You may have seen recent announcements regarding proposed changes to negative gearing and capital gains tax (CGT) in the 2026 Federal Budget.
Given the amount of media attention around these changes, we wanted to provide a clear breakdown of what has been proposed, how it may impact investors, and what it means for both existing and future property purchases.
Firstly, it is important to note that these are currently proposed reforms and are not yet law. The measures would still need to pass through Parliament before taking effect.
What Has Been Proposed
From 1 July 2027, the Government has proposed:
- Limiting negative gearing benefits on residential property to eligible new builds only
- Replacing the current 50% CGT discount with a CPI indexation method and introducing a proposed minimum tax rate on certain capital gains
How This Impacts Existing Property Owners
For investors who already own residential investment properties prior to the announcement date (12 May 2026), the proposed changes are largely grandfathered.
This means:
- Existing investment properties purchased before the announcement date are expected to retain current negative gearing benefits into the future
- Existing properties will continue to operate under current rules unless sold
- Capital gains accumulated before 1 July 2027 are expected to remain under the current CGT framework
In simple terms, most current investors are not expected to lose the existing tax benefits attached to properties they already own.
How This Impacts Future Property Purchases
The impact differs depending on the type of property purchased moving forward.
Established Residential Properties
Under the proposal:
- Existing residential properties purchased after the announcement date may no longer allow rental losses to offset personal income from 1 July 2027 onward
- Losses may instead be carried forward to offset future property income or capital gains
This could reduce the short-term tax advantages traditionally associated with established investment properties.
New Builds
Importantly, eligible new builds are proposed to retain:
- Full negative gearing benefits
- Access to existing CGT concessions in many circumstances
- Stronger government support due to their contribution to housing supply
However, it is important to understand that a property should never be purchased purely for tax benefits.
While some new builds may offer short-term tax advantages, tax benefits alone should not form the cornerstone of an investment strategy. The underlying asset quality, location, land content, supply pipeline, demand fundamentals, and long-term growth potential remain far more important.
Unfortunately, we expect many Australians may fall victim to aggressive marketing from spruikers promoting certain new build projects primarily on the basis of tax incentives and depreciation benefits rather than investment fundamentals.
Not all new builds are strong investments, and in some cases investors can overpay significantly for properties that underperform over the long term.
At Dynamic Advisory, we believe investment decisions should be driven by strategy, research, and long-term fundamentals, not simply short-term tax outcomes.
Potential Market Impacts
In the short term, it is our view that some investors may take a “wait and see” approach while these proposed reforms progress through Parliament and the market adjusts to the changes.
This hesitation could create periods of slightly reduced competition in certain markets, potentially presenting stronger buying opportunities for well-positioned investors.
Over the longer term, if investor activity slows materially, it may also reduce the amount of rental supply delivered to established suburbs and high-demand lifestyle locations where housing is already undersupplied. In our view, the areas most in need of rental accommodation are often not outer new estates located significant distances from major CBDs and employment hubs.
If rental supply continues to remain constrained while population growth and demand remain strong, this could place additional upward pressure on rental yields and rental income over time.
In summary, while these proposed reforms may create some short-term uncertainty or hesitation across parts of the market, we do not believe they change the long-term fundamentals that continue to support Australian property values and investment performance.
Long-term wealth creation through quality assets, strong locations, land content, supply-demand dynamics, cash flow management, and strategic portfolio structuring remain the key drivers of successful investing.
Our View
At Dynamic Advisory, we believe this reinforces the importance of having a clear strategy rather than relying solely on tax benefits when building a portfolio.
Every investor’s situation is different, and the right approach will depend on:
• Your goals
• Income position
• Borrowing capacity
• Existing portfolio
• Time horizon
• Risk tolerance
How We Mitigate Risk
At Dynamic Advisory, our approach has never been centred around chasing tax benefits or speculative “hotspots”.
Instead, we focus on identifying fundamentally strong locations that are supported by genuine owner-occupier demand, limited supply, strong household incomes, infrastructure investment, and long-term livability.
In many cases, we actually prefer areas with lower investor concentration and stronger owner-occupier appeal, as these markets often demonstrate:
• Greater price stability
• Lower volatility
• Stronger long-term demand
• Better resale depth
• Reduced exposure to investor sentiment swings
When assessing investment opportunities, our team analyses a broad range of data points and market fundamentals, including:
• Owner-occupier vs investor ratios
• Vacancy rates
• Supply pipelines and future dwelling approvals
• Population growth and demographic trends
• Household income levels
• Infrastructure and employment drivers
• Land scarcity and zoning constraints
• Days on market and buyer competition levels
• Rental demand and yield trends
• Flood, environmental, and location risks
• Street-level desirability and property positioning
We believe risk mitigation comes from buying quality assets in fundamentally strong locations, rather than relying on short-term tax outcomes to justify an investment decision.
If you would like to understand how these proposed changes may impact your own plans, feel free to reach out to our team or book in directly for chat using this link.
Author: Matt Piotrowski
