The 2026 Federal Budget has created one of the biggest property tax conversations we’ve seen in years.
For property investors, the headlines have been hard to ignore: negative gearing changes, capital gains tax reform, grandfathering, new builds, established properties, carried-forward losses.
It’s a lot.
The big change: negative gearing is set to be limited
The Government has announced that from 1 July 2027, negative gearing will be limited to new builds. In simple terms, this means the tax treatment of investment property losses will depend on what type of property you buy and when you buy it. Existing arrangements are set to remain unchanged for properties held before Budget night, while investors who buy new builds will still be able to deduct losses from other income.
For investors buying established residential property after Budget night, the rules are expected to change. Losses will still be able to be deducted against residential property income, and unused losses can be carried forward, but they will not be able to be deducted against other income such as wages. That is a significant shift.
Under the current system, many negatively geared investors can offset a rental loss against their salary or other income.
Under the proposed new settings, that benefit becomes more limited for established properties purchased after Budget night.
What does this mean in real life?
Let’s say you buy an established investment property and it makes a $10,000 loss in a financial year. Under the current rules, that loss may reduce your taxable income from other sources, such as employment income, but under the proposed rules, if that property was purchased after Budget night and is not a new build, that $10,000 loss may not reduce your wage income.
Instead, it may need to be offset against residential property income or carried forward to future years. That doesn’t mean the loss disappears, but it may change your short-term cash flow. For many investors, cash flow is what determines whether they can comfortably hold a property, refinance, or move on to the next purchase.
New builds may become more attractive
The Government’s stated intention is to push more investor activity toward new housing supply, meaning new builds may receive more favourable tax treatment than established properties under the proposed changes. However, this does not automatically mean every investor should rush into new property.
New builds can have advantages such as:
- Depreciation
- Tenant appeal
- Lower immediate maintenance
- Potentially stronger tax treatment
But they can also carry risks such as:
- Build delays
- Valuation issues
- Oversupply in some areas
- Developer quality concerns
- Weaker land component in certain apartment-heavy markets
Instead of asking “Should I only buy new now?”, a better question is
“Does this asset still work for my strategy after tax, lending, cash flow, growth and risk are all considered?”
Capital Gains Tax (CGT) is also in the spotlight
The Budget also proposes replacing the 50% CGT discount with a discount based on inflation, as well as introducing a minimum 30% tax on gains from 1 July 2027. The Government stated that the CGT reforms will only apply to gains arising after 1 July 2027, and investors in new builds will be able to choose between the existing 50% CGT discount and the new arrangements. This is another reason investors should be careful before making decisions based on headlines.
For some investors, holding may still make sense. For others, reviewing ownership structure, future sale timing, cash flow and portfolio goals may be worth doing sooner rather than later.
The real issue is borrowing power
Tax changes get attention, but borrowing capacity is where investors often feel the impact first. If future rental losses are treated differently, lenders may also adjust how they assess investment scenarios over time. Even before that happens, investors still need to manage existing serviceability pressures, interest rate buffers, living expenses, debt levels and future portfolio plans. A property that looks good on paper still needs to work with your lending position.
Buying a property is one thing.
Building a portfolio is another.
If you already own investment property, the key message is simple: review your position before making any major decisions.
The following are important things to look at:
- Your current loan structure
- Your interest rate and repayment type
- Your available equity
- Your cash flow
- Your tax position
- Your future borrowing capacity
- Your plans to buy, sell or refinance over the next 12 to 24 months
The Budget does not mean every investor needs to change course.
But it does mean “set and forget” is becoming riskier.
From our perspective
The 2026 Federal Budget has changed the conversation for property investors, but the fundamentals remain the same: Good investing still comes back to buying the right asset, with the right structure, at the right time, for the right reason. The investors who do well from here will not be the ones reacting to every headline because they will be the ones who understand their numbers, get advice early and make decisions based on strategy, not fear.
For first-time investors, the bar is getting higher. The days of buying almost anything and relying on tax benefits to soften the holding cost may become harder, particularly for established properties purchased after Budget night. That does not mean property investment is over, but means the deal needs to stand up on its own. You need to understand the numbers before you spend on things like rent, expenses, tax, lending, buffers, growth potential and exit options.
A tax benefit should support the strategy.
It should not be the strategy.
If you’re unsure how the proposed changes could affect your borrowing capacity or next investment move,
this is the time to review your position.
General information only. This article does not take into account your personal financial, tax or legal circumstances. Speak to your broker, accountant and financial adviser before making any decision.
