The biggest change to Australian property tax settings in a generation is now on the books, and this month it is back in the headlines, with Treasury’s consultation on the next tranche of draft legislation closing on 21 August 2026. If you own an investment property in Geelong, on the Bellarine Peninsula, in Melbourne or anywhere in Australia (or you have been thinking about buying one) the negative gearing and capital gains tax reforms that take effect on 1 July 2027 will shape your decisions from here.
There is a lot of noise around this topic, so this guide sticks to what has actually been legislated, what is still in consultation, and (the part we live and breathe as brokers) what it means for your borrowing power and finance strategy. One important note up front: we are finance brokers, not tax advisers. The tax figures below are drawn from official announcements and reporting as at 11 August 2026 and details may still be refined, so confirm how the rules apply to you with a registered tax agent or the ATO before acting.
The reforms were announced in the 2026-27 Federal Budget on 12 May 2026, badged by the government as a package to “boost home ownership”. The Treasurer has framed the changes as levelling the playing field for first home buyers while preserving gains investors have already made and supporting new housing supply. The core measures have since passed Parliament: the ATO confirms the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and its companion rates Act are now law. In other words, this is no longer a proposal you can assume will go away.
At the same time, the fine print is still being settled. Exposure drafts of a further bill (reported as the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026) were released for public consultation that closes on 21 August 2026, covering definitions and mechanics such as what counts as a “new” property and various exemptions. So the framework is fixed; some detail may still move. That distinction matters when you are deciding whether to act now or wait.
Today, if your investment property runs at a loss (the rent does not cover interest and expenses) you can generally deduct that loss against your salary or other income. That is negative gearing as it has worked for decades. From 1 July 2027, that treatment is limited to new builds for properties acquired after the Budget announcement. Three buckets emerge:
Grandfathered properties. If you already owned an investment property at 7.30pm AEST on 12 May 2026, nothing changes for that property: it keeps full negative gearing treatment for as long as you hold it. Reported draft provisions also preserve grandfathering where ownership transfers because of death or divorce.
Established properties bought after 12 May 2026. These can be negatively geared only until the rules commence on 1 July 2027. From that date, losses on established investment properties acquired after the announcement can no longer be deducted against your other income.
New builds. Negative gearing remains available for new residential property. Under the reported draft definition, a property acquired within 24 months of its certificate of occupancy qualifies as “new”, and can be transacted more than once within that window without losing the benefit. Exemptions have also been flagged for build-to-rent projects, affordable and social housing, and NDIS participant housing. These definitions sit in the tranche still under consultation, so treat them as near-final rather than final.
| Your situation | Negative gearing from 1 July 2027 | CGT treatment |
|---|---|---|
| Owned before 7.30pm, 12 May 2026 | Retained (grandfathered) while you hold the property | Gains accrued to 1 July 2027 keep existing treatment; gains after that date fall under the new rules |
| Established property bought after 12 May 2026 | Not available from 1 July 2027 (deductions against other income cease) | New rules apply to gains accruing after 1 July 2027 |
| New build (within 24 months of certificate of occupancy, per draft rules) | Retained: new builds remain eligible for negative gearing | New rules apply to gains accruing after 1 July 2027 |
*Summary of announced and reported measures as at 11 August 2026: general information only, not tax advice. Definitions in the consultation tranche may be refined before commencement. Confirm your own position with a registered tax agent or the ATO.
The second limb of the reform reworks capital gains tax on property. Since 1999, individuals who held an asset for more than 12 months have generally paid tax on only half the gain: the 50% CGT discount. From 1 July 2027, that discount is replaced for individuals, trusts and partnerships with cost base indexation (your purchase cost is adjusted for inflation, so you are taxed on the real gain rather than the paper gain) together with a 30% minimum tax rate on capital gains.
Crucially, the government has confirmed the new rules apply to gains that accrue after 1 July 2027. Gains you have already made under the old system are preserved, which is why the headline “the CGT discount is being abolished” overstates the position for existing owners. Whether indexation leaves you better or worse off than the discount depends on inflation, your holding period and your income: genuinely a question for your accountant, and one worth asking before you next sell. Depreciation and other deductions on investment properties are unchanged by this package and continue as normal.
Most of the commentary has focused on tax returns. As brokers, we are watching something that bites earlier: serviceability. When a lender assesses an investment loan, many factor the expected negative gearing tax benefit into your income: it is called a negative gearing add-back. If that benefit no longer exists for the property you are buying, the add-back goes with it, and your maximum loan size falls.
Reported modelling by a Sydney brokerage suggests a single applicant on $100,000 with no other debt could see investment borrowing capacity fall from around $750,000 to around $600,000 once negative gearing benefits are excluded from servicing, roughly a 20% reduction. Every lender calculates differently and policies will evolve as the start date approaches, so treat this as an illustration of direction, not a quote. Ask your broker to model your actual position.
Two practical flow-on effects are worth understanding now. First, the gap between what you can borrow for a new build versus an established property may widen, because the new build keeps its gearing benefits, that will push some investors toward construction loans, house-and-land packages and off-the-plan purchases, each of which has its own finance quirks. Second, if you are close to your borrowing ceiling and planning to buy an established investment property, the difference between settling under today’s servicing treatment and next year’s could be material. Loan structure (interest-only periods, offsets, how your investment lending is structured across properties) is doing more work than ever.
An Ocean Grove couple we work with own two long-held investment units in Geelong West and were weighing up a third purchase. Their first question was whether the new rules would strip negative gearing from the units they already own. It will not: both were bought years before 12 May 2026, so they are grandfathered for as long as the couple hold them. The real decision was about the next purchase. An established house in Belmont would lose its gearing benefits from July 2027, while a new build in Armstrong Creek or Mount Duneed would keep them, but new estates come with different rental profiles, valuation risk and construction timelines. We modelled their borrowing capacity both ways, flagged the servicing difference, and sent them to their accountant to weigh the tax side before committing. The point is not that one answer is right: it is that the same budget now produces two quite different strategies, and the numbers need running before the emotion kicks in.
Locally, the reform redraws the map a little. Greater Geelong has both deep established stock (Geelong West, Newtown, Belmont, Highton) and some of Victoria’s most active growth corridors in Armstrong Creek, Mount Duneed, Charlemont and Lara, with more supply coming through the Surf Coast and Torquay. From July 2027, the tax system will treat those two halves of our market differently for new investors: established purchases lose the gearing deduction, new builds keep it. Add the CGT shift and softer market conditions: we covered the falling-price environment yesterday, and the RBA’s August rate decision is due this very afternoon (see our RBA preparation guide), and it is easy to see why some investors are frozen at the wheel.
Our view is unglamorous but practical. Existing owners generally do not need to do anything sudden: grandfathering rewards holding, and selling a grandfathered property means the replacement purchase sits under the new rules. Prospective investors should run the numbers on both paths: an established property still stacks up for plenty of buyers on yield, land value and location even without gearing benefits, while first-time investors comparing a new build should stress-test rental assumptions in estates where many rentals hit the market at once. Portfolio builders may find the order in which they buy (established versus new) now affects how far their borrowing capacity stretches; our guide to building a property portfolio covers the sequencing logic, and structures such as SMSF property investment have their own distinct rules worth professional advice.
Before 1 July 2027, get three numbers on paper for each property you own or plan to buy: which bucket it falls into (grandfathered, established post-announcement, or new build), what your lender’s servicing looks like with and without the gearing add-back, and what your accountant says the CGT position would be if you sold in five years under indexation. Investors who know those three numbers will make calm decisions while everyone else reacts to headlines. A free investment property assessment is a sensible place to start.
No. Properties owned at 7.30pm AEST on 12 May 2026 are grandfathered and keep their existing negative gearing treatment for as long as you hold them. Reported draft provisions also preserve that treatment where a property passes to you through death or divorce. The new restrictions apply to established properties acquired after the announcement, from 1 July 2027. Confirm your specific position with a registered tax agent.
Under the draft legislation released for consultation, a residential property acquired within 24 months of receiving its certificate of occupancy is treated as new, and it can change hands more than once inside that window without losing eligibility. Exemptions have also been flagged for build-to-rent, affordable and social housing, and NDIS participant housing. These definitions are part of the consultation that closes on 21 August 2026, so check the final legislation or ask your adviser before relying on them.
No. The government has confirmed the new CGT rules (cost base indexation and a 30% minimum tax rate in place of the 50% discount) apply to gains that accrue after 1 July 2027. Gains built up before that date are preserved under the existing treatment. How the apportionment works in practice for your property is exactly the kind of question to put to your accountant before you sell.
Be careful with this logic. An established property bought today (after the 12 May 2026 announcement) can only be negatively geared until 30 June 2027, buying now does not lock in the old treatment permanently, because grandfathering attaches to the announcement date, not the commencement date. A purchase should stack up on its fundamentals (yield, location, your cash flow without the tax benefit) rather than on a deadline. Model the loan both ways with your broker and get tax advice before you commit.
Whether you hold a grandfathered portfolio, are weighing a new build against an established purchase, or just want your borrowing capacity modelled under the new rules, we will run your numbers properly, alongside your accountant, not instead of them.
With years of experience in mortgage broking and finance, Melanie helps first home buyers, refinancers, investors and business owners across Geelong, the Bellarine, the Surf Coast, Melbourne and regional Victoria make their money work harder. Contact our team on 03 9020 2699.
