What changed: CGT discount abolished for new purchases
From 1 July 2027, the 50% CGT discount for individuals, trusts, and partnerships is abolished for investment properties purchased after Budget night (7:30 PM AEST, 12 May 2026). In its place, cost base indexation using the Consumer Price Index (CPI) applies, along with a minimum 30% effective tax rate on real capital gains.
Properties purchased before Budget night are grandfathered — the 50% discount continues to apply to gains accruing before 1 July 2027.
What changed: Negative gearing quarantined for established properties
From 1 July 2027, negative gearing for established residential investment properties purchased after Budget night is restricted. Rental losses from these properties can only be deducted against other residential property income — not against salary, wages, or other income. Unused losses carry forward indefinitely.
New builds are exempt: investors purchasing new builds can continue to deduct losses against all income.
Who is affected
The changes affect different investors very differently:
- Investors who owned properties before Budget night: protected by grandfathering. No change to negative gearing. CGT discount continues on pre-cliff gains.
- Investors who purchased established properties after Budget night: new CGT rules apply from 1 July 2027. Negative gearing losses quarantined.
- Investors purchasing new builds: exempt from both changes. Full negative gearing and choice of CGT method.
- Investors with pre-1985 properties: CGT exemption continues for pre-cliff gains.
The transitional Bucket B calculation
For grandfathered properties held past 1 July 2027, gains are split at the cliff date. Pre-cliff gains get the 50% discount. Post-cliff gains are subject to CPI indexation. The split is calculated proportionally based on the holding period, or by obtaining a formal valuation as at 1 July 2027.
New builds: the key exception
The Government has explicitly exempted new builds from both changes to encourage housing supply. Investors purchasing newly constructed dwellings can: deduct losses against all income (full negative gearing), choose between the 50% CGT discount or CPI indexation when selling, and access the same tax treatment as pre-Budget-night investors.
What investors should do now
The most important actions for property investors in the current environment:
- Calculate your CGT exposure for each property using ClearGain's Scenario Modeller
- Build your cost base — every dollar reduces your capital gain
- Understand your grandfathering status — check your contract exchange date
- Consider the timing of any planned sales relative to the cliff
- Talk to a registered tax agent about your specific situation
Understand your Budget 2026 exposure
ClearGain shows you exactly how the Budget changes affect each of your properties — with Bucket B calculations, grandfathering status, and scenario comparisons.
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This article is for general information purposes only and does not constitute financial product advice, tax advice, or legal advice. Always seek advice from a registered tax agent or financial adviser before making investment decisions.