Australia’s lower house has passed the government’s most significant tax overhaul in decades, a legislative package that reshapes the property investment landscape. The reforms scrap the 50% capital gains tax (CGT) discount and limit negative gearing to newly built homes. The package is explicitly aimed at boosting housing affordability, signalling a policy shift away from investor-friendly tax treatment of established residential property.
Three Confirmed Changes to Australia’s Property Tax Rules
According to the Australian Taxation Office (ATO) and the Federal Budget, the bill contains three core changes property investors should understand:
- The 50% CGT discount is replaced. The longstanding discount on gains for assets held more than 12 months gives way to cost-base (inflation) indexation, with a 30% minimum tax rate on net capital gains. The new treatment applies only to gains accruing after 1 July 2027; gains accrued before that date stay under the current discount.
- Negative gearing is limited to new builds. Interest-expense deductions against other income will be available only for newly constructed homes going forward.
- Existing holdings are grandfathered. Properties held before Budget night retain their current treatment.
The CGT change is broader than residential property alone: it applies across CGT assets held by individuals, trusts and partnerships, while the main residence exemption is unaffected.
When the CGT and Negative Gearing Changes Take Effect
The legislation remains not yet law. The lower house passed the bill on 4 June 2026 by a vote of 94–48 after amendment attempts failed, but it has not yet passed the Senate, where the government does not hold a majority and will need crossbench support. The targeted effective date is 1 July 2027 if enacted in current form — a date drawn from the ATO’s published guidance and the Budget, and subject to change during the legislative process.
Comparing Current and Proposed CGT and Negative Gearing Rules
| Investment scenario | Current rules | Proposed rules (not yet law) |
|---|---|---|
| Property held before Budget night — CGT | 50% CGT discount for assets held >12 months | Discount kept on gains accrued before 1 July 2027; inflation indexation + 30% minimum rate thereafter |
| Property held before Budget night — negative gearing | Rental losses deductible against other income | Grandfathered — existing arrangements unchanged |
| Established property bought after Budget night — negative gearing | Rental losses deductible against other income | Deductible against property income only; unused losses carried forward, not against wages |
| Newly built property — CGT | 50% CGT discount | Investor may choose the 50% discount OR inflation indexation + 30% minimum rate |
| Newly built property — negative gearing | Rental losses deductible | Rental losses deductible (new builds only) |
| Personal tax relief | Standard brackets | $250 Working Australians Tax Offset (from 2027–28) plus a $1,000 instant deduction |
To illustrate the mechanism without forecasting figures: an investor selling an established property after 1 July 2027 would lose the 50% discount, be taxed on the inflation-adjusted gain subject to the 30% minimum rate, and be unable to negatively gear it; an investor in a newly built home could still negatively gear and could elect the old discount or the new regime on disposal.
Transitional Rules, Grandfathering, and Points Still to Be Finalised
The Budget measure sets out the transitional treatment, though some practical points still depend on the final enacted text and ATO guidance.
Confirmed transitional treatment: properties held before Budget night keep existing negative-gearing arrangements; established housing bought after Budget night can still be negatively geared against property income, with unused losses carried forward, until the rules tighten; CGT changes apply only to gains arising after 1 July 2027; and new-build investors may choose the old 50% discount or the new regime.
Still to be finalised: the precise definition of “newly built” for off-the-plan versus completed developments; the treatment of contracts signed before but settled after 1 July 2027; and how foreign-owned corporate structures interact with the individual-based rules. Until the Senate passes the legislation and the ATO issues finalised guidance, investors should not assume fixed timelines or universal applicability of any single interpretation.
Zagdim Analysis
For property investors, the reform changes the core investment calculus. The combined effect of removing the flat CGT discount and confining negative gearing to new builds points clearly toward the government’s stated intent: redirecting capital toward new housing supply rather than established stock.
The practical implications differ by investor type:
- Leveraged landlords lose the two reliefs that made established-stock investment efficient: the flat discount and negative gearing against other income.
- New-build investors retain the most flexibility, keeping negative gearing and a choice of CGT regime on disposal.
- Overseas and high-net-worth investors using local structures face a system that rewards real (inflation-adjusted) gains over leveraged speculation, prompting a likely reassessment toward new developments or other asset classes.
The most investor-favourable treatment attaches to property held before Budget night; treatment then narrows in stages for purchases made afterward. For internationally mobile investors weighing Australian residential property, the decision now turns less on the headline discount and more on build status, holding structure, and timing relative to the 1 July 2027 effective date — assuming the bill passes the Senate in its current form.
Have a question about how this might affect your situation? We can help you clarify where things stand, step by step — start here.
This article is based on officially verified sources current as of 5 June 2026. Tax rules and their timing can change, particularly while legislation is before the Senate. Always confirm your specific situation with a licensed Australian tax adviser or the ATO directly. This content does not constitute tax, legal, or financial advice.
