Sweeping reforms to Australian property investment tax laws passed in the Federal Parliament on 25 June 2026. The historically significant legislative changes are made in negative gearing, capital gains tax, small business tax concession and self-managed superannuation fund. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 introduced major provisions intended to make property prices more affordable for younger Australians and improve fairness for wage earners. 

Negative gearing

From 1 July 2027, negative gearing on residential properties will be restricted exclusively to new builds. Investors who purchase established housing after 12 May 2026 (the budget night) can no longer use negative gearing rules which allow them to deduct rental losses against their wage or non-residential income. These investors, however, are eligible to carry forward rental losses against future rental income. Existing investment properties owned before the budget night (12 May 2026) are grandfathered and continue under the negative gearing rules.

Under the current grandfathered rules, jointly owned assets such as an investment property owned by a couple will not benefit from these grandfathered provisions if they are transferred to single ownership when one partner dies or a couple divorces. The government has undertaken to rectify this unintended consequence in the next tranche of budget legislation.

Capital gains tax (CGT)

From 1 July 2027, Property investors will no longer qualify for the 50% CGT discount on capital gains from the sale of properties or other assets, if these assets are owned for 12 months or more. Instead, capital gains will be taxed by an inflation-indexed discount. The new rules also ensure a minimum 30% tax on real capital gains. These rules apply to real capital gains realised from 1 July 2027.

As a simple worked example, if the cost base (original price) of the property is $400,000, sold for $500,000 after 12 months of ownership, the capital gains realised will be $100,000 and the investor will pay tax on $50,000 at their marginal rate of tax under the old rules. Assuming the cumulative inflation rate over the ownership period is 20% (after 6 years or so), the real cost base will be $480,000, the real capital gain will be $20,000 and the investor will pay tax on $20,000 under the new rules.

Small business tax concession

The aggregated annual turnover threshold to access the small business 50% active asset CGT reduction was increased from $2 million to $10 million. This turnover will have to be generated from the disposal of active assets used in small businesses. These provisions are legislated under Subdivision 152-B of the Income Tax Assessment Act 1997. It is estimated that 2.7 million businesses or around 98% of active Australian businesses will be eligible for this concession.

Self-managed Superannuation Funds

The new legislation removed a loophole allowing investors with Self-Managed Super Funds (SMSFs) to borrow money to purchase established properties for investment.

Under section 67 of the Superannuation Industry (Supervision) Act 1993, a trustee of a superannuation fund must not borrow money or maintain a borrowing for investment, except for limited recourse borrowing arrangement under sections 67A and 67B of the same Act. This exception allows a trustee including a trustee of an SMSF to borrow for investment in a single asset which is held in a bare trust or holding trust. This exemption is no longer available to SMSFs and their trustees.

Concluding remarks

Through the tax reform around property investment, the government expects to reverse a decade of decline in home ownership, enhance housing affordability for young people, and better align the tax treatment of asset income and labour income in Australia.

The opposition leader Angus Taylor declared to repeal these tax measures if elected as they are built on broken promises. They also said the government has railroaded the budget through the Parliament as a political fix and to stop the debate.