Treasurer Jim Chalmers' May 2026 Budget made the biggest changes to property investment tax in a generation. Negative gearing has been narrowed, the 50% capital gains tax discount introduced by the Howard government in 1999 is being replaced, and family trusts are next. Prime Minister Anthony Albanese has argued the changes will tilt the market back towards first home buyers. Critics, including the Coalition and many business groups, say they will hurt investors, renters and housing supply. Here is what has actually changed.
Negative gearing: law, from 1 July 2027
The changes passed the Senate on 25 June 2026 with Greens support, and the House agreed to the amended bill. From 1 July 2027, losses on established homes bought after Budget night (12 May 2026) can only be deducted against residential property income. Unused losses carry forward to later years, but they can no longer reduce tax on your wages.
- Properties held before Budget night keep the old rules.
- New builds can still be negatively geared against any income.
For a new investor in an established home, a $10,000 rental loss that once cut tax by around $3,900 a year (at the 37% rate plus Medicare) now waits until the property makes a profit or is sold.
Capital gains tax: law, for gains after 1 July 2027
The 50% CGT discount is being replaced by indexation, which removes inflation from the gain, plus a minimum 30% tax on net capital gains. This covers shares and other assets as well as property. It only applies to gains arising after 1 July 2027, and investors in new builds can choose the old 50% discount instead.
As a rough illustration, take a property bought for $500,000 and sold ten years later for $900,000, with inflation of 3% a year. Indexation lifts the cost base to about $671,958, leaving a taxable real gain of $228,042. Under the old rules, half the $400,000 gain, $200,000, was taxable. The higher inflation runs, the better indexation looks by comparison, and the reverse is true when inflation is low.
Discretionary trusts: still before parliament
The government also wants a minimum 30% tax on the income of discretionary (family) trusts from 1 July 2028, so that distributing income to family members on lower rates no longer cuts tax as much. The bills passed the House of Representatives on 29 October 2026 and now go to the Senate, so this is not yet law.
- The trustee would pay the tax, with beneficiaries getting a credit for it.
- Fixed trusts, charities, super funds, deceased estates and some testamentary trusts are excluded.
- Three years of rollover relief from 1 July 2027 would let businesses restructure into a company or fixed trust.
The Coalition has called the trust measure a "death tax" because of its effect on some inherited trusts, a description the government rejects.
The politics
The government says the package will help about 75,000 more people buy a home over the decade, and will help fund a $250 tax offset for workers from 2027–28. Mr Albanese has acknowledged that rising support for One Nation was part of the context for acting. Opponents argue that discouraging investment in established homes will reduce rental supply at a time when rents are already rising.
What it means for you
If you already own investment property, little changes for those properties. If you are buying, the after-tax cash flow of an established home now looks quite different from a new build. Run the numbers both ways with the residential investment calculator, and get advice before buying or restructuring a trust.