Negative Gearing and CGT Changes Are Now Law: What Property Investors Need to Know Before 1 July 2027

If you bought an established investment property after 7:30pm on 12 May 2026, it will lose negative gearing from 1 July 2027 (Baker McKenzie, 2026). The budget proposals are no longer proposals. Here is who is affected, who is protected and what to do before the start date.

What has changed?

The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed the Senate on 25 June 2026 (Baker McKenzie, 2026) and was ratified by the House of Representatives 98 votes to 39 (Sellers, 2026). It makes two major changes for residential property investors: it limits negative gearing and it replaces the 50% CGT discount.

Who loses negative gearing from 1 July 2027?

Residential dwellings acquired after 7:30pm AEST on 12 May 2026 (budget night) will no longer qualify for negative gearing treatment from 1 July 2027 (Baker McKenzie, 2026).

The losses are not lost entirely. They are quarantined and carried forward, and can only be used against future residential rental income or residential capital gains (Corrs Chambers Westgarth, 2026). The difference is timing: you can no longer use them to reduce tax on your wages each year.

Who keeps negative gearing?

• Grandfathered owners. Properties acquired before 7:30pm on 12 May 2026 keep their existing treatment until sale (Acumentis, 2026).
• New builds. Net rental losses from new residential dwellings are exempt (Baker McKenzie, 2026).
• Certain structures and programs. Widely held trusts, build-to-rent developments and investors in government housing programs are excluded from the restrictions (Acumentis, 2026).

How do the new capital gains tax rules work?

The 50% CGT discount is being replaced with cost base indexation, which adjusts gains for inflation, plus a 30% minimum tax rate on capital gains accruing from 1 July 2027. Gains that accrue before that date are still assessed under the current rules (Corrs Chambers Westgarth, 2026).

In practice, the law treats assets as being disposed of and reacquired on 1 July 2027 (Baker McKenzie, 2026). If you sell later, the gain will be split between the old and new rules, and that split needs to be defensible (Acumentis, 2026).

What else is in the new law?

SMSF borrowing. Senate amendments added a ban on new SMSF borrowing for residential property, secured as a condition of Greens support (Acumentis, 2026; CGT, negative gearing changes clear final hurdle, 2026). If you were planning an SMSF purchase, confirm the details and start date with your adviser before acting.

Lender serviceability. ANZ, NAB and Macquarie have already updated their policies to recognise negative gearing only on new builds or pre-budget established properties (Sellers, 2026). This can reduce borrowing capacity for an established investment purchase.

The “widow’s tax”. As passed, jointly owned grandfathered properties lose their exemption if one owner dies or the property transfers through divorce. The Government has committed to fixing this in a second tranche of legislation (Sellers, 2026).

More legislation to come. ATO guidance on negative gearing has not yet commenced, and further CGT legislation is still being progressed in tranches (Chartered Accountants Australia and New Zealand, 2026).

What should investors do before 1 July 2027?

• Confirm your acquisition date. Know whether each property sits before or after the 12 May 2026 cut-off, and give your accountant the contract documents.
• Plan your records. A dated valuation close to 1 July 2027 can help support the split between old-rules and new-rules gains. Ask your accountant what evidence they will need.
• Re-run cash flow on post-budget established purchases. Without the annual tax offset against wages, a loss-making property costs more to hold each year.
• Weigh new builds properly. Negative gearing is one factor. Land content, location and resale demand still drive long-term returns.
• Watch the second tranche. Joint ownership, SMSF and transitional details may still change.

Frequently asked questions

Is negative gearing being abolished in Australia? No. From 1 July 2027 it is limited for established dwellings bought after 12 May 2026. New builds and grandfathered properties keep it.

Does the change apply to an investment property I already own? If you acquired it before 7:30pm AEST on 12 May 2026, your existing negative gearing treatment continues until you sell.

When do the CGT changes start? 1 July 2027. Gains accrued before then are assessed under the current rules.

This article is general information only and is not tax or financial advice. Speak to a registered tax agent or licensed financial adviser about your situation.