Australia’s property investors are having to rethink how they approach their next purchase.
Changes to negative gearing and Capital Gains Tax (CGT) mean the tax treatment of future residential property investments will look different from 1 July 2027. For investors considering their next move, this could influence the type of property they buy, how they assess cash flow and how they structure their finance.
The reforms have now passed Parliament, although some implementation details are still being finalised ahead of their commencement.
So, are property investors changing course? Early signs suggest some are reassessing their strategies, but it is still too early to know exactly how the changes will reshape the market.
Here’s what investors need to know.
What is changing for property investors?
The Federal Budget introduced significant changes to the way negative gearing and CGT will apply to residential property investments.
From 1 July 2027:
- Negative gearing for residential property investments will generally be limited to eligible new builds.
- The existing 50% CGT discount will be replaced by a cost-base indexation method, with a 30% minimum tax rate applying to capital gains.
There are also grandfathering provisions.
Properties held at 7:30pm AEST on 12 May 2026 will generally be exempt from the negative gearing changes. The CGT changes will apply to gains that accrue from 1 July 2027.
These changes mean investors need to look beyond the tax treatment of a property and consider the broader investment picture, including rental income, ongoing costs, borrowing capacity and long-term objectives.
Important: Tax treatment can vary depending on your circumstances. If you’re considering an investment based on the tax implications, speak with your accountant or financial adviser before making a decision.
Are investors changing their strategy?
There are early signs that some investors are reassessing their approach.
A survey of more than 1,400 Australian investors found that more than 80% believed residential investment property had become less attractive following the 2026 Federal Budget changes. At the same time, 51.5% said they planned to hold their existing investments and wait to see how the changes develop.
The survey provides a snapshot of investor sentiment rather than a complete picture of the market.
What it does highlight is that investors are thinking more carefully about their next purchase.
Rather than relying primarily on tax benefits, some may place greater emphasis on the property’s underlying fundamentals.
That could include:
- Rental yield
- Ongoing cash flow
- Property location and demand
- Potential long-term growth
- Purchase price
- Property expenses
- Loan structure
- Overall borrowing capacity
The right balance will look different for every investor.
Could new builds become more attractive?
One potential shift is a greater focus on newly constructed properties.
From 1 July 2027, eligible new residential properties will continue to receive the existing negative gearing treatment, while established properties purchased after the relevant date will generally be subject to the new rules.
This may make new builds more appealing to some investors.
There have already been signs of increased investor activity in the new-build market. However, it is important not to assume that a new property is automatically a better investment.
The numbers still need to stack up.
A higher purchase price, construction considerations, rental demand, ongoing costs and the property’s location can all affect the overall investment outcome.
For investors, the question is not simply “Can I still negatively gear this property?”
It is also “Does this property make sense for my overall investment strategy?”
Existing properties are being treated differently
Investors who already held established properties before the relevant date will generally retain the existing negative gearing treatment under the grandfathering provisions.
This could influence decisions around holding versus selling an existing property.
For some investors, holding an established property may continue to make sense as part of their broader strategy. Others may decide that their circumstances have changed and that it is time to reassess their portfolio.
There is no one-size-fits-all answer.
The important thing is to understand how your existing properties, debt levels and future plans fit together before making a decision.
Your accountant or financial adviser can help you understand the tax and investment implications. Your mortgage broker can help you understand the lending side.
Cash flow could become more important
One of the biggest changes for future investors is the reduced role of negative gearing on established residential properties.
Under the new rules, investors purchasing established properties will generally no longer be able to offset rental losses against their salary or wage income.
That could put greater focus on the property’s cash flow.
For example, imagine an investor is considering two properties at a similar price.
Property A has a lower rental yield and relies heavily on potential tax benefits and future capital growth.
Property B generates stronger rental income and is closer to being cash-flow neutral.
The changes could make the second property more attractive to some investors. But that doesn’t mean it is automatically the better investment.
Rental demand, location, property quality, expenses, finance costs and the investor’s broader strategy all need to be considered.
This is where getting the numbers together before purchasing becomes particularly important.
What about SMSF property investment?
There have also been changes affecting borrowing through self-managed super funds (SMSFs).
From 10 August 2026, SMSFs can no longer use new Limited Recourse Borrowing Arrangements (LRBAs) to purchase residential property. Existing LRBAs are grandfathered.
SMSFs can still purchase residential property outright using cash, while LRBAs can continue to be used to acquire business real property, subject to the relevant rules.
These changes add another layer of complexity for investors considering property through an SMSF.
SMSF property investment involves lending, tax, superannuation and legal considerations, so specialist advice is important before making any decisions.
What does this mean if you’re considering your next investment?
The new rules don’t necessarily mean property investment is no longer attractive.
They do mean the way investors assess a potential purchase may need to change.
For future purchases, investors may want to look more closely at:
Cash flow: How much rental income will the property generate compared with its ongoing costs?
Borrowing capacity: How much can you comfortably borrow under current lender policies?
Loan structure: Does the proposed finance structure suit the property and your broader portfolio?
Property fundamentals: What are the local rental demand, supply and long-term market conditions?
Long-term strategy: How does the property fit with your existing investments and future goals?
The tax treatment is just one part of the equation.
What could this mean for your finance?
If you’re considering buying an investment property, it can be useful to understand your finance position before you start looking at properties.
At Ironbark Group, we can review your borrowing capacity, compare suitable loan options and help you understand how different loan structures may work with your circumstances.
We can also help you explore different borrowing scenarios, whether you’re looking at an established property, a new build or adding another property to an existing portfolio.
Thinking about your next investment property? Get in touch with Ironbark Group to discuss your finance options and compare the lending solutions that may be available to you.