The 2026–27 Federal Budget was finally delivered by Treasurer Jim Chalmers on 12 May 2026. It combines cost-of-living relief with important reforms to taxation and housing policy. Under this, the government has introduced major changes to the rules governing property investment, capital gains tax, and discretionary trusts.
But what potential changes did the government make? What could all of this mean for your property investment plans? Who is the winner, and who will suffer? This article covers the deeper insight.
Major Changes to the Taxation System
The Budget introduces structural reforms that significantly alter longstanding tax advantages for property investors while protecting existing arrangements in many cases.
Negative Gearing
Previously, investors could deduct rental losses on any residential property fully against their salary and other income. But from 1 July 2027, this will be restricted to established properties purchased after 12 May 2026.
Losses can now only offset rental income or residential capital gains, with excess losses carried forward. But properties acquired before the announcement (7:30 pm AEST 12 May 2026) will be fully grandfathered. Only new builds continue to qualify for unrestricted negative gearing.
Capital Gains Tax (CGT)
The previous 50% CGT discount for assets held over 12 months is being replaced. Now, from 1 July 2027, cost base indexation using CPI will apply to real gains, along with a minimum 30% tax rate on net capital gains. But these changes will apply to gains accruing after 1 July 2027 only. It’s like transitional rules protect earlier gains, and new builds retain more favourable options.
Impact on First Home Buyers
Considering its impact on first-home buyers, the reforms aim to reduce investor competition for established homes. By putting limits on tax incentives on existing properties, more homes may become available or affordable for owner-occupiers. Because, as per the government, these changes could support around 75,000 additional first-home buyers over the next decade by slightly moderating price growth.
Impact on Property Investors
However, investors planning to buy new established properties might face higher holding costs and lower after-tax returns. But existing portfolios purchased before 12 May 2026 remain largely protected under the old rules.
These reforms are designed to nudge investors toward new housing projects, where the tax advantages remain intact. In other words, if you’re looking to grow your portfolio, the government is signalling that new builds are the safer bet for keeping those tax breaks.
Impact on SMSF Holders
Most Self-Managed Super Funds (SMSFs) are exempt from the new minimum 30% tax on discretionary trusts. This means the majority of SMSFs will not likely be directly impacted by the trust changes. That said, SMSFs that use discretionary trusts as part of their broader investment or estate planning should review their current structures.
What This Could Mean for You
Coming to your own situation, whether you are a first-home buyer or a property investor, these reforms could influence your future buying, selling, and tax planning decisions. The Budget seeks a fairer balance between wage earners and asset owners.
But this is general information only and does not constitute financial or tax advice. Please consult a qualified tax advisor or financial planner for personalised advice. You can also reach out to Nfinity Financials at 1300 GET LOAN, 0456 456 267 or book your time at Nfinity Financials to understand more about it.
