What everyday property buyers and investors actually need to know

What actually changed?

The Government has announced major tax changes that affect future property investors, particularly people buying established investment properties after 7:30pm on 12 May 2026.

The biggest changes are:

Negative gearing on most future established investment properties becomes less favourable
Capital gains tax (CGT) rules change from a flat 50% discount to an inflation-adjusted model with a 30% minimum tax
Existing owners are generally protected under current rules
Brand new properties are treated more favourably than established ones

Does this affect me right now?

If you already own property, in most cases nothing changes immediately.
These changes are mainly focused on future purchases after the cutoff date.

Will my current investment property be affected?

No – if you purchased before the cutoff date, your existing property generally remains under the old rules unless future governments change policy.

What does “grandfathered” mean?

It means:

Buy before 7:30pm on 12 May 2026 = old rules
Buy after = new rules

Your purchase date determines which tax framework applies.

If I sell and buy again later, do I keep the old rules?

No.
Once you sell, a future purchase falls under whatever rules apply at that time.

Borrowing Capacity / Lending

Will my borrowing capacity be impacted?

Likely yes – especially for future investment purchases after the changes fully take effect, although lenders are yet to confirm exactly how this will look.

Why:

Negative gearing may no longer boost borrowing power the same way for established properties
Some lenders may reduce borrowing capacity for certain investment scenarios
My early estimates based on what i THINK they will do suggest borrowing capacity for some investors could reduce by around 10% (case by case)

Have banks changed their policies yet?

No.
Because there is still a transition period (negative gearing will end on the 1st of July 2027 for properties being purchased now), many lenders are likely still assessing how they’ll apply policy. They haven’t even hinted at anything, but in all my years of experience I can assure you they will…

Will brand new properties improve borrowing capacity?

Potentially yes, because tax benefits remain more favourable – but better tax treatment does not automatically mean it’s a better investment. Please keep an eye out for my next email and I’ll show you why!

Negative Gearing

What is negative gearing?

Negative gearing is when:
Your rental income is less than your property expenses

This can include:

Interest
Property management
Maintenance
Depreciation
Vacancy costs / lower rent

Am I losing negative gearing completely?

Not exactly.
For many future established properties:

You may no longer offset losses against your salary immediately
Losses may instead be carried forward and used against future gains or other property income

Does negative gearing still apply to brand new properties?

Yes – brand new / eligible new builds are generally treated more favourably.

If my property makes a loss, what happens?

That loss may:

Offset future capital gains
Offset profits from other investment properties
So the tax benefit may be delayed, not necessarily lost.

Does this mean property investing is dead?

Absolutely not!
Property can still absolutely be a strong long-term wealth strategy – but short-term tax-driven strategies may be less attractive.

Capital Gains Tax (CGT)

What changed with CGT?

Currently:

Hold property over 12 months = 50% discount on profit

Example:

$100,000 gain
Only $50,000 taxed

New system:

Discount becomes inflation-adjusted instead of flat 50%
30% minimum tax rate applies

Does this mean I’ll pay more tax than before the change?

In many cases, yes – particularly if:

You’re a retiree
You’re on lower income
You were relying on lower marginal tax rates later

I thought initially there was a loophole when the compounded inflation eventually exceeded 50% (in 15 – 20 years) but the 30% killed that idea!

Does this affect my family home?

No – based on current announcements, your primary residence remains exempt.

Is long-term property still worth it?

Yes – in many cases, long-term growth becomes even more important.

Trusts / Structures

Do these changes affect family trusts?

Yes.
Discretionary trusts are expected to face:

30% minimum tax rules
Reduced flexibility for income splitting

Are trusts still worth it?

Yes, potentially – but more for:

Asset protection
Estate planning
Ownership flexibility

Less so purely for tax minimisation. Interestingly, I always would urge caution when considering a trust as a property vehicle as you couldn’t immediately apply negative gearing, but with the new changes you can’t do that in your personal name anyway!

Does this affect SMSFs?

No – SMSFs are generally excluded from these particular changes. If you haven’t set one up, there’s never been a better time to look into it!

Are companies now better than trusts?

Not necessarily.
This is highly case by case and should involve accounting advice.

First Home Buyers

Does this make buying a first home easier?

Not necessarily.

While the policy is framed around affordability, supply shortages, high immigration (in relation to the housing supply), and construction costs remain major factors. Pushing investors towards building new will only push the costs of construction up, so they still haven’t dealt with the supply issue.

Will house prices go down?

No one knows for certain.

My view:

Affordable, high-demand areas will likely rise as investors chase higher rental yields
Premium markets may soften where there is a lot of high income investor activity (they generally favour negative gearing)
Supply shortages will keep upward pressure on prices

Will rents go up?

Potentially yes.
If fewer investors buy or yields need to be stronger (which I believe will be the case), rental pressure may increase.

Should I buy now or wait?

Case by case, but in my experience the old adage rings true – “fortune favours the brave”

Potential benefits of acting sooner:

Less competition during uncertainty
Better borrowing capacity before lenders fully adapt

But you should ensure that you are in a secure position to move forward.

Is brand new property automatically better now?

In my opinion, not necessarily…

Higher deductions don’t always outweigh:

Higher purchase price (usually new builds are more expensive)
Oversupply risk (especially apartments and new estates)
Lower land value percentage component

Keep in mind, it’s the land that goes up in value, not the structure.

Always compare:
Real investment quality > tax deductions alone

My Thoughts…

At the end of the day, property investment has always been about buying the right asset first. Tax deductions can help, but they should never be the main reason you buy a property – after all, tax deductions usually mean you’re making a loss. What really drives long-term wealth is strong property selection, good growth, smart cashflow management (mainly so you can retain the property safely), and buying in the right area at the right price.

A great investment with solid growth will usually outperform a poor investment with better tax benefits. In simple terms: don’t chase tax deductions – chase quality assets and good strategy.

Please also keep an eye out for my next email, where I’ll walk through a range of real-world pre- and post-budget scenarios to show how these changes may impact different buyers. In some cases, the changes may not be as bad as they first appear – but in others, the impact could be significant!

Important:

This is general property and lending information only – not tax or financial advice. Always speak with a qualified accountant or adviser about your personal circumstances