Finance Hub and NetworksNegative gearing restricted to new builds. The CGT discount replaced by inflation indexation. A 30% minimum tax on trusts and capital gains. CBA estimates house prices will be about 3% lower than otherwise and investor borrowing capacity could drop 20-30%.
Book a Complimentary ConsultationTax policy does not buy property. Borrowing capacity does. These reforms land on a market already under pressure from serviceability constraints.
Currently, many lenders factor the expected negative gearing tax refund as income when calculating how much you can borrow. With negative gearing removed for established properties purchased after announcement, that refund disappears from the serviceability calculation. Mortgage brokers are reporting that borrowing capacities could drop by 20-30% in some cases.
CBA estimates that removing negative gearing is equivalent to roughly a 90-155 basis point increase in investor mortgage rates in immediate cash-flow terms. Concentrated among high-marginal-rate investors with high leverage and low rental yields.
CBA used a modified RBA Saunders-Tulip housing model. Combined effect of NG and CGT changes: house prices about 3% lower than they otherwise would have been. Treasury estimates around 2% less growth over a couple of years.
Impact concentrated in investor-heavy segments. Apartments, townhouses, and lower-priced established dwellings most affected. Quality family homes in tightly held school zones will not behave the same as generic investor apartments.
Existing investors have a strong incentive to hold rather than sell. Selling loses grandfathering permanently. This reduces available listings. First-home buyers face less competition but also fewer properties on the market.
Treasury estimates rent increase of less than $2/week for median rent households. Housing supply measures and Rent Assistance increases cited as offsetting factors.
WATO ($250/year) and three tax cuts combined deliver up to $2,816/year extra for average-income workers from 2027-28. For dual-income households, roughly $5,600/year. Modest but real boost to servicing calculations.
Properties held before 7:30pm AEST 12 May 2026 can continue to be negatively geared against all income until sold. Selling and re-buying loses grandfathering permanently.
Full negative gearing retained for new builds adding to supply. Can also choose either 50% CGT discount or indexation when selling. Strongest tax position post-reform.
From 1 July 2027, rental losses only offset residential property income. Losses carry forward. No more reducing salary tax. NG becomes a tax deferral, not an immediate refund.
Lenders who counted NG tax refunds as income for serviceability will no longer do so for established loans. The single biggest practical impact for investors.
| Scenario | Eligible? |
|---|---|
| New apartment off-the-plan | Yes |
| Duplex replacing single house | Yes |
| New construction on vacant land | Yes |
| Knock-down rebuild (same count) | No |
| Extension/renovation | No |
| Granny flat on existing property | No |
Main residence - CGT-exempt. SMSFs - excluded. Commercial property - not affected. 60% CGT discount for affordable housing - retained. Small business CGT concessions - unchanged.
The 50% CGT discount is replaced by CPI-based cost base indexation and a 30% minimum tax. Effect depends on your return, holding period, and inflation.
Instead of halving your nominal gain, you adjust the cost base upward by CPI each year. You pay tax only on the real gain above inflation. 30% minimum tax rate applies.
At 2.5% annual return on $500k held 10 years, indexation produces zero taxable gain. Treasury example: investor pays $24,858 less in tax under indexation.
At 7.5% annual return on $500k over 10 years, taxable gain is $390,474 under indexation vs $265,258 under 50% discount. Extra $58,851 in tax.
Pre-1 July 2027 gain: 50% discount applies. Post-1 July 2027 gain: CPI indexation + 30% minimum. You need the asset value at 1 July 2027 - get a formal valuation or use ATO formula.
Choose whichever method gives the better outcome. New build investors can never be worse off under the CGT changes.
From 1 July 2028, trustees pay minimum 30% tax on taxable income. Most significant trust tax change in decades.
Trustee pays 30% tax. Individual beneficiaries get non-refundable credits. If beneficiary already pays 30%+, no additional tax. Targets income splitting to low-income family members.
Pitcher Partners flagged that some structures face 60%+ effective tax rates on trust distributions through corporate beneficiaries. If you use a bucket company, review urgently before 1 July 2028.
Three-year rollover (1 Jul 2027 to 30 Jun 2030) allows CGT-free restructuring into companies or fixed trusts. Small businesses can access 25% corporate rate.
1. Review distribution strategy with accountant before 30 June 2027
2. Model 30% minimum tax impact
3. Assess restructuring during rollover window
4. Get property valuations before 1 July 2027
Permanent annual offset from 2027-28 for all workers. 13 million benefit. Increases effective tax-free threshold by ~$1,800.
From 2026-27, claim up to $1,000 work expenses without receipts. 6.2 million workers benefit, average saving $205.
| Income | 3 Cuts + WATO | With Deduction |
|---|---|---|
| $50,000 | $1,715 | Up to $2,050 |
| $75,000 | $2,318 | Up to $2,638 |
| $100,000 | $2,965 | Up to $3,285 |
| $130,000 | $4,165 | Up to $4,485 |
| $200,000 | $5,315 | Up to $5,785 |
For dual-income households, ~$5,600/year extra translates to $5,000-$8,000 additional borrowing capacity. Average tax rate falls from 25.5% to 24.7% by 2027-28.
NG is grandfathered. Do not panic-sell. Get a valuation before 1 July 2027. If holding through trust, review with accountant before 2028.
New builds retain full tax benefits. For established, factor in lost NG against salary. Get pre-approval for actual borrowing capacity.
Less investor competition. Small borrowing boost from tax cuts. 5% Deposit Scheme continues.
Existing loan unaffected. Additional investment borrowing needs reassessment. Trust structures may warrant loan review.
Compare pre-reform vs post-reform negative gearing and CGT outcomes for your investment property. Covers all four scenarios.
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