The rules of the property investment game are shifting, and the changes on the table could reshape how you borrow, structure, and grow your portfolio. If you have been relying on negative gearing or the 50 per cent CGT discount to make your numbers work, the proposed reforms announced in the 2026-27 Budget demand your full attention. This analysis cuts through the noise to explain exactly what is being proposed, who is protected by the 12 May 2026 grandfathering cut-off, and how the move to limit negative gearing to new builds from 1 July 2027 will affect your taxable position. We also examine the new CGT arrangements, including CPI indexation and the 30 per cent minimum tax, along with the specific exclusions for SMSFs and widely held trusts. From the 1 July 2028 changes for discretionary trusts to the carried-forward loss rules for self-employed borrowers, we break down the key dates and practical implications. Most importantly, we explore what this could mean for your borrowing power and the steps you can take now to prepare.
What Is Actually Being Proposed? A Plain-English Overview
The package has four measures: negative gearing limited to new builds from 1 July 2027; the 50 per cent CGT discount replaced by CPI indexation plus a 30 per cent minimum tax on real gains from the same date; grandfathering for property held before 7:30pm AEST on 12 May 2026; and a 30 per cent minimum tax on discretionary trusts from 1 July 2028.
It shifts tax support from established property toward new supply. The Government aims to “level the playing field” for first home buyers. It cites housing prices rising more than twice as fast as average full-time earnings since 1999, and a seven percentage point fall in home ownership among 25 to 34 year olds between 2001 and 2021 (Budget explainer).
These are proposals, not settled law. The ATO and Parliament bill digest we reviewed showed navigation only, so passage is unconfirmed (ATO). Verify before acting.
Two clocks matter: purchase date (12 May 2026) governs grandfathering; accrual date (1 July 2027) governs CGT. Conflating them is common. Tax savings for home buyers helps frame your position.
The 12 May 2026 Grandfathering Cut-Off: Who Is Actually Protected
Properties held before 7:30pm AEST on 12 May 2026 sit outside the negative gearing limitation, per Treasury’s Budget 2026-27 summary. Own the property at the cut-off and your ability to offset a rental loss against other income remains intact, a mechanic explored in how negative gearing affects your investment loan.
The cut-off turns on purchase timing, not settlement. The reference point is the date you committed, generally exchange of contracts. Exchange later on an established dwelling and you fall on the other side of the line.
Grandfathering does not shield you from the CGT changes. The CGT reform applies to gains accruing after 1 July 2027, so a long-held property can still be caught even though its negative gearing treatment is protected. Pre-cut-off owners should still review exit plans: a property that was comfortably cash-flow negative under the old deduction rules may need a different holding strategy if expected after-tax proceeds change.
Locate your contract date, and a valuation supporting each property’s position around 1 July 2027. Which side of these dates you sit on drives almost everything else.
Negative Gearing From 1 July 2027: New Builds Only
From 1 July 2027, the proposal limits negative gearing on residential property to new builds. The aim is to steer tax support toward new supply rather than toward competition for existing stock.
Established homes bought after the 12 May 2026 cut-off lose the ability to offset rental losses against wages or salary. Those losses still apply against other residential property income, including capital gains from property. Excess losses are not forfeited; they carry forward, but not against wages or salary in the year they arise.
The scope is wide: individuals, partnerships, companies and most trusts. Widely held trusts and superannuation funds, including SMSFs, sit outside the loss-limitation change.
Read past the headline. The definition of “new build”, transitional arrangements and apportionment rules will be set in the legislation. Until the bill passes, treat any precise numeric example, including ones circulating online, with caution. For self-employed investors, this uncertainty lands hardest on how lenders verify income, so review how income verification actually works before committing to a post-2027 purchase.
Carried-Forward Losses and Self-Employed Borrowers
A carried-forward loss is not a current deduction. It sits on the books and can be used against future residential property income or gains, but it does not reduce this year’s taxable income.
This bites harder for self-employed borrowers. Assessment already leans on tax returns, add-backs and accountant confirmation, so a suspended loss shifts the numbers a lender sees. How lenders will treat those losses is genuinely unconfirmed. No lender policy or worked example on the new rules is public, so anyone stating a loss will be added back in serviceability is guessing.
Cash flow is the sharper problem. A property bought on the expectation of offsetting losses against salary may deliver less after-tax cash than planned, while repayments stay unchanged. If your income is lumpy, it is worth understanding how lenders assess self-employed borrowers when the tax figures move.
Model the position with and without the deduction before committing to a purchase settled after 1 July 2027, and keep your buffer sized for the gap.
CGT Reform: CPI Indexation and the 30 Per Cent Minimum Tax
The 50 per cent CGT discount, in place since 1999, would be replaced from 1 July 2027 by CPI-based indexation plus a 30 per cent minimum tax on real gains. Indexation strips inflation out of the gain first; the minimum tax applies to what remains.
Only gains accruing after 1 July 2027 are caught. A long-held property can be partly affected, making accurate records and a defensible 1 July 2027 valuation position essential. How that value is determined remains unsettled; accountants have asked Parliament to define it.
Because it is a minimum tax, your marginal rate drives the outcome. Higher-rate investors may find the real-world difference smaller than the headline suggests; lower-rate investors may find it larger. Run it on your numbers.
New-build investors may choose between the existing discount and the new arrangements, but only if both outcomes are actually calculated.
The Government’s own comparison table was truncated in the source we could access, so we have not published unverified worked figures. If you see precise numbers quoted without a source, ask where they came from.
Who Is Excluded: SMSFs and Widely Held Trusts
Not every structure is caught. The Budget explainer confirms widely held trusts and superannuation funds, including SMSFs, are excluded from the loss-limitation changes. A negatively geared property held inside an SMSF is therefore outside the new restriction on offsetting losses against wages.
Read that exclusion narrowly. It covers the loss-limitation measure only. The published material does not spell out how the CGT changes interact with assets held in these structures, so we have not assumed an answer either way.
Structure now belongs in the borrowing conversation too. SMSF property loans carry their own lending criteria, contribution and fund rules, and are assessed differently to a loan in your own name.
By contrast, individuals, companies and most trusts are captured. If you hold investment property in your own name or through a standard discretionary trust, the new rules are aimed at you.
Restructuring is not free. Moving property between structures can trigger its own tax and stamp duty consequences, and takes longer than most expect, especially once finance is involved. The changes also increase compliance complexity and may affect investment structuring.
Discretionary Trusts From 1 July 2028
Widely held trusts and SMSFs sit outside the loss-limitation changes. Standard discretionary trusts do not. From 1 July 2028, a 30 per cent minimum tax is proposed to apply to discretionary trusts, with exceptions that are not set out in the material available to us. If you hold investment property in one, the long-standing ability to stream income to beneficiaries on lower marginal rates may be narrowed. For family groups, that changes the maths on trust-held property. Rollover relief runs for three years from 1 July 2027. That window is when a restructure into another entity type may be completed without an immediate tax event, subject to conditions in the Treasury material. Do not wait until 2028. Trust deeds, lender requirements, refinancing timelines and duty assessments take months, and moving finance between structures is rarely quick. Confirm the exceptions, and how they apply to your trust, with a registered tax agent before acting. They are the least covered part of the package in public summaries.
Key Dates at a Glance
With the trust changes mapped, here is the timeline. Dates are proposals until the bill passes both houses.
- 12 May 2026, 7:30pm AEST: grandfathering cut-off. Property held before this point is exempt from the negative gearing limitation.
- 1 July 2027: negative gearing limited to new builds. The CGT discount is replaced with CPI indexation plus a 30 per cent minimum tax on real gains accruing from that date.
- 1 July 2028: 30 per cent minimum tax on discretionary trusts, with exceptions. Rollover relief runs three years from 1 July 2027.
Bill passage remains unknown. Treat all of the above as proposed. Acting on an announcement alone is a real risk.
Separately, a $250 Working Australians Tax Offset applies to income earned from the second half of 2027, benefiting more than 13 million workers. Combined tax cuts deliver up to $2,816 a year for an average-earnings worker. These are tax figures, not borrowing-power figures.
First home buyers weighing timing can check our first home owner grant guide.
What This Could Mean for Borrowing Power
Those dates set the timetable, not how lenders will read your position under the rules. No confirmed policy or worked example explains how rental income, losses or capital gains will be treated. Anything precise is speculation, not fact.
The direction of travel matters. If a rental loss no longer reduces taxable income, the figure lenders assess may differ from the figure that once cut your tax bill, while loan-service cash is unchanged. Lenders weigh both, so surprises appear when they diverge.
Carried-forward losses are the biggest unknown. Whether a lender adds back a suspended loss, ignores it, or treats it as a deduction varies by lender and accountant presentation. For self-employed borrowers, whose assessment relies on add-backs and accountant letters, this detail matters most.
CGT affects strategy more than serviceability. A larger exit tax bill reduces net proceeds, changing the deposit or equity you carry forward. Timing counts: an established dwelling bought after the cut-off sits differently to one bought earlier, so capacity differs by contract date.
A broker who compares policy across lenders can match your position to the lender most likely to assess it properly, and flag treatment changes. Bank assessors work within tighter templates on self-employed income and complex tax positions, and do not compare lenders’ policies.
How to Prepare: Practical Steps for Investors and Self-Employed Borrowers
Lender policy remains unconfirmed, so preparation comes down to six checks.
- Map your holdings. Check each property’s contract date against 12 May 2026. Grandfathering protects the negative gearing treatment only, not CGT on gains accruing after 1 July 2027.
- Get tax advice on records now. Only post 1 July 2027 gains are caught, so valuation evidence and holding records matter more, not less.
- Stress-test cash flow without the deduction. Model repayments and holding costs as if a rental loss cannot offset your salary, with a minimum 30 per cent tax on the gain. If the plan only works with the deduction, revisit it.
- Review your structure. SMSFs and widely held trusts are excluded from the loss limitation. Discretionary trusts face a minimum tax from 1 July 2028; rollover relief runs three years from 1 July 2027.
- Talk to your broker early. Lender treatment of rental income and self-employed assessment will shift, so pre-approval today may not reflect 2027 policy. Right Financial, which specialises in Self-Employed Borrowers, works across Balgowlah, Dee Why and Miranda and can review your position as policy develops.
- Verify the legislation. Check the ATO and the Parliament bill page for passage. Do not restructure or buy on an announcement alone.
The Bottom Line
In short, the proposal shifts tax support for property investment from established housing to new supply. Negative gearing is limited to new builds from 1 July 2027, the CGT discount gives way to CPI indexation plus a 30 per cent minimum tax on real gains from the same date, and discretionary trusts face a minimum tax from 1 July 2028.
Three actions follow. Check your contract dates against 12 May 2026. Stress-test cash flow without the negative gearing deduction. Review your structure before the 1 July 2027 and 1 July 2028 milestones.
Two things remain open: how lenders will assess these losses and gains, and whether the remaining stages pass as announced. Both affect borrowing power. Treat any confident, precise answer on that impact as unverified until a lender policy or the legislation confirms it. Review your position with your tax agent first, then your broker, before you act.
Conclusion
The proposed tax landscape is fundamentally shifting, moving property investment support away from established assets and toward new construction. The major takeaways are clear: negative gearing is tightening significantly, limited to new builds from 2027; the CGT discount is being replaced by a minimum tax regime; and structural changes for trusts are on the horizon.
This complexity underscores the urgent need for proactive strategy. Policy uncertainty means relying on assumptions, especially regarding how lenders will assess future losses or gains, is a major risk. Do not let vague promises dictate your investment timeline.
To mitigate risk and maintain your borrowing power, review your financial structures immediately. Start by speaking with your tax agent. Then, consult an experienced broker who understands the interplay between tax reform and lender policy, recognizing that institutional lenders may not be equipped to handle the coming complexities. Prepare now, so you are positioned to navigate these changes confidently when the dates arrive.