The 2026 Federal Budget delivered the biggest shake-up to property tax in a generation. Negative gearing and the capital gains tax discount, two settings that have shaped how Australians invest for more than two decades, are both being rewritten. If you already own an investment property, or you’re thinking about buying one, the rules you’ve been planning around are changing.
The good news for current owners is that the changes are far less alarming than the headlines suggest, largely because of how they’ve been timed. The picture for future buyers is more nuanced. Here’s a clear, practical breakdown of what’s actually changing, when, and what it means for property investors in Perth.
The two big changes, in plain English
There are two headline reforms, and both start from 1 July 2027.
1. Negative gearing will be limited to new builds. From 1 July 2027, the ability to deduct rental losses against your other income, like your salary, will only apply to newly built properties. Buy an established investment property after the start date and you’ll still be able to claim losses, but only against residential property income such as rent or capital gains, not your wider income. Any unused losses can be carried forward to offset future property income.
2. The 50% capital gains tax discount is being replaced. For assets bought after 1 July 2027, the long-standing 50% CGT discount makes way for inflation-adjusted indexation. In plain terms, you’ll only be taxed on your real gain, the profit above inflation, rather than half your total gain. A minimum tax rate of 30% will apply to those realised gains. For some investors this is better, for others worse, depending on how long you hold and how high inflation runs over that period.
Alongside these, a minimum 30% tax rate on discretionary trusts is scheduled from 1 July 2028, which matters if you invest through a trust structure.
If you already own: you’re largely protected
This is the part worth reading twice. The changes have been grandfathered. Any investment property purchased before 7:30pm AEST on 12 May 2026 keeps the existing arrangements, full negative gearing and the 50% CGT discount, right through until you sell it. Nothing about your current property changes.
In other words, if you bought your investment before budget night, you can keep deducting rental losses against your salary exactly as you do now, and you’ll keep the 50% discount when you eventually sell. The reform is prospective, not retrospective.
This has created an interesting dynamic. Because existing arrangements are locked in for current owners, the tax treatment you have right now is, in a sense, more valuable than it’s ever likely to be again. Some investors are choosing to hold rather than sell, precisely because selling and re-buying later would mean stepping into the new rules. If you’ve been weighing up whether to offload an established investment, the tax side of that decision has genuinely shifted, and it’s worth modelling before you act. Releasing some equity from a property you already hold can be a way to fund your next move without triggering a sale and losing your grandfathered position.
If you want to buy: new builds become more attractive
For future buyers, the reforms deliberately tilt the playing field toward new housing supply. That’s the policy intent to channel investment into building more homes rather than competing for existing stock.
If you buy a new build after 1 July 2027, you keep the more generous treatment: you can negatively gear against your broader income, and you can choose between the old 50% CGT discount and the new indexation method. New builds are the clear winners under the reform.
If you buy an established property after the start date, the maths is tighter. You can still claim losses, but only against property income, and your eventual capital gain falls under the new indexation-plus-minimum-30% regime. It doesn’t make established investment unviable, it changes the after-tax return, which is exactly the kind of number you want to run carefully before committing.
This is where the financing conversation and the tax conversation start to overlap. If new builds are now more tax-favoured, residential construction loans and house-and-land strategies become more relevant for investors than they were a year ago. The right loan structure for a build is different from a standard purchase, and getting it right from the outset matters.
What hasn’t changed
Plenty of the fundamentals are untouched, and it’s easy to lose sight of them amid the noise.
Your family home remains completely CGT-free. The main residence exemption wasn’t touched, which is why some households are now putting more into their own home: upsizing, renovating, or moving and renting out their former residence to keep its grandfathered investment status.
The basic advantages of property investment also remain: leverage, the ability to use a relatively small deposit to control a larger asset, and Perth’s persistent rental demand. Negative gearing was always only one piece of the case for property, never the whole argument.
And how investors structure and fund their portfolios is still flexible. If you hold property personally, through a trust, or inside super, the options haven’t disappeared, but the tax treatment of each is now more important to get right. For those building within superannuation, SMSF home loans remain available, though the trust changes from 2028 mean structure deserves fresh, professional attention.
What this means specifically for Perth investors
Perth’s situation is its own story. The city has led the nation for price growth, the rental vacancy rate is around 0.5%, and rents have climbed strongly, conditions that keep investor interest high despite higher holding costs. With gross yields sitting around 3.6%, many Perth investment properties are negatively geared today, which is exactly why the negative gearing changes are drawing attention locally.
But the timing protections matter here too. A Perth investor who bought before budget night keeps everything they have. A Perth investor planning to buy in 2027 and beyond has a real decision to make between established stock and new builds, and given how tight Perth supply is, new builds carry both a tax advantage and a contribution to the supply the city badly needs.
Cash flow is the other piece. With the negative gearing benefit on future established purchases narrowing, the way you structure repayments matters more. Some investors use interest only loans to manage cash flow during the early years of an investment, though the right approach depends entirely on your goals and the after-tax numbers, not a rule of thumb.
How to work out your own position
Tax reform is one of those areas where general rules only get you so far: your income, your structure, your timeline and your existing holdings all change the answer. A few sensible steps:
First, confirm the status of anything you already own. If it was purchased before 7:30pm on 12 May 2026, your existing treatment is protected, and that’s a meaningful asset in itself.
Second, if you’re planning to buy, model the after-tax return under the new rules before you fall for a property. The headline price and rent are only half the story; the tax outcome and your holding costs complete it. An income tax calculator can help you sketch how rental income and deductions interact with your overall position, and a rent vs buy calculator is worth a look if you’re also weighing whether to rentvest.
Third, budget for the full cost of getting in, not just the deposit and loan. A property buying cost calculator helps you see duty, fees and the other line items that shape your real entry price.
Finally, get advice that’s specific to you. These reforms intersect tax, structure and finance, and the right move for one investor is the wrong move for another.
Get your finance and your strategy aligned
The tax changes don’t make property investment a bad idea, they make structure and timing more important than ever. If you’re protecting a grandfathered position, weighing a new build, or buying your first investment, the financing decision and the tax decision need to work together.
Talk to Central Lending Solutions about how to structure your next investment property loan around the new rules. With over 20 years of experience, access to a wide panel of lenders and no fee for our broking service, we’ll help you line up the right loan for the strategy that suits you and connect the dots with your accountant or tax adviser so nothing gets missed. Book a free, no-obligation chat today.
Frequently Asked Questions
I already own an investment property. Do I lose negative gearing?
No. If you purchased it before 7:30pm AEST on 12 May 2026, your existing arrangements are grandfathered. You can continue to deduct rental losses against your other income, including your salary, and you’ll keep the 50% capital gains tax discount when you eventually sell. The new rules apply to properties bought after the start date, not to what you already hold.
When do the changes actually start?
The main reforms, limiting negative gearing to new builds and replacing the 50% CGT discount with inflation indexation, apply from 1 July 2027. The minimum 30% tax on discretionary trusts is scheduled from 1 July 2028. Existing investments are protected from budget night, 12 May 2026.
Can I still negatively gear a new property after the changes?
Yes, if it’s a new build. From 1 July 2027, newly built investment properties keep the ability to deduct losses against your broader income, and you can choose between the old 50% CGT discount and the new indexation method. Established properties bought after the start date can only have losses claimed against property income, not your salary.
Is property investment still worth it under the new rules?
For many investors, yes, but the case rests more on fundamentals than on tax breaks. Leverage, rental demand and long-term growth still apply, and Perth’s tight rental market remains a strong backdrop. The change is that after-tax returns now depend more heavily on whether you buy new or established, how you structure the holding, and your individual tax position, so running the numbers properly matters more than it used to.
Should I rush to buy before the rules change?
Not on tax grounds alone. The protections are based on the 12 May 2026 budget date, which has already passed, so a purchase now wouldn’t capture the most generous grandfathered settings in the way buying before budget night did. The better approach is to make a decision that suits your finances and goals, and to model the after-tax outcome under whichever rules apply to your purchase, rather than rushing to beat a deadline.
This article is general information only and is not tax, financial or legal advice. The measures described were announced in the 2026 Federal Budget and some are subject to the legislative process; details and start dates can change. Always consult a qualified accountant or tax adviser, and a licensed mortgage broker, about your own circumstances before acting.
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