Negative gearing and CGT reform is now law: what changes on 1 July 2027, and what to do before then

The biggest change to property investment taxation in a generation is no longer a proposal. On 25 June 2026, the federal parliament passed the budget's investor tax package — through the lower house 98 votes to 39, and through the Senate with Greens support — and the Australian Tax Office has since confirmed the measures are now law. The start date is 1 July 2027, which gives investors, would-be investors and sellers roughly eleven months to understand their position and act deliberately rather than react late.

We covered the proposals in detail when the budget landed — see our explainers on the negative gearing changes and the CGT changes — but now that the legislation is settled, here is exactly what was passed, including one late amendment that surprised the industry.

What becomes law on 1 July 2027

• Negative gearing narrows to new builds. From 1 July 2027, rental losses on newly purchased established investment properties can no longer be deducted against wages or other income. Losses are instead quarantined: they carry forward against future rental income or the eventual capital gain. Investors who buy or build new dwellings keep full negative gearing.
• Existing investors are grandfathered. Properties held at 7:30pm AEST on 12 May 2026 — budget night — keep the old negative gearing treatment. The change applies to purchases after that time, and only bites from July 2027.
• The 50% CGT discount is replaced. For gains accruing after 1 July 2027, the flat 50% discount gives way to indexation of the cost base (so you are only taxed on real, above-inflation gains) plus a 30% minimum rate on those gains. New-build investors can choose whichever treatment suits them.
• New SMSF property borrowing is banned. A Senate amendment ends new limited-recourse borrowing arrangements for residential property in self-managed super funds, effective 45 days after royal assent. Existing SMSF loans are grandfathered. If an SMSF purchase was in your plans, this closes the borrowed-money version of it — our SMSF property guide covers what remains possible.

What it does to the market

The honest answer is that nobody knows precisely, but the early signals are visible. CBA's economists estimate the package will lower national prices by a little under 5% over time as investor demand adjusts, and they expect investor lending to roughly halve this year from its late-2025 peak. Cotality's June data already shows investor caution contributing to the broader demand slowdown — and its research director Tim Lawless notes the flip side: gross rental yields have climbed to their highest since late 2025, and "higher yields might help motivate investors into the established housing market without the crutch of negative gearing."

There are second-order effects to watch too. The new-build carve-out is designed to push investor capital toward new supply, which over time adds rental stock — but in the near term, some analysts expect fewer investors in the established market to mean fewer rentals exactly when vacancy is already around 1.3%. And an analysis from the University of Western Australia argues the indexation method could actually favour some long-hold, modest-growth investors over the old discount. The distributional effects will take years to settle.

If you already own an investment property

Your negative gearing treatment is unchanged — grandfathering protects properties held on budget night. The CGT change still matters, though: gains accruing after 1 July 2027 fall under the new rules, so the timing of any planned sale now interacts with the transition. Selling is a bigger decision than tax alone, but if a sale was already on your horizon, it is worth modelling both sides of the boundary with a registered tax agent. Our guides on how negative gearing works and property depreciation cover the current rules, and the rental yield calculator helps you sense-check what your property earns against what it could sell for.

If you were planning to invest

The decision tree has genuinely changed. Buying an established property after budget night means quarantined losses from July 2027 — so the numbers need to work closer to cash-flow-neutral, which pushes attention toward higher-yield suburbs and toward new builds, where both negative gearing and the choice of CGT treatment survive. That is exactly the behaviour the policy intends, and it is why comparing capital growth against cash flow matters more now than it did a year ago. Rising yields help: with rents still climbing and prices soft, the income side of the equation is the strongest it has been in years, though only a small fraction of suburbs are cash-flow positive at today's mortgage rates.

What it means for you

• Existing investors: nothing changes for your negative gearing; the CGT transition on 1 July 2027 is the date to plan around with your accountant.
• Buying established from here: assume quarantined losses from July 2027 — run the numbers on yield, not tax savings. Start with the rental yield calculator.
• Considering a new build: the carve-out makes new property the tax-favoured path, and it stacks with state incentives aimed at the same goal.
• SMSF plans: new borrowing inside super closes 45 days after assent. Existing arrangements stand. Get advice before restructuring anything.
• Sellers: more investor stock may come to market around the transition; if you are selling an investment property, our cost of selling guide and a free appraisal are the starting points.

This article is general information, not tax advice. The new rules interact with individual circumstances in ways that genuinely require a registered tax agent or financial adviser.