The 2026–27 Federal Budget brought the biggest shift to property investment and superannuation strategy in almost three decades. Those changes are now legislated. If you own investment property, hold assets outside super, or are building toward retirement, this is worth a few minutes of your time.
On 12 May 2026, Treasurer Jim Chalmers announced reforms to two of the most widely used property investment strategies: negative gearing and the capital gains tax (CGT) discount. Six weeks later they were law. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed both houses of Parliament on 25 June 2026 and received Royal Assent on 26 June 2026. The final legislation also added a measure that was not in the Budget: a ban on new SMSF borrowing to buy residential property.
Here is what you need to know, in order of urgency.
1. SMSF borrowing for residential property: already in force
This is the change that has already taken effect. From 10 August 2026, SMSFs can no longer enter into a new limited recourse borrowing arrangement (LRBA) to buy residential property. The ban was added during Senate negotiations and took effect 45 days after Royal Assent.
Existing LRBAs are grandfathered, as are purchases where contracts were exchanged before 10 August 2026. Borrowing to buy commercial property inside an SMSF is unaffected. If you were planning to use your SMSF to gear into residential property, that strategy is no longer available and your plans should be reviewed.
2. Negative gearing: limited to new builds from 1 July 2027
From 1 July 2027, negative gearing for residential property is limited to new builds. For established properties caught by the new rules, rental losses can no longer be offset against other income such as wages. Instead, losses are quarantined and can only be used against residential property income or capital gains, with any excess carried forward.
The key date for grandfathering is budget night. Properties held at 7:30pm on 12 May 2026, including those under contract but not yet settled, keep their existing negative gearing treatment until sale. Established properties bought after that time do not.
Some investors are excluded and keep existing treatment, including widely held trusts, build-to-rent developments, investors in government housing programs, and super funds.
For investors who rely on negative gearing to reduce taxable income, particularly those on higher incomes, this removes a key cash flow lever on future purchases of established property.
3. Capital gains tax: indexation replaces the 50% discount from 1 July 2027
From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced. Gains on assets held longer than 12 months will instead be adjusted for inflation through cost base indexation, with a minimum 30% tax rate on the remaining real gain.
The change is not retrospective. Gains that accrued before 1 July 2027 are assessed under the current rules; only gains from that date fall under the new framework.
The legislation also raised the turnover threshold for the 50% active asset concession for small businesses from $2 million to $10 million. Testamentary trusts were also given a reprieve.
Some detail is still being finalised. Treasury has consulted on a second tranche of legislation covering matters such as how a “new residential dwelling” is defined and how the rules apply to property transferred on death or relationship breakdown. New builds are expected to keep access to the 50% CGT discount, subject to that definition.
Key dates
- 12 May 2026 (7:30pm): grandfathering cut-off for existing investment properties
- 26 June 2026: Royal Assent
- 10 August 2026: SMSF residential LRBA ban commenced
- 1 July 2027: CGT overhaul and negative gearing restriction commence
4. Superannuation: still the comparatively sheltered structure
The legislation did not change the tax treatment of super. Super funds are excluded from the CGT reforms and continue to apply the existing one-third CGT discount in accumulation phase, alongside concessional tax rates.
With property now facing a tighter tax environment, super may be a comparatively more tax-efficient vehicle for growing wealth over time. Outcomes will depend on your circumstances, balance and investment mix. The SMSF borrowing ban also means super’s advantage now sits in its tax treatment, not as a way to gear into residential property.
The bottom line
The negative gearing and CGT changes are now law, and they are a genuine structural shift in how property investment is taxed in Australia. The SMSF residential borrowing ban is already in force. With the main changes starting on 1 July 2027, there is a window to review your strategy before they apply. Whether you hold investment property, are building your super, or both, now is the time to speak with a qualified adviser.
