What are the major changes to negative gearing in the 2026 Federal Budget?

The Australian government is restricting negative gearing exclusively to new-build properties to incentivise housing supply. For existing dwellings acquired after budget night, negative gearing benefits will only be available for a one-year grace period ending July 1, 2027, after which the tax perk is removed for those specific assets.

How is the Capital Gains Tax (CGT) discount changing for investors?

The current blanket 50% CGT discount for assets held over 12 months is being abolished for new purchases made after budget night. Instead, the tax system will revert to a pre-1999 indexation model, which taxes "real" gains by adjusting the asset’s cost base for inflation over the life of the investment.

Why did the government include a one-year grace period for these tax changes?

The July 1, 2027, implementation date is a strategic "buffer" designed to prevent a sudden stampede of investors rushing to buy existing property before the legislation is formally passed.

Are existing investment properties exempt from the new negative gearing rules?

Yes, properties that were already negatively geared prior to the budget announcement are "grandfathered" and remain exempt from the changes.

How do the new tax rules treat investments in new-build homes?

New-build properties are exempt from the crackdown to encourage the construction of more housing units. Investors in new builds retain the ability to use negative gearing and are given a choice regarding capital gains: they can either keep the traditional 50% discount or opt for the new inflation-indexed model.

What is the "intergenerational fairness" narrative behind these reforms?

Treasurer Jim Chalmers framed these property tax increases as a way to rebalance the housing market in favor of younger Australians and first-home buyers.

What does the 2026 Budget signal for Australia's fiscal deficit and tax relief?

The budget confirms there will be no surplus over the next four years, though the government aims to reduce overall deficits by saving more than it spends.

Chalmers targets investors in bold housing tax overhaul

Written by Liezl GambePublished May. 10 2026Last Updated May. 10 2026

Treasurer Jim Chalmers has delivered a transformative budget focused on "intergenerational fairness", confirming a major crackdown on negative gearing and capital gains tax aimed at cooling the investor market for existing homes.

In a move to prevent a pre-legislation "stampede" of buyers, the government announced a one-year grace period; while the new rules apply to properties acquired from budget night, the full restrictions will not take effect until July 1, 2027.

The transition allows investors who purchase existing dwellings now to maintain negative gearing benefits for only twelve months before the perk is permanently stripped away.

Under the new regime, negative gearing will be restricted exclusively to new-build properties to incentivise housing supply.

Similarly, the blanket 50% CGT discount will be abolished for assets acquired after budget night, reverting to a pre-1999 indexation model that adjusts gains for inflation.

New builds remain exempt from these changes, offering investors a choice between the traditional discount or the new indexation method.

Chalmers defended the reforms as a necessary step to rebalance the market for younger Australians.

A one-off "cost-of-living" payment of up to $300 for salary earners was announced, alongside a $2 billion investment in critical infrastructure to unlock 65,000 new homes over the coming decade.