Are Property Investors Changing Course After the New Negative Gearing Reforms?
The Federal Government’s negative gearing and Capital Gains Tax (CGT) reforms mark one of the biggest shifts in property investment tax settings in years. With the core changes now legislated, investors are rethinking everything from what type of property to buy to how they assess cash flow and long-term returns.
Some of the finer implementation details are still being worked through ahead of the changes taking effect, but the broad shape of the reforms is now locked in.
What’s changing, and when
Treasurer Jim Chalmers announced the reforms in the 12 May Federal Budget. From 1 July 2027:
- Negative gearing on residential property will be limited to new builds only.
- The 50% CGT discount will be replaced with cost base indexation and a 30% minimum tax rate on capital gains.
Properties already held before the announcement (7:30pm AEST, 12 May 2026) are exempt from the negative gearing changes. The CGT reforms will only apply to gains that accrue after 1 July 2027.
The market reaction
The reforms landed on a market that was already cooling from rate hikes, affordability pressures, global uncertainty and cost-of-living strain — and the announcement appears to have accelerated that softening, with auction clearance rates dipping below pandemic-era levels and investor confidence taking a hit.
A survey of more than 1,400 Australian investors found over 80% felt residential investment property had become less attractive since the Budget changes, while just over half said they’d hold their existing investments and wait to see how the legislation plays out. It’s a useful read on sentiment, though not necessarily representative of every investor.
How investor strategy is shifting
It’s still early days, but a few trends are starting to emerge:
- New builds are drawing more interest — Oliver Hume data shows new-build sales to Victorian investors have topped 40% for the first time since December 2024, as investors chase properties that will still qualify for negative gearing after 2027.
- Established properties bought before 12 May 2026 remain attractive to hold, since they keep their existing negative gearing treatment for as long as the owner keeps them.
- Cash flow is taking on more weight in investment decisions, with positively geared properties and strong rental yields becoming a bigger drawcard now that tax relief on new purchases will be harder to come by.
SMSF borrowing rules have also tightened
From 10 August 2026, SMSFs can no longer use Limited Recourse Borrowing Arrangements (LRBAs) to buy residential property, though existing LRBAs are grandfathered. SMSFs can still buy residential property outright with cash, and LRBAs remain available for business real property.
Reaction has been mixed, with some critics warning it could make it harder for Australians to build retirement wealth through property, while others expect it to lift interest in commercial property within SMSFs. Given the complexity, specialist financial, legal and tax advice is essential here.
Thinking about your next move?
While we can’t provide tax or financial advice, we can help you get the lending side right — reviewing your borrowing capacity, comparing loan options, and helping you understand how different property and finance scenarios might play out under the new rules.
Let’s talk through your investment strategy