shares and productive businesses into residential property. Property can be a sound investment, but an economy also needs capital in industries that create employment, build capability and lift productivity.
Housing is also a place to live. When tax settings, credit and scarcity combine to push prices and rents beyond household capacity, the effects are not confined to an investor's balance sheet. They appear as housing stress, instability and political division.
There are risks in changing long-standing settings, including transitions in investor demand and financing decisions. In my view, however, the present affordability pressure made leaving the system unchanged the riskier course.
The investment response should be better analysis
The reforms do not make property investment irrelevant. They increase the importance of fundamentals: realistic rent, borrowing capacity, building condition, location, supply, planning constraints and a credible long-term use.
Investors should model the property under the rules that apply to them and obtain current tax advice. A property bought for a tax outcome is very different from one selected because it can sustain demand, support a stable tenancy or add housing through a new build, redevelopment or appropriate change of use.