The 2026–27 Federal Budget introduces the most significant tax changes for property investors in more than two decades. With new rules set to affect negative gearing, capital gains tax (CGT), and transitional arrangements for existing assets, investors will need stronger documentation, clearer record‑keeping, and more strategic planning than ever before.
1. Negative Gearing Reform: Only New Builds Eligible From 1 July 2027
Negative gearing is being reshaped into a targeted incentive rather than a universal tax strategy. From 1 July 2027, only new residential properties will qualify for negative gearing. This shift will significantly change how investors manage cash flow, structure portfolios, and plan long‑term tax outcomes.
Key Dates and Eligibility Rules
| Date / Period | Treatment |
| Before 7:30pm AEST, 12 May 2026 | Existing properties purchased before this time are fully grandfathered and can continue to be negatively geared indefinitely. |
| 12 May 2026 – 30 June 2027 | Established properties purchased in this window can be negatively geared only until 1 July 2027. |
| From 1 July 2027 | Established properties purchased from this date cannot be negatively geared. |
| Ongoing | Losses from non‑eligible properties can still be carried forward, but only against future residential property income, including capital gains. |
SMSFs and Other Asset Classes
The negative gearing changes do not apply uniformly across all investor types or asset categories. Based on Budget papers and explanatory notes:
- SMSFs are expected to be exempt from the negative gearing restrictions.
- Commercial property, shares, and other investment classes are also expected to remain unaffected by the negative gearing reforms.
This means the restrictions are targeted specifically at individual investors purchasing established residential property, not the broader investment market.
Investor Impact
The ability to offset rental losses against wages or business income will disappear for future purchases of established properties. This makes precise documentation — including depreciation — essential, because carried‑forward losses will only be usable when the property generates income or when offsetting gains from other assets.
Click here for our full article on the negative gearing changes exclusively.
2. Capital Gains Tax Reform: Indexation Returns and a 30% Minimum Tax
CGT is undergoing a major overhaul designed to align tax outcomes more closely with real economic gains. Two significant changes will apply to assets held for at least 12 months, and both will require investors to maintain more accurate cost‑base records than ever before.
The Two Major CGT Changes
| Change | Explanation |
| Cost Base Indexation Reintroduced | From 1 July 2027, the current 50% CGT discount will be replaced with CPI‑based indexation, meaning gains will be adjusted for inflation. |
| 30% Minimum Tax on Real Gains | A minimum 30% tax rate will apply to real capital gains accruing after 1 July 2027. Income‑support recipients are exempt. |
Transitional Arrangements for Existing Assets
| Timing | CGT Treatment |
| Gains accrued before 1 July 2027 | Continue to receive the 50% CGT discount. |
| Gains accrued after 1 July 2027 | Subject to indexation + minimum tax. |
| Valuation Options | Investors can obtain a 1 July 2027 valuation or use an ATO‑approved formula to apportion gains. |
Asset Classes Affected by CGT Changes
Unlike the negative gearing reforms, the CGT changes are broad and are expected to apply to all CGT assets, including:
- residential property
- commercial property
- shares and managed funds
- crypto assets
- business assets
- SMSF‑held assets
This makes accurate cost‑base documentation — including depreciation schedules — even more important across all investment types.
Investor Impact
CGT outcomes will vary depending on inflation, holding period, and asset performance. Accurate depreciation schedules will be essential for documenting capital works, improvements, and adjustments that directly influence the cost base under the new rules.
Click here for our full article on the CGT changes exclusively, including calculation examples.
3. New Builds Receive Preferential Treatment Under the Budget
New residential developments are the clear beneficiaries of the Government’s housing‑supply strategy. Investors purchasing new builds will retain access to negative gearing and will have more flexibility when calculating capital gains. This preferential treatment strengthens the tax advantages of new construction and increases the importance of capturing early‑year depreciation.
Special Rules for New Builds
| Benefit | Details |
| Negative Gearing Continues | Investors in new builds can continue to negatively gear beyond 1 July 2027. |
| Choice of CGT Method | Upon sale, investors can choose between the 50% CGT discount or indexation + minimum tax. |
Investor Impact
New builds typically generate higher early‑year depreciation, which helps offset cash‑flow pressures. With negative gearing preserved, depreciation schedules become even more valuable for maximising deductions during the early ownership period.
4. Why Depreciation Schedules Are More Important Than Ever
With negative gearing restricted, CGT rules changing, and losses quarantined, depreciation remains one of the most reliable and powerful deductions available to investors. A professionally prepared schedule ensures every eligible deduction is captured, cost bases are accurate, and ATO compliance is maintained — all of which become more important under the new tax landscape.
How Depreciation Supports Investors Under the New Rules
| Benefit | Explanation |
| Accurate Expense Capture | With losses quarantined, investors must ensure all capital works, plant & equipment, and improvements are documented correctly. |
| Maximising Deductions in Positive Years | Even without negative gearing, depreciation reduces taxable rental profit and improves after‑tax cash flow. |
| Offsetting Gains Across a Portfolio | Carried‑forward losses — including depreciation‑driven losses — can offset income from other properties. |
| Reducing Future CGT | Depreciation schedules help establish accurate cost bases and document improvements, which is essential under the new CGT rules. |
| Strengthening ATO Compliance | Capital Claims schedules are prepared by AIQS‑qualified quantity surveyors and designed to withstand audit scrutiny. |
Final Thoughts: Change Is Coming — But Good Documentation Protects Investors
The 2026–27 Budget reforms will reshape the investment landscape, but they do not diminish the value of property investment. Instead, they elevate the importance of accurate, comprehensive, and professionally prepared depreciation schedules for:
- maximising deductions
- managing cash flow
- preserving long‑term returns
- reducing future CGT
- ensuring full ATO compliance
Capital Claims remains committed to supporting investors, accountants, and advisers with high‑quality, Australian‑prepared depreciation schedules for all property types, please call on 1300 922 220.
Get a Free Quote for a Depreciation Schedule.
We’ll include an estimate of your potential deductions, and if we can’t guarantee a strong result, we’ll let you know up front and there will be no cost to you.