We'd be lying if we said we were thrilled with these budget rule changes. But for better or worse, they're here. And this is what it means for your strategy...
From 1 July 2027, negative gearing on residential property is being pushed towards new builds. This is now law. Property held before 7:30pm AEST on 12 May 2026 is grandfathered, but established property bought after Budget night loses the old PAYG tax benefit.
Buying established property to run a loss against wage income no longer works the way it did. New property carries a clear tax advantage, and established property needs stronger cash flow, growth and rental fundamentals to justify itself.
Not every new-looking property qualifies. It generally needs to add new housing supply: an off-the-plan apartment, construction on vacant land, or replacing one dwelling with several.
The incentive to buy genuine new supply is strong, and so is the risk. A tax benefit does not fix poor stock, so location, price and rental demand still need to stack up.
From 1 July 2027, the 50% CGT discount is replaced with CPI indexation and a minimum 30% tax rate on real gains. This is now law. Gains before that date can still use the current discount; gains after it fall under the new system.
Long-term growth assets become less attractive where returns run well ahead of inflation. Valuations, record keeping and the timing of any sale now carry more weight in planning an exit.
New builds get a better deal on sale. Investors can choose between the old 50% CGT discount and the new indexation system.
This is a further advantage for new property over established. You can take the better of the two tax outcomes on sale, and where the asset itself is sound, new builds now make sense for many residential investors.
From 10 August 2026, SMSFs are banned from entering new limited recourse borrowing arrangements to buy residential property. This is now law. Existing arrangements, and contracts exchanged before that date, are protected, and an SMSF can still own residential property outright.
Borrowing to buy residential property inside super is no longer available for new arrangements after 10 August 2026. That removes a path many people used to build retirement Wealth, and points SMSF investors towards cash purchases or commercial property.
Commercial property, where it qualifies as business real property, can still be bought inside an SMSF using borrowing.
Commercial property becomes a larger part of the SMSF conversation. Yields can be stronger and leases longer, but vacancy, tenant quality, lending and resale risk all matter more.
From 1 July 2028, a 30% minimum tax is proposed for discretionary trusts, with some exceptions. This is not yet law, but it would affect many family trust structures if introduced.
Trusts used for property, family Wealth and small business planning will need review. The largest impact is on income splitting to lower-income beneficiaries, and some corporate beneficiary arrangements may become less attractive if the proposal becomes law.
Lenders may change how they treat rental income, tax benefits, serviceability, investor appetite and pricing as the tax rules shift.
The impact is not limited to tax. Changes in lending policy can reduce borrowing capacity, alter cash flow modelling and slow the pace of building a portfolio.
The advantage has moved from old property to new property. Borrowing for property in super and trusts just got much harder. Good advice matters more than ever.
This page is general information only. It does not take into account your objectives, financial situation or needs, and is not personal tax, financial, credit or legal advice. The 2026 measures described are legislated or proposed as at May 2026 and remain subject to change, further consultation and the passage of legislation; some, including the proposed discretionary trust minimum tax, are not yet law. Before acting, seek advice from a licensed financial adviser, registered tax agent or legal practitioner about your own circumstances. Idle Wealth™ accepts no liability for any loss arising from reliance on this information.
