Before you read: this is general information about the law as we understand it in October 2026, not tax advice. Some details are still to be set by regulations. Your accountant can tell you how the rules apply to you.
The short version
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed Parliament in June 2026. For residential property it does two things:
- Rental losses are quarantined. For established homes bought after 7:30pm AEST on 12 May 2026, from 1 July 2027 a rental loss can only be used against residential property income and gains, not your salary.
- The capital gains discount is replaced. From 1 July 2027, the 50% discount is replaced by indexing your cost base to inflation, with a 30% minimum tax rate on the gain for resident individuals.
Rental losses
Until now, if an investment property cost more to hold than it earned in rent, the loss reduced the tax on your salary. That's negative gearing.
For established residential property bought after 7:30pm AEST on 12 May 2026, that stops from 1 July 2027. The loss can only be used against income and gains from residential property. Unused losses are carried forward to future years.
Properties owned before that time keep the old treatment. New dwellings that genuinely add to housing supply are exempt; the exact definition is being set by a legislative instrument.
Capital gains tax
For assets sold after 1 July 2027, individuals and trusts lose the 50% CGT discount on gains that build up from that date. Instead, the cost base is indexed to inflation, so only the real gain is taxed.
A minimum tax rate of 30% applies to those gains for Australian resident individuals. Gains are treated as the last slice of your income for the year, so they're taxed at your highest rate for that year, and never less than 30%.
Assets held before 1 July 2027 are treated as sold and bought back on that date, with the gain to that point deferred until you actually sell, and still eligible for the old discount.
New builds
Owners of qualifying new residential dwellings can choose between the old 50% discount and the new indexation method, and their losses aren't quarantined. That will make new builds look more attractive on paper. We still don't buy off-the-plan or in new estates for our clients, because the risks in price, quality and resale haven't changed.
What it means if you're buying an established house now
- Holding costs come from your pocket. Plan your budget on the cost before tax, with no refund.
- Cashflow matters more. A property that's close to paying for itself is easier to hold for the long run.
- Selling has a higher tax cost for many people. A plan to sell the investment for your home deposit needs the tax built in. The Escape Plan does this.
- Hold period and structure deserve a conversation with your accountant before you sign.
What's still being settled
- The definition of a qualifying new dwelling.
- The apportionment method for gains before and after 1 July 2027.
- Rollover relief for restructures, announced but not yet law.
We'll update this guide as those are settled.
Sources
- Treasurer, "Government introduces first tranche of tax reform", 28 May 2026
- Baker McKenzie, "Major changes to CGT and negative gearing", July 2026
- Corrs Chambers Westgarth, "Capital gains tax and negative gearing amendments"
General information only. Nothing on this site takes into account your objectives, financial situation or needs, and it is not financial, credit, tax or legal advice. Past performance is not a reliable guide to future performance. Talk to your accountant about how this applies to you.