On the night of 12 May 2026, the Federal Government confirmed the end of negative gearing on established residential properties and changes to CGT across property, shares, and other assets. It is the most significant shift to property tax settings in a generation.

This article covers what actually changed, what did not, and what it means for investors making decisions right now.

What Changed and What Didn't

Two separate changes were announced. They need to be understood separately.

Negative Gearing on Established Properties

From 1 July 2027, negative gearing on established residential investment properties is limited to new builds.

If you purchased before 7:30pm AEST on 12 May 2026, nothing changes. Your existing arrangements are grandfathered until you sell.

If you buy an established property after that date and time, you can still deduct losses against residential property income, rent or future capital gains, but you can no longer offset those losses against other income like wages.

New builds are fully exempt. Investors buying new builds retain access to negative gearing under the existing rules.

Capital Gains Tax

From 1 July 2027, the 50% CGT discount that has applied to all assets, property, shares, businesses, is being replaced with inflation-adjusted indexation, with a minimum tax rate of 30% on realised gains.

For long-term holders, this is a material shift in how your eventual sale is taxed, not just how losses are treated along the way.

Gains accrued before 1 July 2027 on existing investments retain the 50% discount. New builds retain the choice between both arrangements.

The Government's full factsheet is here: https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf

What It Means for Different Investor Types

If you already own an investment property Nothing changes. Your negative gearing arrangements are grandfathered. The CGT change applies only to gains accrued after 1 July 2027, and even then your pre-2027 gains retain the 50% discount.

If you're buying an established property after budget night You can still deduct losses. They are quarantined to residential property income rather than eliminated. For cash flow positive properties or those approaching neutral, the practical impact is limited. For highly negatively geared positions relying on wage offset, the impact is more significant.

If you're considering new buildsNegative gearing remains fully intact. The CGT change applies from 1 July 2027 but new build investors can choose between the new indexation model and the existing 50% discount, whichever produces the better outcome at time of sale.

If you were relying on negative gearing to make the numbers work This is the most important category. If the deal only worked because of the tax offset against wages, it was never a strong enough asset or strategy. That position needs to be reassessed from the ground up.

What This Doesn't Change

The fundamentals of sound property investment haven't moved.

Location selection still does the heavy lifting. Rental demand, economic depth, supply constraints, and long-term population growth remain the primary drivers of capital performance. None of that changed on Tuesday night.

Cash flow modelling without negative gearing has always been the responsible baseline. Every property assessed at The Nelis Group has been modelled this way. Not as a conservative assumption, but as the only responsible one. If the numbers didn't work without the tax offset, the deal didn't proceed. That discipline matters more today than it did yesterday.

The Cost of Doing Nothing

It isn't zero. It never has been.

Every year you don't own a compounding asset is a year someone else does. Property in strong markets doesn't wait for political certainty. A future government could reverse or modify these changes. It has happened before and it will happen again.

What you can control is whether you own a quality asset in a strong market, whether you have the cash buffer to hold through the uncomfortable years, and whether your decision was built on fundamentals that outlast any single policy change.

This isn't the end of property investment in Australia. It's the end of decisions that needed a tax offset to work.

What Comes Next

Over the coming articlesI will be breaking this down further. The real cash flow numbers under the new rules, what the CGT indexation model means for different holding periods, and why my view on new builds has not changed even with this announcement.

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Note: At the time of publishing, these changes have been announced but not yet passed through parliament. The Nelis Group recommends confirming the current status of this legislation with a relevant licensed professional before making any decisions.

Disclaimer: The information in this article is general in nature and does not take into account your personal objectives, financial situation, or needs. It is not financial, legal, or tax advice. The Nelis Group accepts no liability for actions taken based on this content. You should seek independent advice from a relevant licensed professional before making any decisions and always confirm the latest rules and thresholds with your relevant authority.