Australian Federal budget 2026: What you should know?

In the 2026–27 Federal Budget, the Australian Government have introduced major proposed changes to property investing , announced sweeping tax reforms especially around negative gearing and capital gain tax (CGT) effectively abolishing the tax perk for future purchases of established homes.

What is negative gearing?

Negative gearing is a financial strategy where the costs of an investment (like a rental property mortgage and maintenance) exceed the income it generates. In Australia, this resulting net loss can be deducted from an investor's overall taxable income (such as their salary), thereby reducing their income tax bill. For example,  if your annual salary = $100k; your annual rental loss = $20k, then your tax is calculated on $80k. This helps investors to gain more borrowing power, to purchase an investment property.

However under the new rule, you will no longer be able to offset rental losses against your income. Instead your losses can only offset future rental profits or capital gains from the property. 

What is  Capital gains tax (CGT)?

Capital gains tax (CGT) is the tax you pay on profits from disposing of assets including investments, such as property, shares, crypto assets etc. Currently, if you hold an investment asset >12 months, you get a 50% CGT discount. Example: you purchase a property for $500k and make a gain = $200k, then only $100k taxed.

However under the proposed new rule, the 50% discount would be removed and replaced with ‘ inflation indexation’, meaning only the “real gain” after inflation is taxed. 

The major policy changes at a glance