What the proposed 2026 tax reforms could mean for property investors

Tax reform is once again a major talking point for Australian property investors, with the 2026 Federal Budget proposing significant changes to two of the most widely discussed areas of property investment, capital gains tax (CGT) and negative gearing.

While these measures have been announced by the Government, they remain proposed reforms and must still pass through Parliament before becoming law, meaning details may yet evolve.

For investors, moments like this naturally raise questions, but they also present an opportunity to stay informed, and understand what any future changes could mean for your portfolio. Here’s a simple breakdown of what’s been proposed and what it may mean moving forward.

1. Proposed changes to Capital Gains Tax (CGT)

Currently, Australians who hold an investment asset for more than 12 months are generally entitled to a 50% capital gains tax discount, meaning only half of the profit is taxed when the asset is sold.

Under the proposed changes:

From 1 July 2027, the Government proposes replacing the current 50% CGT discount with an inflation-based model, meaning tax would apply only to the portion of the gain above inflation.

A minimum effective tax rate of 30% on gains would also apply under the new framework.

Importantly, the proposed changes would apply only to capital gains accrued after 1 July 2027.

Investors in eligible new builds may be able to choose between the current 50% CGT discount and the new indexed model, offering additional flexibility.

What could this mean for investors?

These changes may reduce some of the long-term tax advantages traditionally associated with investment property ownership, particularly for investors focused primarily on capital growth.

At the same time, the proposed concessions for new builds may further strengthen the appeal of newly built properties as part of an investment strategy.

2. Proposed changes to Negative Gearing

Negative gearing has long been a cornerstone strategy for Australian property investors, allowing rental losses to be offset against personal income.

Under the proposed changes:

Existing investment properties held before Budget night would remain under the current rules.

From 1 July 2027, negative gearing would be limited to new builds, with the stated aim of directing tax support toward increasing housing supply.

Investors purchasing new builds would continue to be able to deduct rental losses against other income, including wages and salary.

Investors purchasing established properties after Budget night would still be able to deduct losses against residential property income, but unused losses would need to be carried forward and could not be deducted against other income such as wages.

What could this mean for investors?

This may shift investor behaviour toward:

• stronger cash-flow opportunities,
• higher rental yield assets, and
• increased demand for newly built properties and developments.

For landlords, this reinforces the importance of understanding a property’s rental performance, not just its future resale value.

3. Potential considerations for the property market

While these reforms are still proposed, they are expected to influence how investors assess property opportunities and structure future investment decisions.

Greater focus on new builds:

With the proposed tax concessions largely favouring newly built properties, investors may place increased attention on new developments and off-the-plan opportunities when reviewing their options.

Renewed focus on investment fundamentals:

If negative gearing benefits become more limited for established properties, factors such as rental yield, cash flow and long-term holding costs may become even more important in investment decision-making.

What should investors do now?

As with any policy change, the best approach is a calm, informed one.

These reforms are proposed, not yet law, and may change as they move through the legislative process.

For now, investors should consider:

• speaking with their accountant or financial adviser,
• reviewing their current investment strategy, and
• staying informed as further details become available.

Our advice as your Property Management Team

Tax policy can change, but strong investment fundamentals remain the same.

Whether you own one investment property or a growing portfolio, the key is ensuring your asset is performing well today while remaining adaptable for tomorrow.

If you would like to better understand how these proposed reforms could impact your individual situation, portfolio structure or future investment plans, we are always happy to connect with trusted local professionals for tailored advice. For accounting and taxation guidance, Dante from Abbaco Accounting + Advisory is available to assist and can be contacted directly at [email protected].

As always, you can reach out anytime to our team for a confidential conversation.

This information is general in nature and should not be considered financial or tax advice. Tax outcomes will vary depending on individual circumstances, and investors should seek advice from a qualified accountant or financial adviser before making any decisions.