Capital gains tax and negative gearing reforms are making headlines. Here’s a clear look at what’s being proposed and what it could mean for investors and first home buyers.
The May 2026 budget introduced proposed changes to property investment taxation that are being described as the most significant in a generation. The reforms target capital gains tax and negative gearing, with the stated aim of improving housing affordability and directing investment toward new housing supply.
In the weeks following the announcement, there will be no shortage of opinion. Some of it will be helpful. Much of it will add more heat than light.
This article sets out what is actually being proposed, who it is likely to affect, and what buyers and investors should be considering. As these changes have not yet been legislated, individual circumstances vary significantly. Always speak with a qualified accountant or financial adviser before making decisions.
How Will CGT and Negative Gearing Changes Affect Investors
The key message is: don’t panic.
The proposed reforms include grandfathering provisions. If you owned an investment property before 7:30pm AEST on 12 May 2026, including properties under contract but not yet settled, your existing tax treatment continues for as long as you hold that property. The proposed changes target future purchases of established residential properties, not existing holdings.
What changes and when
Capital gains tax changes may still affect existing investors who sell after 1 July 2027. Under the proposed model, gains accrued before that date retain the current 50% CGT discount. Gains accrued after 1 July 2027 would be taxed under a new inflation-indexed system, with a proposed minimum tax rate applying to real gains. For long-term investors selling shortly after the reforms commence, the additional impact may be relatively modest.
New builds are treated differently
Eligible new builds are expected to retain favourable tax treatment, including access to negative gearing and the ability to choose between the existing 50% CGT discount or the new indexed arrangement at the time of sale.
For future purchases of established properties, the proposed reforms are expected to reduce some of the tax advantages traditionally associated with property investment. This may mean lower annual deductions while the property is held, and potentially more tax payable when it is eventually sold.
The impact will depend on your individual circumstances, including when your property was purchased, your income, the property type and how long you intend to hold it. Speak with your mortgage broker, accountant or financial adviser about how the proposed changes may affect your position.
What Does the 2026 Budget Mean for First Home Buyers
The government says the proposed reforms are designed to reduce what it describes as an intergenerational imbalance in the property market. By reducing some of the tax advantages linked to established investment properties, the intent is to give first home buyers a fairer chance to compete.
Supporters of the reforms point to the likelihood of investor demand shifting away from established homes and toward newly built properties, which could ease competition in some segments of the market.
What buyers should keep in mind
Purchasing property will still require careful planning regardless of how the reforms play out. Borrowing capacity, interest rates, local market conditions and housing supply will continue to be the dominant factors in affordability.
For buyers considering entering the market, now is a good time to explore available grants, speak with a broker and research suburbs that fit your long-term goals and budget. Understanding how conditions are shifting puts you in a better position to act when the right opportunity comes along.
The property market may be changing. Preparation, research and good advice will always matter.
Want to understand what the proposed changes mean for your situation? Contact your local Professionals agent today.
