Update, 26 September 2026: what is now law
The budget landed on 12 May 2026. The two-property cap and lower discount percentage speculated about below never made it in. Four developments since then decide where investors stand.
Tax Reform No. 1 Act (Act No. 49 of 2026, assented 26 June 2026). From 1 July 2027, individuals, trusts and partnerships lose the 50% CGT discount. It is replaced with CPI indexation of the cost base plus a 30% minimum tax on the real gain. Established homes bought from 7.30pm on 12 May 2026 lose salary-offset negative gearing from 1 July 2027. Their losses only offset residential property income, including capital gains, with any excess carried forward. New builds keep negative gearing and can choose the 50% discount or the new rules.
SMSF borrowing ban, from 10 August 2026. The same Act stops new SMSF borrowing to buy residential property. Loans already in place are grandfathered. Our SMSF borrowing ban guide has the detail.
Tax Reform No. 2 Act (Act No. 71 of 2026, assented 26 August 2026). A home keeps its pre-budget or new-build treatment when it passes to you after a spouse or co-owner dies, or through a relationship breakdown.
Tax Reform No. 3 Bill, not yet law. This is where the definition of a new build sits. The August exposure draft treats a home as new if bought within 24 months of its certificate of occupancy. Until it passes, that test can still change, as we explain in new build vs established.
For the current position, read the 2027 investor playbook, or run your own numbers in the CGT calculator and the investment structure calculator.
Originally published 6 April 2026 and updated 4 May 2026 with the signals available before budget night. Kept as a record of what was expected.
The 2026-27 federal budget will be handed down by Treasurer Jim Chalmers at 7:30pm AEST on Tuesday 12 May 2026. For property investors, this is shaping up to be the most consequential budget in over a decade.
The government has been working through changes to negative gearing and the capital gains tax discount. The RBA decides on rates a week before the budget. Inflation has re-accelerated. And the government is under pressure to show progress on its 1.2 million homes target. All of it lands inside one week.
This covers what is actually confirmed, what Chalmers has said, what is still speculation, and what investors should be doing this week.
What Chalmers has actually said
The Treasurer has been deliberately careful in his language. There is a sharp line between what he has confirmed and what commentators have inferred.
Confirmed: On the CommBank View podcast on 30 April 2026, Chalmers spoke “without signing up to a particular model or to any part of this speculation”. He said the government thinks “there are intergenerational issues in the tax system and in the housing market.”
Most recent: The same day, on Channel Seven’s Sunrise, he framed the budget around intergenerational fairness. “There are some issues of intergenerational fairness that we’re very focused on. And one of those issues is around whether or not young people can get a toehold in the housing market.”
He added a revenue caveat on the podcast. Even on the speculated path, “people shouldn’t expect there to be this huge amount of new revenue show up over the course of the next few years in the budget.”
What is on the table
Three property-related policy areas are in play. Two are tax, one is supply.
Negative gearing
The model that has had the most public airing is a cap that would limit negative gearing deductions to a maximum of two investment properties per person. Rental losses on properties beyond the cap would be quarantined. They could only be offset against future rental income from those properties, not your salary or wages.
The more aggressive scenarios floated by commentators in late April include a full abolition of negative gearing for new investments, with grandfathering for existing holdings. Chalmers has not confirmed this version, but he has not ruled it out either.
The political map matters here. The Coalition will not support any wind-back. The Greens will support a wind-back but want it harder, with concessions limited to a single existing property. To pass anything in the Senate, the government needs the Greens. That makes a softer cap harder to pass than a tougher one.
We cover this in detail in our negative gearing changes breakdown. The key context number: ATO data for 2023-24 shows about 224,000 people hold three or more rental properties, roughly 9.6% of all property investors. The vast majority of investors are below any cap that has been seriously discussed.
CGT discount
Two scenarios are being talked about.
The reported scenario lowers the CGT discount from 50% to 33% on residential investment property only, leaving shares and other assets at 50%. Under the current rules, if you sell after holding for more than a year, you pay tax on half the capital gain. Under the modelled change, you pay tax on two-thirds.
The more aggressive scenario, raised by some economists and commentators in the past fortnight, replaces the CGT discount with indexation across all assets. That treatment removes the inflation component of a gain from tax altogether but loses the flat 50% concession. Whether residential property comes out ahead or behind under indexation depends on the holding period and the inflation path.
Existing holdings are widely expected to be grandfathered under either scenario. Properties already owned would keep their current tax treatment. New rules would apply to future purchases.
The modelled 50% to 33% change looks like this in dollar terms at the 37% marginal rate, across three different capital-gain scenarios.
| Capital gain | Current tax (50% discount, 37% rate) | Modelled tax (33% discount, 37% rate) | Extra tax |
|---|---|---|---|
| $100,000 | $18,500 | $24,790 | $6,290 |
| $200,000 | $37,000 | $49,580 | $12,580 |
| $400,000 | $74,000 | $99,160 | $25,160 |
You can model your own position with our capital gains tax calculator.
Housing supply
The supply side is where the budget will probably move most decisively, because it is bipartisan-adjacent and not blocked in the Senate.
Help to Buy. The shared equity scheme launched on 5 December 2025. By 10 February 2026, Housing Australia reported over 2,356 places approved, with 278 homes bought and more than 2,078 buyers still looking. The annual cap is 10,000. The government contributes up to 40% of the purchase price for new homes and 30% for existing. It is for owner-occupiers, not investors, but it shifts demand at the lower price points investors compete in.
Housing Accord shortfall. The 1.2 million homes over five years target implies about 20,000 homes a month. Building approvals fell 10.5% in March 2026 alone, to 17,300 dwellings.
Foreign buyer ban. The ban on foreign purchases of established dwellings remains in place. The budget may extend or strengthen it.
Housing Australia Future Fund. Round 3 has been launched to fund 21,350 new social and affordable homes. It does not address the broader market but signals direction.
The supply numbers matter for tax discussion because the political case for changing negative gearing rests on whether the change improves housing affordability without making the supply problem worse.
The economic backdrop
The budget arrives with inflation rising and rates going up.
Inflation has re-accelerated. The March CPI, released 29 April, came in at 4.6% annual, up from 3.7% in February. Trimmed mean was 3.3% annual. Both well above the RBA’s 2-3% band.
The RBA is hiking. The cash rate sits at 4.10% after back-to-back hikes in February and March 2026. The RBA decides again on Tuesday 5 May, a week before the budget on 12 May. It went on to lift the cash rate to 4.35%, effective 6 May. The full implications are in our May 2026 RBA decision and CPI breakdown.
Property prices are still rising despite all of it. The national median dwelling value was about $933,000 in Cotality’s March figures, with regional markets outpacing capitals over the first quarter. Sydney and Melbourne are now in slight retreat. Perth and the mid-sized capitals are still climbing. That split is covered in our latest property market update.
In most markets, the shortage of homes is outweighing higher rates, and tax changes do nothing to add supply.
What it could mean for you
You own one or two properties
Under the modelled two-property cap, you are unaffected. Your deductions stay as they are. Under the more aggressive Greens-style proposal (one property cap), you would feel a change on the second property. Under the full abolition scenario, anything you buy after the commencement date would not benefit from negative gearing.
The CGT change only affects you if you sell after 1 July 2027. Existing holdings were not grandfathered outright, which was the expectation at the time of writing. Growth up to 30 June 2027 keeps the 50% discount and growth after it is indexed. If you are building a portfolio, the timing of your next purchase still matters.
You own three or more properties
The two-property cap would affect deductions on your third and subsequent properties. Run the numbers on what quarantined losses would mean for cash flow. For many investors the impact is manageable, especially where those properties are close to neutrally or positively geared. For investors leaning hard on negative gearing on multiple properties, the impact compounds.
You are planning to buy in 2026
There is no need to rush, or to put your plans on hold indefinitely. If changes are announced Tuesday, there will be a commencement date. The historical pattern is for tax measures to commence 1 July or later in the financial year. The window between announcement and commencement is when timing decisions matter most.
Growth, yield and location still decide long-term returns, and tax is one input among them.
You are considering selling
If selling within the next few years was already part of your plan, the CGT change could cost you real money. The reduced discount percentage speculated about here is not what happened. The discount was replaced with indexation plus a 30% minimum tax. Existing holdings were not grandfathered outright. Instead, growth up to 30 June 2027 keeps the 50% discount through a transition split. The CGT calculator runs both regimes on your own numbers.
What the industry is saying
The Housing Industry Association argues that taxing established homes more heavily would mean fewer new homes commencing construction.
The Grattan Institute’s modelling puts property prices up to 2% lower than otherwise, with little effect on rents.
Rental supply is the other worry. Cotality’s national rental vacancy rate was 1.6% in March, well below the decade average of 2.5%.
Both sides have a defensible case. The practical outcome will depend heavily on the specific design and the transition rules.
What to do this week
Review your portfolio numbers. Count properties. Identify which ones run at a loss. Calculate how much of that loss you currently deduct against your income. If you own three or more, model the quarantined-loss scenario.
Talk to your accountant before Tuesday, not after. A good accountant can model how each scenario affects you and flag transactions worth doing or pausing this week.
Do not panic-buy or panic-sell. Major reform announcements always trigger a rush of emotional decisions. The investors who do best are the ones who already did the analysis and act calmly when the details are confirmed. If you want a second set of eyes before acting, here’s whether a buyers agent is worth it.
Watch the data, not the headlines. The markets that are performing best right now are being driven by population growth, undersupply, and infrastructure. A budget can change your after-tax return, and those growth drivers keep working either way.
Mind your EOFY position. With 30 June approaching there are tax strategies worth considering before year end, regardless of what the budget delivers.
We will update this Tuesday night
Budget night is Tuesday 12 May 2026. We will publish the actual measures and what they mean for your investment strategy within hours of the speech.
Until then, use this week to know your numbers, work out how each scenario would affect you and have a plan for each one.
This is general information only and not financial or tax advice. Speak to your accountant or financial adviser about how the 2027 changes apply to your specific situation.
See how we find investment properties that stack up either way.
If you want to talk through how the budget might affect your portfolio, book a free discovery call.
