From 1 July 2027, the Government plans to limit negative gearing on residential property to new builds (with existing holdings grandfathered). It has also flagged changes to the 50% CGT discount, moving instead to cost base indexation and a 30% minimum tax rate on real (inflation‑adjusted) capital gains.
In short, the changes are mostly forward‑looking. The policy aim is to take some tax pressure off existing homes and encourage investment into new supply, with the stated goal of improving affordability.
Negative gearing changes
If legislated as announced, from 1 July 2027 you would only be able to offset net rental losses against salary/other income where the investment is in a new build residential property. Residential properties already held at 7:30pm (AEST) 12 May 2026 would be grandfathered, and there would be specific exemptions for eligible affordable/government housing program investments.
Capital gains tax (CGT) changes
For individuals, trusts and partnerships, the proposal is to replace the 50% CGT discount (for assets held at least 12 months) from 1 July 2027 with: (i) cost base indexation so only the real gain (above inflation) is taxed, and (ii) a 30% minimum tax rate on that real gain. Importantly, transitional rules are intended to limit the change to gains accruing after 1 July 2027. There is also a proposed choice for investors who acquire new homes (between the existing 50% discount and the new indexation/minimum tax approach) when they eventually sell.
Why are negative gearing and CGT changes being proposed?
The stated intent is to improve housing affordability by reducing tax-driven investor demand for existing dwellings and encouraging investment into new supply. The CGT changes are also pitched as an integrity measure — taxing inflation‑adjusted gains and reducing incentives to time disposals around the 50% discount. The Government has indicated the main residence exemption and superannuation settings are not intended to be affected, and that further consultation will occur on design detail (including how the measures interact with early‑stage and start‑up businesses).
What should you do now?
- Don’t rush to restructure based on headlines. These are proposals with consultation still to come, and the detail will matter.
- If you’re planning to buy residential property, factor in that negative gearing may be restricted to new builds from 1 July 2027 (subject to legislation).
- If you hold investments with large unrealised gains, it may be worth modelling outcomes under both the current 50% discount and the proposed indexation/minimum tax approach.
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