Date: 19 May 2026
Author: Matt Handley, Director at Northern Key Property Group
The 2026-27 Federal Budget has announced the most significant shake-up to property investment taxation in over 25 years. The headline news-the restriction of negative gearing for established properties and the overhaul of the Capital Gains Tax (CGT) discount-has understandably caused a stir in the market.
However, before anyone hits the panic button, there are two critical things to understand. First, these changes do not take effect until 1 July 2027-over 12 months from now. Second, existing property investors are fully grandfathered and protected.
Here is a clear, factual breakdown of what was announced, when it actually takes effect, and what it means for you.
Important: Nothing Has Changed Yet
The Budget was an announcement of policy intent. The changes still need to pass the Senate, and the actual implementation date is 1 July 2027. Until that date, the current tax rules continue to apply as normal.
The date of 12 May 2026 (Budget night) is only relevant as the cut-off point for determining which future property purchases will eventually be affected. It does not mean anything changed overnight in how your tax is calculated.
1. Negative Gearing: What Was Announced
The Government announced it will limit negative gearing for residential property to new builds only, commencing 1 July 2027.
From that date, losses from established residential properties will only be deductible against rental income or capital gains from residential properties. They will no longer be deductible against other income such as salary and wages.
- Which properties are affected? Established residential properties acquired (contract date) from 7:30pm AEST on 12 May 2026. These properties can still be negatively geared under the current rules until 30 June 2027, but from 1 July 2027 the new restrictions apply.
- Which properties are protected? Any property acquired before 7:30pm on 12 May 2026 (including contracts entered into but not yet settled) is fully grandfathered. These properties are exempt from the changes for as long as you hold them.
- What about new builds? Eligible new builds are exempt from the changes entirely. Negative gearing will continue to apply to investment in new housing supply.
- What about excess losses? If your rental losses cannot be fully used in a particular year, they can be carried forward and applied against future rental income or capital gains from residential property.
- What about SMSFs? Self-Managed Super Funds (SMSFs) and widely held trusts (Managed Investment Trusts/MITs) are excluded from the negative gearing restrictions. If you hold your investment property through an SMSF, these changes do not apply to you.
2. Capital Gains Tax (CGT): What Was Announced
The Government announced the removal of the 50% CGT discount, to be replaced by cost base indexation with a 30% minimum tax on net capital gains. This commences 1 July 2027.
Under the new system, the cost base of your asset will be indexed to inflation. You will only pay tax on the real profit above inflation. However, a minimum 30% tax rate will apply to net capital gains regardless of your marginal tax rate.
Key details:
- Applies to all CGT assets (not just property) held by individuals, trusts and partnerships.
- Transitional arrangements ensure changes only apply to gains arising on or after 1 July 2027.
- For assets held before and after 1 July 2027: the 50% discount applies to gains before that date, and the new indexation model applies to gains after that date.
- Pre-1985 assets remain exempt from CGT on gains before 1 July 2027.
- Investors in new residential properties can choose either the 50% CGT discount or the new indexation model.
- Income support recipients (including Age Pension) are exempt from the minimum tax.
- Your family home remains entirely exempt from CGT.
3. Discretionary Trusts: What Was Announced
A new 30% minimum tax on the taxable income of discretionary trusts will be introduced from 1 July 2028—two full years from now.
This is relevant for investors who hold property through family trusts and distribute income to lower-income beneficiaries. Beneficiaries will receive non-refundable credits for the tax paid by the trustee.
Excluded from this measure: fixed trusts, widely held trusts, superannuation funds, special disability trusts, deceased estates, and charitable trusts. Primary production income is also excluded.
The Government will provide expanded rollover relief for three years from 1 July 2027 to support small businesses that wish to restructure out of discretionary trusts.
4. The Timeline at a Glance
| Date | What Happens |
| 12 May 2026 (Budget Night) | Announcement only. Cut-off date for determining which future purchases are affected. Current tax rules continue to apply as normal. |
| Now until 30 June 2027 | No change to how you lodge your tax. Properties purchased after 12 May 2026 can still be negatively geared during this period. Legislation still needs to pass the Senate. |
| 1 July 2027 | Changes commence: negative gearing restrictions begin; CGT 50% discount replaced with indexation; 30% minimum CGT tax begins. |
| 1 July 2028 | 30% minimum tax on discretionary trust distributions begins. |
5. What This Means for the Brisbane Rental Market
Treasury modelling estimates that the reduction in investor demand will result in approximately 35,000 fewer homes being built over the next decade. The impact on rents is estimated to be an extra $2 per week for a household paying the median rent.
However, some real estate industry bodies warn the impact on rents could be far more severe, particularly as fewer investors enter the established property market and rental supply tightens.
For existing landlords in high-demand areas like North Lakes, Kallangur, and Warner, this likely means sustained strong rental demand over the coming years.
The NKPG Verdict: Don’t Panic, But Do Pay Attention
There is no need to make any rushed decisions. The changes do not take effect for over 12 months, and they still need to pass the Senate.
If you already own an investment property, you are fully grandfathered. Your negative gearing arrangements remain unchanged for as long as you hold the property.
If you are considering selling, remember that giving up a grandfathered property means giving up a negative gearing concession you can never get back on another established home.
The smart play right now is to hold, optimise your yield, and ensure your property is being managed to its full potential. With fewer investors entering the established market from mid-2027, your existing rental property becomes a more scarce commodity.
Now is the time to ensure your property manager is conducting regular rent reviews, addressing maintenance proactively, and actually communicating with you. If they are not, it might be time for a conversation.
Disclaimer: This article is general information only and does not constitute financial or tax advice. These policies are subject to passage through the Senate. Please consult your accountant or financial adviser regarding your specific circumstances.
Source: Australian Government Budget 2026-27, Budget Paper No. 2: Budget Measures (budget.gov.au)