The 60-second version. The Albanese government's 2026 Federal Budget announced three proposed tax changes for property investors. Negative gearing and CGT are proposed from 1 July 2027 and trust distributions from 1 July 2028, with a lookback rule proposed for purchases after 7:30pm AEST on 12 May 2026. None of them is law until legislated. The model compares the same purchase under both regimes. Whether the acquisition date matters for you is a question for your accountant. New builds have separate rules.
Rule 1. Negative gearing limits on established residential
Under current rules, an investor with a rental loss of, say, $18,000 in a year can deduct that loss against their salary income and receive a tax refund proportional to their marginal rate. In this illustration, an $18,000 loss at a 37% marginal rate offsets about $6,660 of tax. The outcome for any reader depends on their own circumstances; an accountant confirms. This is the mechanism that has made negative gearing a household term in Australia for four decades.
From 1 July 2027, this is proposed to stop for established residential property acquired after 7:30pm AEST, 12 May 2026. Losses can only be offset against other property or investment income, not salary. Any unused loss carries forward indefinitely against future property gains.
What actually changes
| Acquisition date | Rule that applies |
|---|---|
| Before 12 May 2026 7:30pm | Legacy rules. Losses deductible against salary indefinitely. No change. |
| Between 12 May 2026 and 30 June 2027 | Legacy rules apply until 30 June 2027. From 1 July 2027 onward, new rules kick in for this property. |
| 1 July 2027 onward | New rules from day one. Losses quarantined to property/investment income only. |
New build exemption. Properties classified as "new build" retain full negative gearing indefinitely. Definition matters: vacant land with new dwelling, OR demolition and greater dwelling count. Knock-down-rebuild same-count does NOT qualify. Substantial renovations do NOT qualify. This is the crucial carve-out. As announced, qualifying new builds keep the existing negative gearing treatment after 1 July 2027. Eligibility is confirmed by your accountant.
Rule 2. CGT discount replaced with cost-base indexation + 30% minimum
Today, if you hold a property more than 12 months and sell at a profit, only 50% of the gain is taxable. It is the single biggest tax break in Australian property.
From 1 July 2027, this changes. The 50% discount is replaced with two things:
- Cost-base indexation. Your original purchase price is adjusted upward for CPI. Only the gain above CPI-adjusted cost is taxable.
- Minimum 30% inclusion. Whatever the CPI adjustment shows, at least 30% of the raw gain is taxable. Prevents zero-tax outcomes in high-inflation scenarios.
Split-treatment for pre-1 July 2027 holdings
If you already own a property, you get split treatment on any future sale:
- The portion of your gain accrued up to 30 June 2027 remains under the old 50% discount rule.
- The portion accrued from 1 July 2027 onward uses the new indexation + 30% minimum method.
As announced, a valuation dated 30 June 2027 may be relevant to establishing the split point. Ask your accountant whether you need one and how a sale without one will be treated once the legislation is final.
New build election. Owners of qualifying new-build stock can elect to apply the 50% discount to the entire gain, even for the post-1 July 2027 portion. As announced, new dwellings are treated differently from established stock.
Rule 3. 30% minimum tax on discretionary trust distributions
This one is proposed to start on 1 July 2028. As announced, a minimum 30% tax rate on discretionary (family) trust distributions is proposed, regardless of the beneficiary's actual marginal rate. It is not law until legislated and the proposal may change.
Historically, investors have used family trusts to "spray" distributions to lower-taxed beneficiaries. A parent on 47% marginal rate could distribute to an adult child on 19%, capturing the differential. Post-1 July 2028, that structural advantage narrows dramatically.
The reform doesn't ban trusts. It removes the tax arbitrage. Trusts are used for asset protection, estate planning and structural flexibility; whether one suits you is a matter for your lawyer and accountant. If the proposal is legislated as announced, the rate difference from distributing to lower-taxed beneficiaries would narrow. Your accountant confirms how any structure is treated.
Rollover relief window
As announced, a rollover relief window of 1 July 2027 to 30 June 2030 is proposed for restructuring discretionary trusts into different vehicles (companies, unit trusts, individual ownership) without triggering CGT. It is not law until legislated; your accountant and lawyer confirm what applies.
Watch the stamp duty caveat. The CGT rollover does NOT waive state stamp duty on land transfers. For land-rich trusts, restructuring can trigger multi-hundred-thousand-dollar stamp duty bills even with CGT relief. Speak to a lawyer + accountant BEFORE moving. The three-state review (NSW, VIC, QLD) matters differently in each.
Questions to take to your accountant
Three questions, in order:
- Am I planning to acquire more established residential in the next 12 months? The model shows the same purchase under both regimes. As announced, properties acquired before the cutoff keep the current negative gearing treatment; your accountant confirms.
- Am I holding property I intend to sell in the next 10 years? Ask your accountant whether a 30 June 2027 valuation would help your position.
- Do I have a discretionary trust? Your accountant can advise on the timing of any trust restructuring. The proposed rollover window opens on 1 July 2027.
What we baked into the tracker
StratMap models all three reforms as announced. Every strategy property carries a taxRegime field that auto-classifies from purchase date. The engine branches on:
- Negative gearing quarantining (post-cutoff established residential)
- Cost-base indexation via hardcoded quarterly CPI series (built for 2026-2035 projection)
- Split-CGT calculation with 30 June 2027 pivot date
- New-build election flag on qualifying properties
- Trust distribution modelling with 30% minimum inclusion
You can change assumptions if the legislation changes in parliament. The model reflects the reforms as announced.
The compliance frame. This article is educational. StratMap models the numbers. Your accountant advises on tax. Your lawyer advises on structures. Your broker advises on lending. Nothing in this article, or in the tracker, is personal financial advice. Australian residential property is not a financial product under the Corporations Act 2001 and StratMap does not hold an AFSL.