What Do the 2026 Federal Budget Negative Gearing Changes Mean for Brisbane Property Investors?
From 1 July 2027, negative gearing is limited to new residential builds under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. Losses from established properties bought after Budget night are quarantined to property income, making negative gearing advice in Brisbane essential for investors.
This article provides general information only and does not constitute financial or tax advice. Speak with a qualified adviser before making decisions based on your individual circumstances.
What Is Negative Gearing and How Has It Worked?
Understanding how negative gearing works is important before assessing whether it suits your property investment strategy. Seeking negative gearing advice in Brisbane can help investors evaluate the tax implications, ongoing holding costs and potential risks in the context of their broader financial position.
Negative gearing occurs when an investment property’s rental income is less than the total expenses of owning it, including loan interest, council rates, repairs, maintenance and depreciation. Under the current rules, the ATO allows investors to claim these rental expenses as deductions, and until now those deductions could be offset against all taxable income, including wages and salary.
In practical terms, a property making a net rental loss has been able to reduce an investor’s overall tax bill. However, the property still costs the investor money — the tax deduction reduces the after-tax holding cost but does not eliminate the loss. As ASIC’s MoneySmart guidance explains, investment losses are real costs even when they attract a tax offset.
What Changed in the 2026 Federal Budget?
The 2026–27 Federal Budget introduced two major reforms affecting residential property investors: changes to negative gearing and changes to capital gains tax (CGT). Both reforms were enacted through the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026 and commences on 1 July 2027.
In the 2026–27 Budget speech, the Treasurer framed the reforms as intended to level the playing field for first home buyers and to direct investment toward new housing supply rather than established dwellings. According to Treasury modelling in the budget factsheet, the reforms are expected to result in approximately 75,000 additional owner-occupiers over the next decade.
The table below summarises how negative gearing treatment changes for different categories of residential property investor.
| Investor category | Before 1 July 2027 | From 1 July 2027 |
| New build purchaser | Rental losses deductible against all income | Unchanged — rental losses remain deductible against all income |
| Established property purchased after Budget night (12 May 2026) | Rental losses deductible against all income (transitional) | Rental losses quarantined to residential property income; cannot offset wages or salary |
| Property held at Budget night | Rental losses deductible against all income | Grandfathered — rental losses remain deductible against all income until property is sold |
Under the Budget measures, investors purchasing new constructions can still deduct losses from other income such as wages and salary. For established housing purchased after Budget night, losses may be deducted against residential property income — including rental income and capital gains from other investment properties — but cannot offset other income types. Unused losses can be carried forward to future years.
How the Grandfathering Rules Work
Properties held at 7:30 pm AEST on 12 May 2026 — the time the Budget was handed down — are exempt from the negative gearing changes. According to the ATO’s guidance on the reforms, these properties can continue to be negatively geared under the existing rules until they are sold, regardless of when that sale occurs.
The grandfathering provisions also cover specific transitional scenarios. According to Chartered Accountants ANZ, investors who had entered into contracts that were not yet settled at 7:30 pmm on Budget night are classified as existing investors and retain grandfathered status. Investors who were positively geared on Budget night but later became negatively geared — for example, due to interest rate increases — may also continue to claim full deductions on those grandfathered properties.
The following investors retain access to the current negative gearing rules:
- Those who held a residential investment property at 7:30 pm AEST on 12 May 2026
- Those who had entered into a contract to purchase (but had not yet settled) at that time
- Those who were positively geared on Budget night but later became negatively geared on a grandfathered property
What Counts as a “New Build” Under the Legislation?
A property qualifies as a new build under the legislation if it genuinely adds to Australia’s housing supply. The Treasurer’s second reading speech confirmed that new build investors can still claim full negative gearing deductions. When they eventually sell, they may elect to apply either the existing 50% CGT discount or the new cost base indexation method to their entire capital gain. Build-to-rent developments and social or affordable housing projects are also exempt from the new restrictions.
Chartered Accountants ANZ has noted that knock-down rebuilds and substantial renovations generally do not qualify as new builds unless there is an increase in overall housing supply — for example, a house demolished and replaced with a greater number of dwellings such as a duplex or units.
Key distinctions for property investors:
- A newly constructed dwelling that adds to total housing stock generally qualifies as a new build
- A knock-down rebuild that replaces one dwelling with one dwelling generally does not qualify
- A knock-down rebuild that increases the number of dwellings (e.g. replacing a house with a duplex) may qualify
- Build-to-rent and social or affordable housing developments are exempt from the restrictions
Whether a project qualifies as a new build can depend on how it changes the number and type of dwellings on the site. Financial Strategies Group can help Brisbane property investors assess the tax implications of a proposed development and understand how the rules may apply to their circumstances.
Capital Gains Tax: From the 50% Discount to Cost Base Indexation
The existing 50% CGT discount is replaced with cost base indexation for capital gains accruing from 1 July 2027. Under the new method, the cost base of an asset is adjusted for inflation so that investors pay tax on their real capital gains after inflation rather than receiving a flat 50% discount. A minimum tax rate of 30% applies to real capital gains, though recipients of certain income-support payments — including the Age Pension and JobSeeker — are exempt from this minimum rate.
The table below compares the current CGT treatment with the rules that take effect from 1 July 2027.
| Feature | Current rules | From 1 July 2027 |
| CGT calculation method | 50% discount on nominal capital gain (for assets held 12+ months) | Cost base indexed for inflation; tax paid on real gain |
| Minimum tax rate | No specific minimum — taxed at marginal rate after 50% discount | 30% minimum tax rate on real capital gains (recipients of certain income-support payments, including the Age Pension and JobSeeker, are exempt) |
| Transitional treatment | N/A | 50% discount applies to portion of gain accruing before 1 July 2027 |
The ATO has confirmed that the CGT reforms apply to gains accruing after 1 July 2027, and the existing 50% discount continues to apply to the portion of any gain that accrued before that date. This means investors who hold property across the transition date will have their capital gain split into pre- and post-1 July 2027 components.
Practical Considerations for Brisbane Property Investors
Brisbane property investors may need to reassess holding costs and investment strategy under the new rules. For investors considering established property purchases after 1 July 2027, the negative gearing limits in the legislation mean that rental losses are restricted to residential property income and cannot reduce other income such as wages, potentially increasing the after-tax holding cost depending on individual circumstances.
Queensland land tax applies annually to investment properties and adds to the overall cost of holding a residential investment in Brisbane. The principal place of residence is exempt, but investment properties are subject to land tax based on the land value as determined by the Valuer-General, excluding buildings and other improvements. Land tax only applies where the total taxable value of all freehold land held in Queensland equals or exceeds $600,000 for individual investors (or $350,000 for companies and most trusts). This existing holding cost, combined with any change to the tax treatment of rental losses, may affect the overall return profile of established property investments.
Considerations for Brisbane property investors may include:
- Reviewing the after-tax holding cost of existing and potential property investments
- Comparing the financial impact of investing in new builds versus established properties under the new rules
- Understanding how CGT cost base indexation may affect the eventual tax on disposal
- Seeking guidance from a small business accountant or property investment accountant in Brisbane who can model scenarios based on individual circumstances
What the Changes Do Not Affect
The negative gearing reforms apply to residential property and do not affect other asset classes. The Treasurer’s second reading speech confirmed that the negative gearing changes apply to residential property held by individuals, partnerships, companies, and most trusts — but exclude commercial property, shares, widely held trusts, and superannuation funds. Investors in these excluded asset classes can continue to negatively gear under the existing rules.
The CGT discount changes — replacing the 50% discount with cost base indexation — apply specifically to individuals, trusts and partnerships. Companies do not currently receive the 50% CGT discount and are therefore not affected by that particular change.
About the author: Paul Young is Financial Strategies Group’s Business Growth Adviser and AI Solutions Consultant. A Xero Certified Partner who studied Business Accounting at Monash University, Paul has more than 25 years of business and accounting experience. His background includes taxation, finance, business coaching, property investment, tax planning and financial strategy. Based in Brisbane, he now specialises in helping professional-services firms improve business growth, operations and client acquisition. Financial Strategies Group serves clients through offices in Brisbane’s Northside, the Sunshine Coast and the Gold Coast.
Frequently Asked Questions
Can I still negatively gear my existing investment property?
If you held a residential investment property at 7:30 pm AEST on 12 May 2026, that property is grandfathered, and you can continue to negatively gear it under the existing rules until you sell it. The ATO has confirmed that properties held at the time of the Budget announcement are exempt from the negative gearing changes. This grandfathering applies for as long as you hold the property, regardless of whether it moves between positively and negatively geared over time. For help reviewing your property portfolio, speak with a property investment accountant in Brisbane.
What happens if I buy an established property before 1 July 2027?
Investors who purchase an established residential property after Budget night (12 May 2026) but before 1 July 2027 can negatively gear that property during the transitional period, after which the new quarantining rules take effect. From 1 July 2027, rental losses on that property are quarantined to residential property income and can no longer offset wages or other income. Chartered Accountants ANZ has outlined these transitional arrangements in detail. To understand how this may affect a planned purchase, consider speaking with a property investment accountant in Brisbane.
How does cost base indexation differ from the 50% CGT discount?
Cost base indexation adjusts a property’s purchase price for inflation so that investors are taxed on the real gain rather than the nominal gain. Under the current 50% discount, investors halve the nominal capital gain regardless of how much is attributable to inflation. From 1 July 2027, the Treasury has confirmed this is replaced by indexation, with a 30% minimum tax rate on real capital gains. Recipients of certain income-support payments — including the Age Pension and JobSeeker — are exempt from this minimum rate. Financial Strategies Group’s wealth generation and investment services can help model how this may affect your portfolio.
Can I carry forward quarantined rental losses?
Yes. Under the 2026–27 Budget measures, investors whose rental losses on established properties are quarantined to residential property income can carry forward unused losses to future years. These losses may be offset against future residential property income, including capital gains from investment property sales. Financial Strategies Group’s taxation services team can help you understand how loss carry-forward may apply to your situation.
Are self-managed super funds affected by the negative gearing changes?
No. The Treasurer’s second reading speech confirmed that superannuation funds — including SMSFs — are excluded from the negative gearing restrictions. This means an SMSF holding residential investment property can continue to deduct rental losses against the fund’s other income under the existing rules. The changes apply to residential property held by individuals, partnerships, companies, and most trusts, but not to super funds. Financial Strategies Group’s superannuation and SMSF services can help you review your fund’s property strategy.
What Queensland-specific costs should property investors factor in?
Brisbane property investors may be subject to Queensland land tax, which applies annually to investment properties based on the land value as determined by the Valuer-General, excluding buildings and other improvements. The principal place of residence is exempt. Land tax only applies where the total taxable value of all freehold land held in Queensland equals or exceeds $600,000 for individual investors (or $350,000 for companies and most trusts). When combined with the changes to negative gearing, these holding costs may affect the overall return profile of a property investment. Financial Strategies Group’s wealth generation services can help model total holding costs for Brisbane investment properties.
Can I still claim rental expenses like loan interest and council rates?
Yes. The types of expenses that can be claimed as rental deductions have not changed. The ATO’s rental expenses guidance confirms that interest on loans, council rates, repairs, maintenance and depreciating assets remain deductible. What has changed is whether the net rental loss — after all deductions — can be offset against non-property income such as wages. Financial Strategies Group’s taxation services can help ensure you are claiming all eligible deductions.
Ready to Review Your Property Investment Strategy?
The 2026 negative gearing and CGT reforms may affect how you structure and manage residential property investments in Brisbane. Financial Strategies Group, based in Aspley on Brisbane’s Northside, works with property investors across South-East Queensland to model different scenarios and develop tax-effective strategies. To explore how these changes may apply to your situation, speak with our property investment accountant in Brisbane or book an initial consultation.