The 2026/27 Federal Budget: what it means for property investors

KEY TAKEAWAYS:

Negative gearing: Existing property investments will be grandfathered, while new builds will retain negative gearing benefits.

Capital gains tax (CGT): Existing property investments will be grandfathered, while investors who purchase new builds will have continued access to the 50% CGT discount.

Tax on discretionary trusts: Tax changes to discretionary trusts may prompt investors to adopt alternate structures, such as companies, to potentially receive refunds of excess tax paid via franking credits and reduced land tax. SMSFs remain unaffected and continue to be a popular vehicle for property investment.

Infrastructure and construction support: An additional $2 billion has been allocated for infrastructure to support new housing developments.

Positive impact for Resimax Group: The proposed changes are expected to strengthen demand for new developments, creating positive outcomes for both Resimax Group projects and investors.

The Federal Budget, announced on 12 May 2026, marks a major shift in the taxation of investment assets, particularly property. While the Budget covered a wide range of measures, this article focuses on the key changes likely to impact property investors and the broader housing market. These measures have not yet been drafted into legislation, leaving time for further industry advocacy and potential refinement.

Since taking office, the Albanese Government has prioritised housing affordability and increasing housing supply, with the National Housing Accord targeting 1.2 million new homes over the next decade. A central theme of the Budget is directing investor capital towards new housing supply, while reducing the tax advantages historically associated with existing investment properties.

Importantly, the Government acknowledged that many investors made decisions under previous tax rules, which is why several changes include grandfathering provisions for existing owners.

Negative Gearing

From 1 July 2027, negative gearing will generally only apply to newly built properties. Existing investment properties purchased before this date will retain current benefits under grandfathering arrangements.

For established properties purchased after 1 July 2027, investment losses will be quarantined and carried forward against future income from that property rather than offset against salary or wages.

One of the biggest impacts may come from lenders, who are unlikely to include future negative gearing tax refunds ‘add-backs’ in serviceability assessments for established property purchases. This could reduce borrowing capacity for some investors.

Capital Gains Tax (CGT)

The Budget proposes major CGT reforms. Since 1999, investors have benefited from a 50% CGT discount on assets held longer than 12 months. Under the new proposal, the system will revert to the previous inflation-indexation method from 1 July 2027.

However, investors purchasing newly built properties will still be able to access the generally more favourable 50% CGT discount if held for more than 12 months. Existing investment properties will also retain current CGT treatment under grandfathering provisions.

The Government argues these changes will reduce investor competition for established housing and improve affordability for first-home buyers. Treasury modelling suggests the reforms could slow property price growth by around 2% per annum while encouraging stronger demand for new housing.

Tax on Discretionary Trusts

From 1 July 2028, discretionary (family) trusts will be subject to a 30% minimum tax before distributions are made to beneficiaries.

Beneficiaries will receive a tax credit and pay any additional tax based on their marginal rate. However, unlike franked dividends from Australian companies, beneficiaries on lower tax rates will not receive refunds for excess tax paid by the trust.

These changes are aimed at reducing income-splitting strategies commonly used through discretionary trusts. Fixed trusts and SMSFs are not affected.

Infrastructure and Construction Support

The Budget includes significant infrastructure spending aimed at supporting housing growth, including:

• $2 billion for roads, water, electricity and sewage infrastructure in growth areas.
• Funding support for the Victorian Suburban Rail Loop (SRL-East).
• Support for the Melton Rail Electrification Project.
• Measures to fast-track recognition of overseas construction skills to address labour shortages.
• Further cutting and streamlining of construction industry red tape.

These initiatives are intended to accelerate housing supply and support population growth in major development corridors.

Opposition Response

The Opposition has pledged to repeal the major changes to negative gearing, CGT and discretionary trust taxation if elected.

It has also proposed indexing income tax brackets to inflation to reduce bracket creep, which could improve household borrowing capacity over time. In addition, the Opposition has proposed an extra $3 billion in infrastructure funding for growth areas.

In Summary

Treasury expects the Budget measures to gradually reshape the property market by directing investor demand toward new housing supply. While the changes are forecast to improve affordability for first-home buyers, they may also reduce overall housing construction in the medium term.

For developers and builders focused on new housing, the reforms could create significant opportunities as investor demand increasingly shifts toward new build properties with more favourable tax treatment. It is likely that new properties will appreciate faster than the median property price.

As a developer who also has its in-house builder (Tick Homes) and property management team (Leap Real Estate), Resimax Group is expected to strongly benefit from the Budget’s negative gearing & CGT policies that will skew property investment towards new builds.