The Budget Just Killed Negative Gearing — But There's a Loophole Most People Will Miss

追加: 2026-06-01

[00:00:00]At 7:30 p.m. on May 12th, negative gearing, the most powerful tax strategy Australian property investors have used for nearly 40 years, was effectively killed. But not for everyone. And the people who understand the difference are already moving. Let me break down exactly what changed, who's affected, who's not, and what it actually means for your money. First, the headline.

[00:00:27]Negative gearing for established residential properties has been abolished from 1st July 2027. If you buy an existing house or apartment as an investment after budget night, 7:30 p.m.

[00:00:41]on 12th May 2026, you can no longer offset your rental losses against your salary or other personal income.

[00:00:51]That's the change. And for 2.26 26 million property investors in Australia.

[00:00:56]It just rewrote the playbook. But here's what most people are missing. This is not a blanket ban. It's a targeted restriction and the details matter enormously.

[00:01:09]Let's start with who is not affected. If you already own an investment property, one you bought before budget night, you are grandfathered. Nothing changes for you. You can keep negatively gearing under the current rules for as long as you hold that property. Sell it and the grandfathering goes with it. But while you hold it, you're protected. If you were already under contract before 7:30 p.m. on May 12th, you're also grandfathered. The government drew a clear line in the sand and everything before it stays the same. Now, here's the loophole that smart investors are already targeting. New builds are exempt. If you buy a newly constructed property, off the plan, brand new house, new apartment, you can still negatively gear it and you keep access to the 50% CGT discount. Read that again. New builds get both benefits. Established properties bought after budget night get neither. That's not an accident. The government is deliberately funneling investor money toward new housing supply. They want investors building new homes, not competing with first home buyers for existing stock. And the tax incentive to do exactly that is massive.

[00:02:34]So, what does negative gearing actually mean in practice? Let's run the numbers.

[00:02:40]Say you buy a $600,000 investment property. You're renting it out for $500 a week. That's $26,000 a year. Your mortgage repayments, insurance, council rates, property management fees, maintenance, and depreciation add up to $38,000 a year. You're running at a $12,000 loss. Under the old rules, you could deduct that $12,000 loss against your salary. If you're on a marginal tax rate of 37%, that's $4,440 back in your pocket at tax time. The government was effectively subsidizing your investment. Under the new rules for established properties, that $12,000 loss can only be offset against other rental income or future capital gains from rental properties. If you don't have other rental income, the loss gets carried forward. You don't lose it, but you can't use it to reduce your tax bill this year. For a lot of investors, that changes the cash flow equation completely. The property that was costing you $600 a month out of pocket after the tax benefit now costs you $970 a month. That's the difference between manageable and painful.

[00:04:03]But here's where it gets even bigger.

[00:04:05]The CGT changes.

[00:04:08]The 50% capital gains tax discount in place since 1999 is gone. From 1st July 2027, it's replaced by costbased indexation plus a 30% minimum tax on capital gains. What does that mean?

[00:04:25]Instead of h havinging your profit and paying tax on the rest, the government will adjust your purchase price for inflation and then tax the real gain at a minimum of 30% regardless of your marginal tax rate. Let's say you buy a property for $600,000.

[00:04:41]You sell it 10 years later for $900,000.

[00:04:45]Under the old rules, your $300,000 gain gets halved to $150,000 and you pay tax at your marginal rate.

[00:04:54]On a 37% rate, that's $55,500 in CGT.

[00:05:00]Under the new rules, your $600,000 cost base gets indexed for inflation. At 2.5% per year for 10 years, your indexed cost base is roughly $768,000.

[00:05:14]Your taxable gain is $132,000, but the 30% minimum tax means you pay at least $39,600.

[00:05:25]In this example, you actually pay less under the new system, but that's only because inflation was doing the work. In a high growth market where property doubles in 7 years, the old 50% discount was far more generous. The higher the real gain, the worse the new system is for investors.

[00:05:44]And here's the kicker. This doesn't just apply to property. The CGT changes apply to shares, crypto, business assets, and every other CGT asset held by individuals, trusts, and partnerships.

[00:05:58]If you're holding ETFs, individual stocks, or a small business, this affects you, too. So, what should you actually do? If you own property bought before budget night, hold it. Your grandfathered status is valuable. you keep negative gearing and the old CGT rules. Selling now means giving up a tax advantage that new buyers can never get.

[00:06:21]If you're thinking about buying an investment property, look at new builds.

[00:06:26]The government has carved out a massive incentive. Full negative gearing plus the choice of either the 50% CGT discount or the new indexation system, whichever is better. That's a structural advantage no established property can match anymore. If you're an ETF or share investor, the 50% CGT discount disappearing is significant. Consider holding assets longer to maximize the inflation indexation benefit. And if you are planning to sell a large position, doing it before July 1st, 2027 locks in the old discount. If you own assets in a trust, the 30% minimum tax hits trusts, too. The old strategy of distributing capital gains to lowincome beneficiaries to minimize tax is severely weakened.

[00:07:19]That's a conversation for your accountant, not a YouTube video. Now, let me be clear about what this doesn't change. Your family home is untouched.

[00:07:29]The main residence CGT exemption stays exactly the same. no tax on selling your own home. The small business CGT concessions are also unchanged and income support recipients, including pensioners, are exempt from the 30% minimum CGT rate. The government specifically protected lowincome Australians. The bottom line is this.

[00:07:55]The budget just created two classes of Australian property investor. Those who bought before 7:30 p.m. on May 12th, 2026, grandfathered, protected, holding a tax advantage that will never be offered again. And those who buy after operating under a fundamentally different set of rules where new builds are king and established property investing requires a completely different strategy. This is the most significant property tax reform in a generation. And whether you're an investor, a first home buyer, or someone who just owns shares in their super, the rules of the game just changed. If this helped you understand what actually happened on budget night, hit subscribe and share it with someone who's still confused about what it means for them.

[00:08:47]Thanks for watching and I'll see you in the next one.