Federal Budget 2026: What sweeping property tax changes mean for you

After months of speculation, Treasurer Jim Chalmers has handed down his 2026 Federal Budget. 

Housing was a major focus on the night, with Mr Chalmers saying reforms would “level the playing field for workers and first-home buyers, and support investment in… new housing supply”. 

Here, we summarise the sweeping property tax changes and analyse what they mean for you. 

Negative gearing

Changes to the negative gearing tax regime will reshape how investors build property portfolios. 

Whereas previously investors could deduct losses on a rental property investment from their taxable income, this housing investment incentive will be restricted to new builds only from 1 July 2027. A move the government hopes will boost supply of new dwellings to address housing supply issues. 

Notably, these reforms won’t apply retrospectively, and rental providers currently negatively gearing properties in Australia will be exempt from the changes. 

Jellis Craig CEO Andrew McCann said the changes to negative gearing would likely drive some investors away from the market. 

“This will clearly have an impact on future investors entering the market. Until the government delivers a more robust housing pipeline, the private rental sector remains essential to maintaining price stability and ensuring adequate supply for Victorian renters.”

Capital gains tax 

From 1 July 2027, the existing 50% Capital Gains Tax (CGT) discount will be replaced with indexation and a 30% minimum tax rate. Investors will no longer receive a fixed 50% discount on nominal capital gains under the new arrangements. Instead, taxable gains will be calculated after adjusting for inflation, with real gains subject to the minimum tax rate where applicable.

Whereas previously, investors benefited from a substantial tax concession when nominal house price growth was strong. Under the new system, the tax outcome will depend directly on the real capital gain. 

Those investors purchasing new builds will have the choice of a 50% CGT discount or the indexation method when they sell the property. 

Mr McCann said this change, and the resulting potential reduced attractiveness of an investment property portfolio in the near future, may in fact support turnover in other segments of the sales market. 

“Homeowners may be incentivised to hold a greater portion of their wealth in their principal place of residence, a shift that could potentially stimulate higher levels of market activity with people looking to upgrade.”  

Housing supply 

The budget includes $2 billion in funding for the Local Infrastructure Fund, intended to unlock infrastructure supporting up to 65,000 homes over 10 years. The funding will be provided to local governments and state utility providers, with $500 million reserved for regional Australia. Accessing the funding will be conditional on states and territories committing to pro-housing supply reforms, including faster and simpler approvals and making more land available for new homes.

Andrew welcomed the government's focus on boosting housing supply. 

“Supply is the 'circuit breaker' for the rental crisis. 65,000 new homes in 10 years is an ambitious but necessary target for the government. More supply means more opportunity for people to find housing, an essential human right for every Australian”.