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On 12 May 2026, Treasurer Jim Chalmers handed down the Albanese Government's 2026-27 Federal Budget.
Our colleagues in the HSF Kramer Tax Practice Group have already covered the broader tax implications in their article, Federal Budget 2026: Back to the future. But what does this Budget mean for the property market in Australia?
The answer is clear: with housing at the top of Labor's agenda, the changes are designed to push investment toward new housing development and to make existing properties less attractive to investors.
The key Budget measures relevant to property development
CGT Changes
Until 1 July 2027, net capital gains for non-main residence properties will continue to receive the 50% CGT discount, however, from 1 July 2027 the discount will be calculated by reference to inflation (CPI), provided that the rate of tax payable will never be lower than 30%.
This means that properties acquired prior to but sold after 30 June 2027 will be subject to a hybrid CGT calculation – net capital gains made prior to 1 July 2027 being subject to the 50% CGT discount, and net capital gains made from 1 July 2027 being subject to the new CPI / minimum 30% method.
The full CGT exemption for properties acquired prior to 20 September 1985 is also being removed, meaning that from 1 July 2027 a hybrid CGT calculation will also apply to those properties.
The CGT changes apply to residential and non-residential properties alike (except where exempt).
Other key measures are that:
- buyers of newly constructed residential properties (that “genuinely add to supply”) have the option of choosing (when they sell) to apply either the 50% CGT discount or the new CPI / minimum 30% method; and
- the existing 60% CGT discount for eligible affordable housing builds will continue to apply.
Changes to negative gearing for established residential property
From 1 July 2027, negative gearing will be changed as it applies to established residential properties – such that losses can only be offset against other income from residential properties, including capital gains (not other income of the taxpayer). Excess losses can be carried forward and offset in future financial years.
The following transitional arrangement will apply in respect of established residential property:
- if already owned, or acquired under contracts exchanged prior to 7:30pm AEST on 12 May 2026, the property is exempt from the changes and can continue to be negatively geared against all taxpayer income until sold;
- if acquired under contracts exchanged after 7:30pm on 12 May 2026 but before 30 June 2027, the property may be negatively geared against all taxpayer income only until 30 June 2027 and from 1 July 2027 the changed negative gearing arrangements will apply; and
- if acquired from 1 July 2027, the changed negative gearing arrangements will apply.
Exemptions from the negative gearing changes
Eligible new builds will be exempt from the changes to negative gearing. To qualify, the new build must:
- be on vacant land or, where existing dwellings are demolished, result in the construction of a greater number of dwellings; and
- have only been owned by the builder and not occupied for more than 12 months.
Widely held trusts and superannuation trust funds will also be exempt from these changes. It is expected that build-to-rent developments and private investors supporting government housing programs may also be exempt, however, the Government is yet to confirm these arrangements.
The changes to negative gearing do not extend to commercial and other non-residential property.
The $6 Billion Commitment to Unlock New Homes
The Budget also commits to lifting total Commonwealth investment in housing-enabling infrastructure by $6 billion, anchored by a new $2 billion Local Infrastructure Fund delivered over four years from 2026-27. This investment is projected by Treasury to unlock up to 65,000 homes across the country.
For developers with land holdings in growth corridors, this is significant. It addresses one of the most persistent and practical hurdles to the early stages of development.
Discretionary Trust Changes
From 1 July 2028, income earned through discretionary trusts will be subject to a minimum 30% tax.
This change may affect the types of investment vehicles that some purchasers or sellers may use in property transactions.
How are the changes likely to impact property development and investment?
The Government’s stated purpose of these changes is to level the playing field for first home buyers, preserve the gains investors have made and support investment in new housing supply.
Only time will tell if the changes achieve this purpose, but the CGT and negative gearing changes in particular will be important factors for investors to consider before making an investment and may make investment into new residential development more favourable than into established residential property.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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