How Will the Federal Budget Affect Your Property Plans?

The 2026–27 Federal Budget has delivered some of the most significant changes to property taxation in decades - and they’re likely to reshape how Australians think about buying, investing and holding property.

While the Government’s stated goal is to improve housing affordability and help more Australians into home ownership, the practical impact will vary depending on where you sit in the market. Let’s break down the key changes and what they could mean for you.

A Shift in the Property Landscape

At the centre of this year’s budget are reforms to two long-standing pillars of property investing: negative gearing and capital gains tax (CGT).

Historically, these settings have made property an attractive investment. However, the Government is now aiming to level the playing field - particularly for first home buyers who have faced increasing competition from investors in recent years.  

1. Changes to Negative Gearing

Negative gearing has long allowed investors to offset property-related losses - such as interest and maintenance costs - against their broader income.

Under the proposed changes:

• From 1 July 2027, negative gearing will be limited to newly built properties

• Investors purchasing existing properties after 12 May 2026 will no longer be able to offset losses against their personal income

• Current property owners are unaffected, with existing arrangements continuing without change.  

What this means:

• New builds may become more attractive for investors

• Established properties could see reduced investor demand

• First home buyers may face less competition in some parts of the market

The broader intention is to direct investment toward increasing housing supply, rather than fuelling demand for existing homes.

2. Capital Gains Tax (CGT) Reforms

The budget also proposes a major overhaul of how capital gains are taxed.

Currently, investors can benefit from a 50% CGT discount when selling assets held for more than 12 months. That’s about to change.

From 1 July 2027:

• The 50% discount will be replaced with a system that adjusts gains for inflation

• A minimum 30% tax rate will apply to capital gains

• Gains built up before the change will still be treated under existing rules

For those investing in new builds, there may be flexibility to choose the most favourable method.

What this means:

• After-tax returns on property investments could be lower

• Long-term holding strategies may need to be reassessed

• Tax planning will become even more important ahead of future sales

What About Existing Investors?

If you already own an investment property, there’s some comfort:

• Current negative gearing rules remain in place

• Existing CGT arrangements are “grandfathered” for gains accrued to date

However, future decisions - like purchasing another property or selling - should now be viewed through the lens of the new rules.

Implications for First Home Buyers

The Government is clearly aiming to ease pressure on first home buyers.

By reducing tax incentives for investors in established properties, the expectation is that:

• Competition for entry-level homes may soften

• More properties could become accessible to owner-occupiers

While this won’t create an overnight shift in affordability, it does signal a longer-term change in market dynamics.

Investment in New Housing Supply

Beyond tax changes, the budget includes funding to support housing construction, including:

• $2 billion allocated to infrastructure to unlock new developments

• An estimated 65,000 additional homes supported over time  

This reinforces the broader direction of policy - encouraging new supply rather than increasing demand for existing homes.

The Bottom Line

This year’s Federal Budget marks a clear turning point for property in Australia.

In simple terms:

• Investors may need to rethink strategy, particularly around established properties

• First home buyers could benefit from reduced competition

• New builds are likely to become a focal point for future investment

As always, the real impact will depend on your personal circumstances and goals. With changes of this scale, it’s worth reviewing your property strategy to ensure it still aligns with where the market - and the rules are heading.

Book a chat with Matt Damos‍