Federal Budget 2026: What the New Property Tax Changes Mean for Australian Investors

While many of the reforms are still subject to legislation, the direction from Government is becoming clearer:

• Encourage investment into new housing supply
• Reduce speculative pressure on existing homes
• Increase tax revenue from capital gains
• Shift investor behaviour toward long-term housing development

At Finsap, we believe the changes may significantly alter how investors assess cash flow, borrowing strategy, and long-term portfolio planning over the next decade.

Key Federal Budget 2026 Property Changes

1. Negative Gearing Changes

Under the proposed reforms, negative gearing on established residential properties purchased after Budget night may no longer be deductible against salary and wage income from 1 July 2027. Instead, future losses from eligible established investment properties would only be able to offset residential rental income or future capital gains from residential property. Unused losses would be carried forward.

Importantly: Existing investment properties owned before the announcement date are expected to be grandfathered under the current rules. The proposed changes also appear to preserve existing treatment for eligible new residential builds, build-to-rent developments, and certain affordable housing projects.

2. Capital Gains Tax (CGT) Reform

The Federal Budget also proposes major changes to the current capital gains tax system. From 1 July 2027, the existing 50% CGT discount may be replaced with an inflation-adjusted cost base model. Rather than automatically discounting half the capital gain, the proposed approach would tax the gain above the inflation-adjusted purchase cost.

The Government has also proposed a minimum effective 30% tax rate on net capital gains. For many investors, this may change the way they assess long-term capital growth, holding periods, and trust structures.

3. Minimum Tax on Discretionary Trusts

Another major proposal is the introduction of a 30% minimum tax on discretionary trusts from 1 July 2028. Family trusts are commonly used throughout Australia for property investing, business ownership, and asset protection. If legislated, these reforms may lead many investors and business owners to review existing trust structures and future acquisition entities.

What Could This Mean for Property Investors?

At Finsap, we believe the biggest shift may not simply be tax itself. The bigger change is likely to be investor behaviour.

Greater Focus on New Builds

Because many of the proposed tax concessions remain available for eligible new residential property, investor demand may increasingly move toward house and land packages, off-the-plan apartments, and townhouse developments. This could increase competition within the new-build market while reducing demand for some established investment stock.

Cash Flow Will Matter More

Historically, some investors relied heavily on negative gearing benefits to support investment decisions. If those benefits become more limited, stronger rental yield and cash flow may become increasingly important. This could lead investors to place greater emphasis on rental demand, interest rate buffers, and holding costs.

Borrowing Structures May Evolve

Many borrowers may begin reassessing whether future purchases should be held in personal names, discretionary trusts, companies, or SMSFs. The right structure will increasingly depend on tax position, borrowing capacity, and long-term investment goals.

Finsap Perspective

At Finsap, we believe the Federal Budget 2026 reforms could reshape the Australian property investment landscape over the next several years. Rather than simply discouraging investing, the changes appear designed to redirect investment toward increasing housing supply.

The strongest investors moving forward are unlikely to be those chasing short-term tax benefits. They will likely be the investors focused on sustainable cash flow, quality assets, and strategic finance structures.