Updated October 2026, 2026 tax changes: from 1 July 2027, negative gearing for residential property is generally limited to eligible new builds (later buyers of that dwelling can't access it), and the 50% capital gains tax discount for individuals, trusts and partnerships is replaced with cost base indexation and a 30% minimum tax on gains. Properties held at 7:30pm (AEST) on 12 May 2026 keep their existing negative gearing treatment, and the changes to capital gains tax apply only to gains that accrue after 1 July 2027; investors in new builds can choose the 50% discount or the new rules. Both changes are now law; see the ATO. This is general information only; speak to a registered tax agent about your situation.
The Australian investment property market has long relied on the favourable tax implications of negative gearing. In light of the highly publicised 2026 Federal Budget announcement, it appears that this investment property strategy requires investors to reconsider their approach to new investments. Far from bringing an end to property investment, we think it is a real opportunity to reconsider investment approaches, and the right time to speak with an investment property buyers agent about building a property investment portfolio that works under new rules.
If you are looking to purchase an investment property, the negative gearing changes, now law, bring new investment strategies for new builds, and may change your long-term plans for an established investment property. At Liviti, an investment property buyers agent works with investors at every stage of building a property portfolio, and the question we’re getting most often right now is: what does this mean for me?
What negative gearing changes were announced in the 2026 Budget?
It’s first important to understand exactly what negative gearing is before being alarmed that it is changing. Put simply, negative gearing is when the costs of holding an investment property (think mortgage interest, maintenance, strata fees and insurance) exceed the rental income. Under the existing tax system, many investors can deduct this rental loss against other taxable income, such as salary or wages, reducing their overall tax payable.
The changes announced in the 2026 Federal Budget focus on the purchase of established properties, meaning existing dwellings as opposed to newly constructed housing. Under the reforms, which are now law, investors who buy established residential properties after Budget night generally won’t be able to offset rental losses against salary or other personal income from 1 July 2027. Properties held at 7:30pm (AEST) on 12 May 2026 are grandfathered under the previous negative gearing rules.
It is important to remember that investing in eligible new builds still allows negative gearing to be claimed against other income. When we consider the housing shortage in many Australian cities, it is evident that incentives to invest in new housing projects will also benefit renters, with tax support redirected toward new housing supply rather than purchases of established residential property. Incorporating news of the negative gearing changes is essential to any long term property investment strategy, and an investment property buyers agent can help you understand your options.
How could the 2026 Budget affect your property investment strategy?
The 2026 Budget changes may affect property investment strategies by reducing the extent to which investors can rely on tax offsets. The after-tax income or cost of holding an investment property becomes more important because it dictates the investment’s financial sustainability.
If losses incurred from holding an investment property cannot be deducted under the budget’s negative gearing changes, investors may need to look for alternative investment property strategies or shore up existing income streams and tame costs.
Some strategies an investment property buyers agent may recommend after the negative gearing changes include:
Property Selection
With negative gearing continuing for eligible new builds, comparing new and established properties carefully matters more. The tax treatment of new builds is now different from established property.
Off-Loading Underperforming Investments
With cash flow more important under the negative gearing changes, it is worth reviewing any properties that are consistently loss-making, and whether a positively geared property would support cash flow better.
Updated Growth Assumptions
With short-term losses on established properties bought after Budget night now generally absorbed by the investor, it is crucial to calculate the long-term capital growth of the investment to see whether it is worth accepting weak rental returns. Some property market conditions may also shift as other investors respond to the budget reforms, so growth assumptions need careful testing rather than being taken for granted.
Personalised Investment Property Strategy
The right decision when investing in property will become more determined by personal circumstances. Factors such as personal income, borrowing capacity, and risk tolerance are more important than ever given the changed tax implications. Speaking with a buyers agent for investment property can be beneficial in understanding the unique circumstances of each property and investor.
The negative gearing reforms do not mean property investing is off the table. They simply mean the numbers need to work more clearly, without relying too heavily on the previously granted tax benefits.
Should investors rethink cash flow and tax planning under the new tax rules?
Cash flow and tax planning are worth revisiting, because changes to negative gearing can alter the real cost of an investment property. The way we evaluate a property’s financial suitability under the current tax rules will look different after 1 July 2027, so a property investment strategy may need to change as well.
Cash flow is the money left over or the shortfall, after rental income is compared against the costs of holding an investment property.
Some investment property expenses include:
- Loan interest
- Property management fees
- Repairs and maintenance
- Insurance
- Strata or body corporate fees
- Council rates
- Water rates
- Land tax
- Vacancy periods
- Depreciation assumptions
Investors want income now, not just capital in 20 years. Following the negative gearing changes, the costs incurred through investment are as important as ever, equally so is the rental income. A revised strategy can stress-test the property’s performance under different scenarios, such as the removal of tax benefits.
The changes preserve existing negative gearing arrangements for properties held at 7:30pm (AEST) on 12 May 2026. It’s always worth reviewing your property investment strategy regularly with an investment property buyers agent, with expert consideration given to changing interest rates, insurance, rent, and council rates.
What does negative gearing reform mean for new builds vs established properties?
The negative gearing reform affects established properties bought after Budget night, generally removing the ability to deduct rental losses from other taxable income from 1 July 2027. Eligible new builds keep negative gearing for the first investor and therefore may offer more favourable tax implications. This does not mean new builds are a better long-term strategy across the board; your own financial goals, risk tolerance and financial capacity still come first.
New builds may suit some investors because they can offer lower early maintenance costs, continued access to negative gearing and more affordable entry points in some areas. As always, due diligence is required to account for untested rental demand, suburb oversupply, and developer build quality.
Established properties offer a wealth of opportunities and potential, with the ability to be renovated to increase value, to enter tightly held markets, and to have more predictable rental histories. Established dwellings have long been seen as a powerhouse of property investment, but they are also more susceptible to higher maintenance costs and those bought after Budget night generally lose negative gearing from 1 July 2027. An investment buyers agent can help you compare both objectively.
Choosing between a new build and an established property is not only a tax question; it also involves a multitude of market research and personal factors, such as financial goals, risk tolerance, and existing income and borrowing capacity. A strong investment property strategy, guided by a property investment expert, considers the full picture: the property’s purchase price, potential rental income, ongoing costs, and capital growth potential.
How can investors adjust their investment property strategy before the changes take effect?
If you are looking to purchase an investment property in the future, it is useful to review all of the numbers before making the purchase rather than relying on current tax implications.
Adapting your strategy for the new negative gearing rules can be done with the help of a buyers agent for investment property at Liviti.
Steps to Buying an Investment Property After Budget Changes
- Re-Run The Numbers
This means modelling the property’s costs and returns before and after tax, including best-case, expected and conservative scenarios under the tax changes that start on 1 July 2027.
- Compare New Builds and Established Properties
New builds may offer tax advantages, as eligible new builds keep negative gearing for the first investor (later buyers of that dwelling cannot access it), whilst established properties may offer other potential benefits such as a more desirable location, higher land value or renovation potential. If you’re unsure which suits you, a buyers agent investment property specialist can help you compare both options on equal footing.
- Check Cash Flow Resilience
This means checking whether you are financially (and mentally) comfortable with an investment property if losses cannot be deducted from total taxable income, or if other stresses arise, such as interest rate rises or a period of vacancy.
- Avoid Rushing
The changes are now law, but that is not a reason to rush into a purchase. A rushed decision may cost you more than the short-term impacts of removing negative gearing. Whatever your strategy, a level head is always your most valuable asset.
- Speak to a Professional
How the changes apply can depend on your situation and on further ATO guidance. Speaking with an investment property buyers agent or a tax accountant can provide you with useful information and the confidence to help you make your next investment.
How to Start a Property Portfolio After the 2026 Budget
If you’re wondering how to start a property portfolio, the rule hasn’t changed: buy something that works on the numbers, not on the tax return. The 2026 changes actually make this clearer. A property that only stacks up because of a tax offset was always a risk. A buyers agent for investment property can help you understand how the property performs before tax, after tax, and under conservative return assumptions before you commit to a purchase.
The best response to the 2026 Budget is neither panic-buying property nor avoiding property altogether. It is about building a clearer, more numbers-led property investment portfolio with a buyers agent who knows how to find the right property for you. Book a discovery call with Liviti today.
