Two tax settings that have shaped Australian property and share investing for more than 25 years are changing on 1 July 2027. Negative gearing for residential property will be limited to new builds. The 50% capital gains tax (CGT) discount for individuals, trusts and partnerships will be replaced with cost base indexation and a 30% minimum tax on real gains that accrue from that date.

The core rules are already law. They were announced in the 2026-27 Federal Budget on 12 May 2026 and enacted in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026. The Australian Taxation Office (ATO) has confirmed the measures are law and that they apply from 1 July 2027.

Some of the detail is not finished. The Act leaves the exact test for a "new residential dwelling" to later rules, and a further bill that would write that test into the Act had not become law as at mid-November 2026. This guide separates what is enacted from what is still proposed.

This page is general information only. It is not personal advice or tax advice, and it does not take into account your objectives, financial situation or needs. Before you buy, sell or restructure an investment, consider speaking with a registered tax agent or a licensed financial adviser.

What is changing on 1 July 2027?

From 1 July 2027, two things change.

First, losses on most established residential investment properties bought after Budget night can no longer be deducted against salary, wages or other non-property income. Those losses can still be used against income from residential properties, including capital gains, and any unused amount can be carried forward. New builds can still be negatively geared. Properties you already held at announcement are carved out.

Second, when you sell a CGT asset you have held for at least 12 months, you will generally no longer halve the gain. Instead, the cost base is increased for inflation, using the Consumer Price Index (CPI), and you are taxed on the real gain. A minimum tax rate of 30% then applies to that real gain, unless an exception applies. Gains that accrued before 1 July 2027 still get the 50% discount, if you were entitled to it.

These CGT changes are not limited to rental properties. Treasury and the Budget explainer say they apply to CGT assets generally, including property and shares, when the asset is held by an individual, partnership or trust for at least 12 months. Investors who buy an eligible new build can choose the old 50% discount or the new indexation rules when they sell.

How does negative gearing work now?

A property is negatively geared when the deductible costs of holding it (interest, rates, insurance, maintenance, agents' fees and similar expenses) are higher than the rent and other income it produces in that year. Under the current rules, that net rental loss can be deducted against your other taxable income, such as salary and wages. That reduces the tax you pay in the year of the loss. A fuller walk-through of those current rules is in how negative gearing works.

If the property later makes a profit, or you sell it and make a capital gain, those amounts are taxable. Unused losses can already be carried forward if you do not have enough other income in the same year.

That is the setting that changes for many established properties from 1 July 2027. It does not change the fact that deductible costs still need to be genuinely incurred in earning the rental income, and it does not change the CGT treatment of your main residence.

What are the new negative gearing rules?

From the 2027-28 income year, the Act applies a quarantine rule. If your deductions for using or holding residential dwellings as residential accommodation exceed your assessable income from those dwellings, the excess is not deductible against other income in that year. It can be applied against capital gains under the net capital gain rules, and any leftover amount is carried forward to the next year as a residential dwelling deduction.

The Act includes a worked example. Henrietta buys an established residential dwelling in July 2028. In 2028-29 she has $50,000 of rent and $65,000 of deductions. She can deduct $50,000. The leftover $15,000 is carried forward. In 2029-30 she has $52,000 of rent and $70,000 of deductions, so she deducts $52,000 and carries forward $33,000 (the old $15,000 plus a further $18,000). In 2030-31, after reducing her mortgage, she has $72,000 of rent and $20,000 of deductions. She can use the $33,000 carried forward against that year's net rental income.

Which properties are carved out?

The quarantine rule does not apply to amounts that relate to:

  • an ownership interest in a residential dwelling you last acquired before 7.30 pm, by legal time in the Australian Capital Territory, on 12 May 2026
  • a residential dwelling that is a new residential dwelling in relation to you
  • a residential dwelling used for an activity or purpose later determined by the Minister, aimed at social or affordable housing and certain disadvantaged groups

If you acquire a dwelling under a contract, the Act treats you as having an ownership interest from the time you enter into the contract, not from settlement. That matters if you signed before the Budget night cut-off and settled later.

The quarantine rule also does not apply to you if you are a widely held unit trust (as defined in the tax law) or a complying superannuation entity, including a self-managed super fund. Fringe benefits are disregarded when working out the excess.

The Budget explainer puts the same rule in plain terms: from 1 July 2027, losses on established residential investment properties purchased from 7.30 pm AEST on 12 May 2026 will only be deductible against other income from residential properties, including capital gains, with excess losses carried forward.

Who is affected?

The Budget explainer says the negative gearing changes apply to individuals, partnerships, companies and most trusts. Widely held trusts (for example, most managed investment trusts) and superannuation funds, including SMSFs, are excluded.

Commercial property, shares and other non-residential investments are not the target of this quarantine. The Act defines a "residential dwelling" as a dwelling other than a caravan, mobile tiny home or other mobile home; a hotel, motel, inn, hostel or boarding house; student accommodation connected with a school or education institution; or a boat or other marine vessel. Adjacent land, a garage, a storeroom or another associated structure is included to the extent it is available for use by an occupant.

Is my investment property affected?

This is the question most existing owners are asking. The practical test is the time you acquired the interest, plus whether the dwelling is a new build for you.

Bought before 7.30 pm ACT legal time on 12 May 2026. The property is grandfathered for negative gearing. You can keep deducting net rental losses against other income, including salary, from 1 July 2027, on the same broad basis as today. Signing a contract before the cut-off is what counts, even if settlement happened later. A fuller walk-through is in the Never Lose Interest guide to whether your property is grandfathered.

Bought an established home after that cut-off. You can still claim rental deductions. What changes from 1 July 2027 is where a net loss can be used. It can reduce other residential property income and capital gains, and it can be carried forward. It cannot reduce your wage or salary from the 2027-28 income year. Until 30 June 2027, the current rules continue to apply.

Buying or holding a new build. New builds can continue to be negatively geared before and after 1 July 2027, if the dwelling is a "new residential dwelling" in relation to you. That definition is the unfinished part of the law, and it is covered below.

Inherited property, relationship breakdown or a transfer from a co-owner. Later legislation has already started to deal with some of these cases. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026, which received Royal Assent on 26 August 2026, includes a schedule of negative gearing amendments. The explanatory material for that bill described changes so that, in some situations, a person who acquires an interest from a spouse, former spouse or co-owner (including because of inheritance or relationship breakdown) can keep the treatment the interest had in the previous owner's hands. The detail is technical. If this is your situation, get advice on the current law rather than assuming the original Budget night cut-off is the only test.

Grandfathering for negative gearing does not freeze the CGT rules. Even a property you bought years ago will have its post-1 July 2027 gain taxed under the new CGT settings, unless a specific CGT exception applies.

What counts as a new build?

This is the main point that is still unsettled.

The enacted law does not set out a complete definition. It says a residential dwelling is a "new residential dwelling" in relation to you if requirements determined by the Minister, by legislative instrument, are met. Those requirements can cover the kind of dwelling, how you acquired your interest (including whether you were the builder or a later purchaser), how the dwelling was created (for example, built on vacant land, created through substantial renovations, or built to replace a demolished dwelling), and whether it has a separate title or similar interest that another entity can acquire. Before making the instrument, the Minister must be satisfied that the requirements will assist in genuinely adding to the supply of residential dwellings in Australia.

The Government has said it intends to put the final definition and exemptions into primary legislation, rather than leaving them only in a ministerial instrument. In an August 2026 consultation, the Treasurer said a property will generally be considered "new" where it genuinely adds to housing supply, provided it was acquired within 24 months of a certificate of occupancy being issued. That 24-month window was described as an extension of the 12 months set out in the Budget, to give builders and developers more time to sell stock on hand.

A later bill, the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, was introduced to write a detailed test into the Act. As at mid-November 2026 that bill had passed the House of Representatives and had been the subject of a Senate committee report, but it had not received Royal Assent. Until it becomes law, or until a ministerial instrument is made, the operational test is not fully locked in.

Because of that, you should treat the following as the Government's stated direction, not as the final statutory test:

  • a dwelling built on land that did not already have a residential dwelling
  • adding dwellings so that there are more dwellings on the land than when you acquired it
  • converting a non-residential building into one or more dwellings
  • buying a dwelling, within a proposed 24-month window from the first occupancy certificate, from someone for whom it was already a new residential dwelling

A knockdown rebuild that replaces one dwelling with one dwelling may not meet a "genuinely adds to supply" test. A home that is new in the everyday sense may not stay "new" for a later buyer once any occupancy-certificate window has closed. Those outcomes depend on the final definition. Do not buy, sell or redevelop on the basis of a draft test.

The Never Lose Interest guide to new builds versus established property after 2027 covers that comparison, and the uncertainty, in more detail. Never Lose Interest will update both guides when the definition is settled.

How do the CGT changes work?

Since 1999, individuals, trusts and partnerships that hold a CGT asset for at least 12 months have generally been able to reduce a capital gain by 50% before it is added to taxable income. From 1 July 2027, that discount is replaced, for gains that accrue from that date, with two new settings.

Cost base indexation

The cost base of the asset is indexed for inflation, using CPI, in a way the Budget explainer says is similar to the arrangements that applied between 1985 and 1999. You are then taxed on the real gain (the rise in value after inflation), not the whole nominal gain. The ATO has said it will provide guidance and tools to support the calculation.

Indexation can leave you better or worse off than a flat 50% discount, depending on the return and inflation over the period you held the asset. The Budget explainer gives worked cameos, assuming 2.5% inflation, an asset purchased for $500,000 in July 2027, a 10-year holding period, and $100,000 of other income a year:

  • At a 5% annual return, similar to longer-term residential property returns in that explainer, the taxable gain is $174,405 under indexation, compared with $157,224 under a 50% discount. Extra tax in that cameo is $8,075.
  • At a 2.5% annual return, equal to the assumed inflation rate, there is no taxable gain under indexation. Under a 50% discount the taxable gain would have been $70,021, and the explainer says the taxpayer pays $24,858 less tax.
  • At a 7.5% annual return, the taxable gain is $390,474 under indexation, compared with $265,258 under a 50% discount. Extra tax in that cameo is $58,851.

These are Treasury illustrations, not a prediction of your result. Your figures will depend on actual CPI, your actual cost base and proceeds, and your other income in the year you sell.

The 30% minimum tax

A minimum tax rate of 30% applies to real capital gains accruing from 1 July 2027. It has no effect until the gain is realised. It does not increase the tax for people whose capital gains are already taxed at 30% or more.

It does affect people who would otherwise pay a lower rate on the gain. The Budget explainer uses Jack as an example. In 2029-30 he has $25,000 of taxable income before capital gains and realises a $10,000 capital gain on an asset he bought in 2027-28. Tax on that gain at ordinary rates (excluding the Medicare levy) would be $1,400, or 14%. Because that is below 30%, he pays an extra $1,600 to bring the tax on the gain up to 30%. Offsets may be available to reduce the minimum tax.

You are exempt from the minimum tax if you received a means-tested income support payment, such as the Age Pension or JobSeeker, in the financial year you realise the gain. The Act frames this as an exception where you received certain payments during the income year.

What happens to gains I have already made?

The new CGT rules apply to gains that accrue from 1 July 2027. Gains that accrued before that date keep access to the 50% discount, if you were otherwise entitled to it.

The Act does this with a deemed sale and reacquisition. In broad terms, you are taken to have sold the asset just before 1 July 2027 (on 30 June 2027) and to have acquired it again on 1 July 2027 for the same amount. The capital proceeds for that deemed sale are the asset's market value just before 1 July 2027, unless you choose a later apportioning method determined under the law. Any gain or loss on the deemed sale is deferred until you actually dispose of the asset. You do not have to make the choice, or finish the calculation, until you lodge the tax return for the year of the real sale.

The Budget explainer works through this with Jane. She buys an asset on 1 July 2022 for $800,000 and sells it on 1 July 2032 for $1,600,000. Using ATO tools, she determines the asset was worth $1,131,371 at 1 July 2027. Her taxable gain is in two parts:

  • $165,685 from before commencement, being the $331,371 gross gain with the 50% discount
  • $319,958 from after commencement, being the $468,629 later gain less cost base indexation

Her total taxable capital gain is $485,643, compared with $400,000 if a 50% discount had applied to the whole gain. At a 47% tax rate, the explainer puts the tax at $228,252, compared with $188,000 under a full 50% discount.

The ATO is expected to provide tools for the 1 July 2027 valuation and the indexation calculation. For assets without a readily ascertainable market value, the Government has also consulted on a draft method for apportioning gains and losses. That method should be confirmed in official ATO or Treasury materials before you rely on it.

Do new builds keep the 50% CGT discount?

Yes, if the dwelling is an eligible new residential dwelling and you choose that treatment. Treasury says investors who buy new builds can choose either the existing 50% CGT discount or the new inflation-based arrangements and the minimum tax. The Act also provides for affordable housing to be treated under a specific CGT rule. Both of those exceptions sit outside the standard indexation and minimum-tax calculation if they apply to the gain.

Whether a particular property is a new residential dwelling for CGT purposes will follow the same unfinished definition discussed above. Until that test is settled, treat any CGT choice as something to revisit with a tax agent when you sell, not as a reason to assume the old discount is locked in.

Do the CGT changes apply to shares and crypto?

Yes, in general terms, if you hold the asset as a CGT asset. The Budget explainer says the indexation changes will apply to all CGT assets, including property and shares, held by individuals, partnerships and trusts for at least 12 months, with only targeted exemptions. Crypto held as an investment is generally a CGT asset under existing ATO guidance, so the new settings are the ones to plan for on gains that accrue from 1 July 2027, unless a specific exemption applies.

Companies already do not get the 50% CGT discount under the current law. Superannuation funds have their own CGT rules, and they are excluded from the negative gearing quarantine. If you hold assets in a company, trust or fund, get advice on which set of rules applies to you.

The 12-month holding rule still matters. Indexation, like the current discount, is described as applying where the asset has been held for at least 12 months. Assets sold inside 12 months are generally taxed on the full gain under current law, and you should not assume a new concession will apply to short-term trades.

What should property investors do before 1 July 2027?

There is no single right move, and this site will not recommend one. The useful work, for most people, is to get your records in order and understand which bucket each property falls into.

Keep the contract, the date and time it was signed, and evidence of the purchase price and incidental costs. If you signed on Budget day itself, the exact time of the contract may matter. From 1 July 2027 you will also need a defensible market value for each CGT asset you already hold, or a method the law allows you to use instead. Start gathering valuations and cost base records well before you sell, even if you have no plan to sell soon. The calculation can wait until the year of sale, but the evidence is easier to collect now.

If you are thinking about buying after Budget night, the tax result will differ depending on whether the property is an established dwelling or a new build, and on whether the final new-build test has been settled. Model the cash flow without assuming a wage deduction for a net rental loss from 2027-28, unless the property will clearly qualify as a new build or is already grandfathered.

If you are thinking about selling before 1 July 2027 to keep the 50% discount on the whole gain, weigh the tax against the other costs of selling, including stamp duty if you buy again, agents' fees and the fact that any later purchase of an established property will not be grandfathered. That is a personal calculation, not a general rule.

The Never Lose Interest guide to CGT old versus new rules for shares, property and crypto works through the discount, indexation and the 30% minimum tax in one place. The negative gearing calculator explainer shows how a rental loss is used under the current rules and from 2027-28. Use the Never Lose Interest calculators to compare the settings on your own numbers, then have a tax agent check the result against the law as it stands in the year you act.

Frequently asked questions

When do the negative gearing changes start?

They apply from 1 July 2027, for the 2027-28 income year and later years. The current rules continue until then, including for established properties bought after Budget night.

What time on 12 May 2026 is the cut-off?

The Act uses 7.30 pm, by legal time in the Australian Capital Territory, on 12 May 2026. Official Budget materials often describe this as 7.30 pm AEST on Budget night. For a contract signed close to that time, keep evidence of when it was entered into.

If I signed before the cut-off but settled after, am I grandfathered?

For negative gearing, the Act treats you as having an ownership interest from the time you enter into the contract. A later settlement date, on its own, should not knock out grandfathering. Have the contract checked if the timing is tight.

Can I still claim interest, rates and repairs on an established property I buy now?

Yes. The change is not that those expenses stop being deductible. From 1 July 2027, a net loss on a non-grandfathered established dwelling can only be used against residential property income (including capital gains) and can be carried forward. It cannot be used to reduce salary or wages.

Do SMSFs and property funds have to quarantine rental losses?

Complying superannuation entities, including SMSFs, and widely held unit trusts are excluded from the quarantine rule in the Act. They still have their own tax rules. Trustees should get advice on their particular structure.

Will I pay more CGT if inflation has eaten most of my gain?

Not necessarily. If your return is close to inflation, indexation can produce a smaller taxable gain than the old 50% discount, as in Treasury's lower-return cameo. If your return is well above inflation, the taxable gain can be larger, and the 30% minimum tax can also lift the bill for people who would otherwise have been taxed at a lower rate.

Does the 30% minimum tax apply if I am on the Age Pension when I sell?

The Budget explainer says recipients of means-tested income support payments, such as the Age Pension or JobSeeker, are exempted from the minimum tax if they receive any payment in the financial year in which they realise the capital gain. The ordinary tax on the gain can still apply.

Are these changes only proposals?

The core negative gearing quarantine and the CGT indexation and minimum-tax rules are law, and they start on 1 July 2027. The detailed definition of a new residential dwelling, and some of the finer CGT implementation rules, were still being completed in later legislation as at November 2026.

General information warning

This article is general information only. It is not tax advice, legal advice or personal financial product advice. It does not take into account your objectives, financial situation or needs. Tax law is detailed, and some of the 2027 settings were still being implemented in later bills and instruments when this page was reviewed. Consider seeking advice from a registered tax agent or a licensed financial adviser before you make a decision.

Sources

Last reviewed: November 2026.