The biggest property tax overhaul in a generation. Here's the info... without the fluff.
The 2026 Australian Federal Budget was handed down last night, delivering what’s being called the most significant overhaul of property taxation in nearly 30 years.
Rather than fill you up with boring political jargon and leave you more confused than when you started, I’m going straight into the key points and how the changes will actually impact you. Whether you currently own a property, would like to own one some day, or have no intention of ever owning one – this budget impacts all home buyers, sellers and renters.
I will note that this article is not intended to give my personal opinion or engage in political debate. It is purely intended to provide a simple way to understand the changes that have been made. Whether the impacts are positive or negative will depend on your own personal circumstances. I have included below some “real-life” case studies as I often find this the easiest way to see examples of how these budget changes look in the real world.
Here’s the black and white of what Treasurer Jim Chalmers officially announced (without too much political fluff):
The 50% CGT discount that was previously in place has been axed. In its place, Australia returns to an indexation model similar to the one used prior to 1999. So instead of getting a standard 50% discount on your capital gain, your original purchase price is adjusted to account for inflation (CPI) over the years you hold it. You’re then taxed on the “actual” gain – the growth above and beyond inflation – at your full marginal rate.
There’s also a new minimum tax of 30% on capital gains. So, no matter what your normal tax bracket is, your capital gain will be taxed on at least 30%. This is an important detail for lower-income investors and retirees who, under the current system, may have paid CGT rates of 10-15%.
Negative gearing has been restricted – but not eliminated entirely. Here’s how it now works:
A note on timing –
All measures in this article have been announced in the 2026 Federal Budget but still need to pass legislation before they become law. While none of these changes are technically in force yet, the announced tax changes are often backdated to apply from the date they were announced. That means if you’re entering into a property contract now, you should consider the implications of the new changes – not just the rules as they currently stand.
Where this article references dates (such as “from Budget night” or “1 July 2027”), these are the dates the legislation is expected to apply from once passed – not the date the rules officially become law.
If you already own an investment property, existing investments are largely grandfathered. The current rules continue to apply for the time being. Any capital gain accrued up to 1 July 2027 will be calculated under the existing 50% discount rules. Any gain after that date falls under the new indexation model.
If you own established property bought after Budget night, your negative gearing rules will change – you can still claim losses, but only against rental income, not your salary.
If you’re planning to buy more, the maths has shifted – and depending on your structure, possibly significantly. I’ve set out two real-world examples to help process the impact of the changes.
Sarah and Tom both earn $80,000 per year. Seven years ago they bought an investment property for $700,000. Today, they’re selling it for $1,000,000. That’s a $300,000 gain.
Previous 50% Discount | New Indexation | |
Gross Gain | $300,000 | $300,000 |
Adjustment | Less 50% discount | Cost base indexed by CPI (~24.5%) |
Indexed Cost Base | N/A | $871,500 |
Taxable Gain (total) | $150,000 | $128,500 |
Taxable Gain (individual) | $75,000 | $64,250 |
Extra Tax Per Person | $25,400 | $21,200 |
TOTAL CGT PAYABLE | $50,800 | $42,415 |
Result: Sarah and Tom are $8,385 better off under the new system.
Why? We’ve been through a high-inflation cycle. When inflation has eaten a big chunk of the “gain”, indexation provides more relief than the 50% discount.
However, if Sarah and Tom were to buy under the new rules, and inflation returned to 2-3% over the next seven years, the same scenario (selling a property with a $300,000 capital gain) would cost them up to $65,000 in CGT – far more than both the 50% discount and the new scheme in a high-inflation market.
But what if you’re not selling today? Many existing investors will be holding their properties well past 1 July 2027, which raises a different question.
What if Sarah and Tom held on instead?
Now imagine Sarah and Tom decide not to sell today, but instead hold onto the property for another seven years, selling in 2033. Because they already own the property (bought before Budget night), they get the benefit of both systems working side by side. Any capital gain that accrues up to 1 July 2027 will still be calculated under the existing 50% discount rules, and only the gain from 1 July 2027 onwards will fall under the new indexation model. In practical terms, that means their final CGT bill is split into two parts – one calculated the old way, one the new way – and added together at the end.
Now consider Lisa. She earns $90,000 per year and bought her investment property in May 2022 for $650,000. Today (May 2026) the property is worth around $800,000. Lisa decides to hold for another six years and sell in 2032 for an estimated $1,100,000 – giving her a total gain of $450,000 over a ten-year hold.
Because Lisa bought the property before Budget night, she gets the benefit of both systems working side by side. Any gain that accrues up to 1 July 2027 is calculated under the existing 50% discount rules, and any gain from 1 July 2027 onwards falls under the new indexation model. Her final CGT bill is the sum of those two calculations.
Here’s how it works out:
Pre- 1 July 2027 (50% discount) | Post- 1 July 2027 (Indexation) | |
Gain in this period | $200,000 | $250,000 |
Adjustment | Less 50% discount | Cost base indexed by CPI (~13%) |
Indexed Cost Base | N/A | $702,000 |
Taxable Gain | $100,000 | $139,500 |
Lisa’s total taxable capital gain: $239,500 Total CGT payable: approximately $101,000
By way of comparison, if the rules hadn’t changed at all and the whole gain was calculated under the 50% discount, Lisa would have paid around $87,000 in CGT. So holding through the transition costs her roughly $14,000 more in tax across the full ten-year hold – not catastrophic, but a real cost worth planning for.
If you already own an investment property and you’re holding past 1 July 2027, the new rules don’t kick in all at once. The gain you’ve already accumulated is protected under the old system – it’s only the new growth from 1 July 2027 onwards that gets caught by indexation. Your timing decision isn’t really “old rules vs new rules” it’s about what proportion of your total gain falls under each.
The “new build” carve-out
One detail worth flagging – if you’re planning to buy a new build, you get to choose between the 50% CGT discount and the new indexation model when you eventually sell. You also keep full negative gearing rights against your other income. The Government has deliberately kept these incentives in place to encourage investment that adds to new housing supply, rather than just shuffling existing homes between owners.
If you’re a first home buyer, you probably feel like your turn to own a home is getting further and further away. The government says the ultimate outcome of this budget is to make ownership more achievable. Whether that actually plays out is the million-dollar question.
The biggest direct impact is reduced competition. Investors and first home buyers have long been chasing the same kinds of properties – units, townhouses and lower-priced houses. With negative gearing restricted on established property and CGT changes potentially making investment less attractive, that competition could ease at exactly the price point you’re buying at. Most economic modelling also suggests property prices may soften slightly as a result.
That said, expect investor demand to shift toward new builds (where negative gearing and the choice of CGT method remain intact). So if you’re looking at new-build properties or off-the-plan apartments, you may still be facing investor competition there.
Your principal place of residence is your safety net. Your owner-occupied home is exempt from capital gains tax. That hasn’t changed and isn’t being touched – so if you’re selling the home you live in, nothing here affects you directly.
For current homeowners thinking about upgrading or downsizing, the broader question is what happens to property values. Most economic modelling suggests the impact on prices will be modest rather than dramatic – somewhere between “barely noticeable” and “a small softening.” Don’t expect a crash.
This is where things get interesting – and where your own decisions might be most affected, even if you’re not directly buying or selling.
National vacancy rates are sitting at around 1.0% (a healthy market is closer to 3%). Rents have been climbing fast and consistently. The big question is: if mum-and-dad investors step back from the market because the tax incentives are gone, who fills the gap?
In Australia, around 99% of rental properties are owned by individual investors – so there isn’t a large pool of corporate landlords ready to step in at scale. If individual investors slow their buying (or sell existing properties), rental supply tightens, and tighter supply usually means upward pressure on rents.
History gives us one (imperfect) reference point. When the Hawke government quarantined negative gearing in 1985, rents rose sharply in Sydney and Perth – though those cities already had supply shortages before the policy change. Other capital cities saw rents stay flat or even fall. The policy was reversed in 1987 after intense industry pressure.
Whether 2026 plays out the same way is anyone’s guess – but for renters, the safest assumption is that the short-term pressure on rents won’t ease quickly.
The 2026 budget represents a real shift in how property is taxed in Australia – the biggest in a generation. But the effects of these changes will play out over years, not weeks. The CGT changes don’t kick in until 1 July 2027, and the trust changes not until 1 July 2028 – which gives you time to think, plan and get good advice before you need to act.
Speak to your accountant this month. Understand exactly where the timing sits for any purchase or sale you’re considering and remember that the negative gearing changes for established properties apply from Budget night.
Even if this budget didn’t speak directly to you, arming yourself with the right information and surrounding yourself with the right people will put you in the best possible position to start taking action sooner. Talking to a broker, talking to a conveyancer and understanding your own unique circumstances will help you reach your goals sooner than you think. Don’t wait for everything to feel perfect before you start.
The CGT changes apply to gains arising after 1 July 2027. Gains accrued up to that date are protected under the current rules. But timing still matters – and if you’re contracting after that date on a future purchase, the maths is genuinely different.
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The thing we want you to take away from all of this is that you’re not powerless here. Big policy changes can feel overwhelming, especially when the headlines are all about who wins and who loses. But the reality is that good information, the right advice, and a clear understanding of how the changes apply to your situation puts you back in control.
If you’re somewhere in the middle of buying, selling or settling property – that’s literally what we do every day at Impero. The legal side of property doesn’t change with the budget, but knowing how the new rules affect timing, structure and decisions absolutely does. If you’ve got questions, that’s what we’re here for.
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