The negative gearing and capital gains changes, explained simply

First, the good news: your existing properties are safe

If you already owned an investment property on Budget night — 7:30pm on 12 May 2026 — nothing about your negative gearing changes. Not now, not in 2027, not ever under these rules. The Government grandfathered every property held at that moment.

This is the single most common worry we have heard since the announcement, so it is worth being blunt about it: if you bought before Budget night, you can stop reading the negative gearing section and relax.

What negative gearing actually is

In plain terms: if your rental property costs more to hold than it earns — mortgage interest, rates, insurance, repairs and management fees add up to more than the rent — you make a loss on paper. Under the current rules you can subtract that loss from your salary, which lowers your total taxable income and gives you a bigger refund.

That is negative gearing. It is not a loophole; it is the ordinary tax principle that you are taxed on your net income rather than your gross income. But it has been unusually generous in Australia compared with most countries.

What is changing, and when

From 1 July 2027, the treatment splits depending on what you buy and when you bought it.

• Bought before Budget night — nothing changes. Full deduction against your salary continues.
• New builds — nothing changes. You can still deduct losses against your salary. This is deliberate: the point of the policy is to push investors towards adding new housing supply rather than competing for existing homes.
• Established homes bought after Budget night — this is the change. Losses can only be offset against income from residential property. If you have no other rental income to soak them up, the loss does not disappear, but it sits there and carries forward to future years until you do.

So it is better described as a deferral than an abolition. You do not lose the deduction; you lose the ability to claim it against your wages this year.

The capital gains change, in plain English

This one affects far more people, because it applies to every capital gains asset — shares and managed funds too, not just property.

At the moment, if you hold an asset for more than twelve months and sell it at a profit, only half the profit gets taxed. That is the 50% discount, and it has been in place since 1999.

From 1 July 2027, that is replaced with two mechanics working together. First, your original purchase price is adjusted upwards for inflation, so you are only taxed on the real gain rather than the part that was just the dollar losing value over time. Second, there is a floor: a minimum 30% tax applies to gains.

Whether you end up better or worse off depends on inflation over your holding period and on your marginal tax rate. Someone on a lower income holding an asset through a high-inflation stretch could do better. Someone on a high income with a large gain over a short period will generally do worse. It is genuinely not a one-way street, and anyone telling you it is has not done the arithmetic.

Importantly, this only bites on gains that build up after 1 July 2027. Everything accrued before then is calculated the old way.

What it means if you are an individual investor

Three practical takeaways.

Do not panic-sell. Selling to get ahead of a change that only applies to future gains, and paying CGT today that you would otherwise have deferred, is usually the more expensive path. Run the numbers before acting.

New builds now carry a real tax advantage. If you were weighing a new apartment against an established house, the tax scales have tipped. That does not automatically make it the better investment — new builds carry their own risks around pricing and quality — but it is now part of the calculation.

Timing a sale matters more than it used to. With a 1 July 2027 line in the sand, when you sell has become a genuine planning decision rather than an afterthought.

SMSFs: the part most people have missed

Here is the headline, and it is a big one. Superannuation funds, including SMSFs, are excluded from the capital gains changes entirely. This was uncertain through the consultation period and the final legislation settled it.

That means an SMSF keeps its existing one-third discount on assets held longer than twelve months. In practical terms:

• In accumulation phase — the effective tax on a capital gain stays at roughly 10%.
• In pension phase — it stays at 0%, subject to the Transfer Balance Cap ($2.0 million as at 1 July 2025).

Set that against a minimum 30% for individuals from July 2027, and the gap between holding an asset personally and holding it inside super has widened considerably. For anyone with a long-horizon asset and the option of either, that is worth a proper conversation.

But there is a catch for SMSFs, and the deadline is now

A separate change — nothing to do with the Budget announcements above — is already law. It received Royal Assent on 26 June 2026 and commences on 10 August 2026.

From that date, an SMSF can no longer set up a new borrowing arrangement to buy residential property. Technically: any new limited recourse borrowing arrangement over real property must be for business real property, meaning premises used wholly and exclusively in running a business. An ordinary house or apartment rented to residential tenants will not qualify.

What this does and does not do:

• Existing arrangements are grandfathered. If your fund already has a residential borrowing arrangement, you do not have to unwind it.
• Refinancing existing arrangements is still available.
• Arrangements established before commencement may still qualify even if settlement happens later — which matters if you are mid-purchase right now.
• Buying residential property outright, with no borrowing, is unaffected. The restriction is on gearing, not on owning.
• Commercial property borrowing continues, provided it meets the business real property test. For business owners buying their own premises through their fund, nothing changes.

If your fund is partway through a residential purchase involving borrowing, this is time-critical rather than something to think about later.

What to actually do now

If you own investment property already: nothing urgent. You are grandfathered on negative gearing, and the CGT change only affects gains accruing from July 2027.

If you are about to buy: the new build versus established decision now has a tax consequence it did not have in April. Worth modelling before you commit.

If you have a large unrealised gain: there is a planning window between now and 30 June 2027. That is not a reason to rush, but it is a reason to have the conversation deliberately rather than by accident.

If your SMSF is buying residential property with borrowed money: act before 10 August 2026.

None of this is advice about your situation — it cannot be, because we do not know your numbers. But it is the shape of the thing, and the shape is enough to tell you whether you need to pick up the phone.