What the 2026 Federal Budget means for property owners and investors

Client Update, May 2026

Reactions to Tuesday night's budget have been mixed. Some have welcomed the direction taken by the government; others have concerns. And many are simply still working through what the changes actually mean in practice.

As your real estate partners, we wanted to make it easy to understand the key changes that relate directly to property, so we have put together the following overview.

Please note: the information below is provided as a general overview only and does not constitute financial advice. We encourage you to speak with your accountant or financial adviser about how these changes apply to your personal situation.

1. Capital gains tax reforms

Replacing the 50% CGT discount

From 1 July 2027, the current 50% CGT discount will be replaced by cost base indexation for assets held for more than 12 months. A 30% minimum tax on net capital gains will also apply. These changes will affect individuals, trusts, and partnerships across all asset types, including pre-CGT assets.

What about existing investments?

Transitional arrangements protect existing investors. The 50% CGT discount will continue to apply to gains that accrued before 1 July 2027, and gains on pre-CGT assets that accrued before that date will remain exempt. Assets sold before 1 July 2027 will continue to be subject to existing rules.

New residential property

Investors in new residential properties will have the option to choose either the 50% CGT discount, or cost base indexation and the 30% minimum tax, whichever is more favourable for their circumstances.

Recipients of income support payments, including the Age Pension, will be exempt from the 30% minimum tax.

Foreign resident CGT

A time-limited concession will be available in the foreign resident CGT regime for investment in the renewables sector, applying to disposals of certain renewable energy infrastructure assets from the first day of the next quarter after Royal Assent through to 30 June 2030.

2. Negative gearing reforms

From 1 July 2027, losses from established residential properties will only be deductible against rental income or capital gains from residential properties. Any excess losses will be carried forward and can be offset against residential property income in future years.

These changes apply to established residential properties acquired from 7:30 PM (AEST) on 12 May 2026. Properties acquired prior to this time, including those where contracts have been signed but settlement has not yet occurred, are exempt until the property is disposed of.

Eligible new builds are exempt from the changes, as are properties held in superannuation funds and widely held trusts. Targeted exemptions also apply to build-to-rent developments and private investors supporting government housing programs.

If you have any questions about how these changes may affect your property, please reach out to the Johnson Real Estate team at any time.

Source: National Tax & Accountants' Association Ltd, 12 May 2026. Redistributed with permission.