20 May

The 2026 Federal Budget has changed how negative gearing and capital gains tax apply to property investors in Australia, effective from 1 July 2027. If you purchased investment property before Budget night on 12 May 2026, your portfolio is grandfathered and unaffected. If you are buying after Budget night, the rules depend significantly on whether you are buying a new build or an established property.

This article breaks down what the changes mean for each type of investor, what you should do now, and what has not changed.

What Did the 2026 Federal Budget Change for Property Investors?

In short, the Budget restructured the tax treatment of investment property to favour new construction over established housing. Here is a quick summary before we go deeper:

Negative gearing on established properties purchased after Budget night is ring-fenced to property income only from 1 July 2027. It can no longer offset wages.
The 50% CGT discount is replaced with an inflation-adjusted model and a minimum 30% tax rate from 1 July 2027.
New build investors retain full negative gearing and get to choose between the old 50% CGT discount or the new regime.
Existing portfolios held before 12 May 2026 are fully grandfathered.
WA first home buyer stamp duty thresholds, the FHOG cap, and the off-the-plan concession have all improved, already in effect from 7 May 2026.

Now let's look at what this means depending on your situation.

Does the 2026 Budget Affect Investors Who Already Own Property?

No. If you purchased your investment properties before Budget night on 12 May 2026, your portfolio is grandfathered. The negative gearing rules that applied when you bought still apply. The CGT discount you would receive on a future sale is also protected under transitional arrangements.

The most important action right now is to confirm that grandfathering applies to your specific structure with your accountant. Do not assume. Get it confirmed.

We have had clients ask whether they should sell before the new rules fully take effect. In almost every case, the answer is no. Selling a performing asset based on incomplete information, before legislation has even passed, creates an unnecessary tax event and disrupts a long-term strategy that is still working. Patience and quality advice are worth far more than a reactive decision made under pressure.

Is Buying a New Build Still a Good Investment After the Budget?

Yes, and in many ways the new rules make new build investment more attractive than before.

Full negative gearing is retained for new construction. Investors can still offset losses against wages and salary. On the CGT side, new build investors get to choose between the old 50% discount or the new inflation-adjusted regime, a structural advantage that established property buyers do not have.

Combined with WA's extended off-the-plan concession, the raised FHOG cap of $800,000, and the expanded survey-strata inclusion that now covers duplexes, triplexes and villas, new build investment is actively incentivised by both levels of government.

That does not mean every new build is a good investment. Location, rental yield, build quality and long-term growth fundamentals still determine whether a property is worth buying. But the tax structure is now working in your favour in a way it is not for established property purchased after Budget night.

How Do the Budget Changes Affect Investors Buying Established Property?

This is where the new rules have the most practical impact, and where careful analysis matters most.

Buying an established investment property after Budget night does not mean you lose the ability to deduct losses. You can still deduct them. But from 1 July 2027, those losses are ring-fenced to residential property income. They cannot be offset against your wages or salary. Any excess loss carries forward to future property income or capital gains.

What this means in practice is that the immediate annual tax benefit of holding a negatively geared established property is significantly reduced. The case for buying a heavily negatively geared established property and relying on the tax offset to carry it is effectively gone for new purchases after Budget night.

Properties with stronger rental yields, lower ongoing costs, and genuine long-term capital growth fundamentals become more important than ever. Yield matters more now than it did before.

The practical takeaway: before you purchase an established investment property after Budget night, you need detailed cashflow modelling that accounts for the post-July 2027 rules. Your accountant needs to be part of that conversation before you sign, not after.

What Does the Budget Mean for First Home Buyers in Western Australia?

For WA first home buyers, this is genuinely one of the strongest buying environments in years.

The WA State Budget changes, in effect from 7 May 2026, and the Federal Budget announcements can be stacked. The stamp duty thresholds have increased by $100,000. The First Home Owner Grant cap is now $800,000, up from $750,000. The off-the-plan concession runs to June 2028 and now covers survey-strata properties including duplexes, triplexes and villas.

For a first home buyer looking at a new build or off-the-plan property in the $800,000 to $900,000 range, the combination of federal and state incentives creates a strong buying position. If this is you, the most productive conversations to have right now are with a mortgage broker about your borrowing capacity and with a buyer's agent about what is available in that price range.

How Does the Budget Affect Property Held in a Discretionary Trust?

A minimum 30% tax rate applies to discretionary trust distributions involving capital gains from 1 July 2028. Three-year rollover relief is available from July 2027, which gives investors a runway to act, but not an unlimited one.

If your investment properties are held in a trust structure, the next 12 months are the window to have a meaningful restructure conversation with your accountant. The question is not whether you need to act. The question is what the right structure looks like for your situation going forward and how long it takes to implement.

Do not leave this one too long.

Has the 2026 Budget Made Property Investment in Australia Less Worthwhile?

No. And it is worth being direct about this.

Property remains the most accessible and reliable long-term wealth creation vehicle available to everyday Australians. The reasons people invest, replacing income, building a portfolio that funds financial freedom, creating security for their family, are exactly the same reasons they will continue to invest in ten and twenty years.

What the 2026 Budget has done is adjust the rules around how different types of property are taxed. It has not changed the underlying case for investing. It has not changed the power of leverage, compounding capital growth, or rental income building over time.

What it has changed is the importance of getting the strategy right from the start. Investors who buy the right property, in the right market, with the right structure and the right advice will continue to build wealth. Investors who try to shortcut that process will find the new rules less forgiving than the old ones.

What Should Property Investors Do Right Now?

Existing investors: Confirm grandfathering applies to your structure with your accountant. Stay the course unless there is a genuine strategic reason to change direction.

Investors looking at new builds: The tax treatment is favourable and both levels of government are incentivising new construction. Make sure the underlying property fundamentals stack up independently of the tax benefits.

Investors considering established property: Get detailed cashflow modelling done under the post-July 2027 rules before you commit. Rental yield matters more than it used to. Speak to your accountant before signing.

First home buyers in WA: The window to stack state and federal incentives is open right now. Get your borrowing capacity assessed and explore what is available in the new build and off-the-plan market.

Trust-held portfolios: Book the accountant conversation in the coming months, not the coming years.

Frequently Asked Questions

Can I still negatively gear an established property purchased after Budget night? Yes, but only against residential property income from 1 July 2027. You can no longer offset those losses against wages or salary. Any excess loss is carried forward.

When do the new negative gearing rules take effect? The cut-off for which properties are affected is Budget night, 12 May 2026. The rules themselves take effect from 1 July 2027. Properties purchased before 12 May 2026 are grandfathered.

Do the CGT changes affect properties I already own? No. Existing properties held before Budget night are grandfathered under current arrangements. The new CGT rules apply to assets acquired after 1 July 2027.

Is new build property still worth buying after the 2026 Budget? Yes. New builds retain full negative gearing and investors get to choose between the old 50% CGT discount or the new inflation-adjusted regime. New construction is the tax-advantaged position under the new rules.

Will property prices fall because of the Budget changes? The short-term impact is uncertain. Some moderation in investor demand for established property is likely. But owner-occupier demand remains strong and supply is still structurally constrained in most capital cities, including Perth. A significant price correction is not the consensus view among market analysts.

Should I sell my investment property because of the Budget changes? In most cases, no. Existing portfolios are grandfathered. Selling based on incomplete information before legislation passes creates unnecessary tax events. Speak to your accountant before making any decisions.

What WA first home buyer incentives are currently available? The stamp duty threshold has increased by $100,000. The FHOG cap is now $800,000. The off-the-plan concession runs to June 2028 with 100% relief to $800,000, tapering to $900,000, and now includes survey-strata properties. These changes are already in effect from 7 May 2026.

Disclaimer: This article provides general information and commentary only. It does not constitute financial, tax, legal or investment advice. Always seek advice from a qualified accountant or financial adviser before making decisions based on any budget changes.

Want to understand what the new landscape means for your situation specifically? Speak to our team. We work with investors across Australia to build strategies that work in any environment.

George Ferrara