Budget 2026: Buying an Investment Property After Budget Night

I May Buy an Investment Property After Budget Night. What Does the 2026 Federal Budget Mean for Me?

If you are considering buying an investment property after 7:30pm AEST on Tuesday, 12 May 2026, the 2026 Federal Budget changes may materially affect your strategy. The key issue is whether you buy an established residential property or an eligible new build. From 1 July 2027, negative gearing is proposed to be restricted to new builds, while investors buying established residential property after Budget night may no longer be able to deduct rental losses against salary, wages or other personal income. The capital gains tax rules are also changing from 1 July 2027, with new builds receiving more favourable treatment than many other assets.

Key points for future property investors

• The date you buy matters. Residential investment properties purchased after 7:30pm AEST on 12 May 2026 are treated differently from properties already held before Budget night.
• Established investment properties lose the key negative gearing benefit from 1 July 2027. If you buy an established residential investment property after Budget night, rental losses are expected to be quarantined and only deductible against residential property income, including future capital gains.
• You may still be able to carry forward losses. Excess rental losses may be carried forward, but they will not generally reduce salary, wage or business income in the same way as the current rules.
• New builds are treated more favourably. Investors buying eligible new residential property should still be able to deduct rental losses against other income.
• New builds also receive more favourable CGT treatment. Investors in new builds may be able to choose between the existing 50% CGT discount and the new indexation method.
• Established property may still make sense. A good established property with strong yield, long-term capital growth and low vacancy risk may still be a better investment than a poor-quality new build.
• Borrowing capacity may change. Lenders may need to adjust how they treat negative gearing benefits in serviceability calculators, particularly for established investment properties purchased after Budget night.
• Do not choose a property only because of tax treatment. Tax settings matter, but asset quality, location, yield, debt structure and long-term strategy matter more.

What changed for investors buying after Budget night?

The 2026 Federal Budget introduced a sharp distinction between:

1. investors who already owned property before Budget night;
2. investors who buy established residential property after Budget night; and
3. investors who buy eligible new residential property.

This page focuses on the second and third groups.

For future property investors, the central question is now:

Are you buying an established property, or are you buying a new build?

That distinction may affect:

• whether a new build premium is justified.
• whether you can negatively gear the property;
• whether rental losses help reduce your annual tax position;
• how lenders assess your borrowing capacity;
• how future capital gains are taxed;
• whether the property remains attractive to future investors;
• whether the purchase makes sense on cash flow alone; and
• whether a new build premium is justified.

Negative gearing after Budget night

Buying an established investment property

Under the announced changes, if you buy an established residential investment property after 7:30pm AEST on 12 May 2026, the current negative gearing benefit is expected to be restricted from 1 July 2027.

This means that if the property makes a loss, you generally will not be able to deduct that loss against salary, wages or other personal income.

Instead, losses are expected to be quarantined and may only be deducted against:

• income from residential property;
• future residential property income; or
• capital gains from residential property.

If the losses cannot be used in the current year, they may be carried forward.

What this means in plain English

Under the old rules, a negatively geared property could reduce your taxable income each year.

Under the new rules for established properties, that annual tax benefit may no longer be available.

That does not mean you can never use the loss. It means the loss is likely to be delayed and limited to residential property income or future residential property gains.

This creates a major cash flow difference.

For investors who rely heavily on negative gearing refunds to help hold a property, established investment property may become harder to justify.

Buying a new build investment property

New residential property is treated differently.

From 1 July 2027, investors buying eligible new builds are expected to continue being able to deduct rental losses against other income.

This means new builds retain the main negative gearing benefit.

The policy intent is clear: the Government wants tax settings to push investor demand toward new housing supply rather than established housing.

Why this matters

New builds may become more attractive to investors because they may offer:

• continued negative gearing;
• more favourable CGT treatment;
• depreciation benefits;
• lower initial maintenance costs;
• appeal to tenants wanting newer homes;
• alignment with government housing supply policy; and
• potentially stronger lender, accountant and adviser interest.

However, investors still need to be careful.

A new property is not automatically a better investment.

The wrong new build can be overpriced, poorly located, oversupplied, hard to rent, slow to grow or difficult to resell.

Tax benefits do not fix a poor asset.

Capital gains tax for future property investors

The Budget also announced major CGT changes from 1 July 2027.

The Government will replace the current 50% CGT discount for individuals, trusts and partnerships with cost-base indexation and a 30% minimum tax rate on capital gains. The CGT reforms apply to gains accruing after 1 July 2027.

For future investors, the key difference is again between established property and new builds.

Established residential property

For established residential property, future capital gains after 1 July 2027 are expected to be taxed under the new indexation method.

In simple terms, the cost base is adjusted for inflation, and tax is applied to the real gain above inflation.

This may produce a better or worse outcome than the current 50% CGT discount depending on:

• inflation;
• property growth;
• holding period;
• marginal tax rate;
• ownership structure;
• selling costs;
• cost-base adjustments; and
• whether the 30% minimum tax applies.

New residential property

Investors buying eligible new builds are expected to have a choice between:

• the existing 50% CGT discount; or
• the new indexation method.

That choice could be valuable.

If the property grows strongly above inflation, the 50% CGT discount may be more attractive.

If inflation is high and real growth is lower, indexation may be more favourable.

This is one reason why new builds may attract increased investor attention after Budget night.

Who is most impacted?

1. PAYG investors buying established property

PAYG investors who rely on negative gearing to reduce annual taxable income are likely to be among the most affected.

If they buy an established property after Budget night, they may no longer receive the same annual tax benefit from rental losses after 1 July 2027.

This could affect cash flow, borrowing appetite and property selection.

2. Investors with high debt and low-yield property

The more heavily geared the purchase, the more important the negative gearing treatment becomes.

Low-yield properties with high debt may become harder to hold if annual losses cannot reduce other taxable income.

3. Investors buying mainly for capital growth

Established property may still appeal to investors focused on long-term capital growth, especially in land-rich locations.

But the investor needs to be able to hold the asset without relying on annual tax offsets.

4. Investors considering new builds

New builds may become more attractive because they retain negative gearing and may offer more flexible CGT treatment.

However, the quality of the asset becomes critical. Investors should not buy a poor new build simply to access tax benefits.

5. First home buyers competing with investors

First home buyers may benefit from reduced investor demand for established homes. However, they may face more competition from investors in new housing if investor demand shifts toward new builds.

How this may affect borrowing capacity

One of the biggest practical questions is how lenders will treat the new rules in serviceability calculators.

At the moment, some lenders recognise negative gearing benefits when assessing borrowing capacity.

If future investors buying established property can no longer deduct losses against salary or wage income, lenders may reduce or remove that benefit from servicing calculations.

This could mean some investors can borrow less than they could under the old rules.

The impact may vary by lender.

Some lenders may move quickly. Others may wait for legislation, ATO guidance and industry policy updates.

This is exactly where broker strategy becomes important.

Different lenders already assess rental income, tax benefits, existing debt, buffers and living expenses differently. These differences may become more important once the new rules are reflected in credit policy.

Our opinion: likely outcomes for future investors

1. Established property is not dead

The easy headline is that established investment property has become less attractive.

That is partly true.

But it does not mean established property stops being a viable investment.

A strong established property in the right location may still outperform a poor-quality new build, even without annual negative gearing benefits.

The investment case simply needs to stand up more clearly on:

• rental yield;
• capital growth prospects;
• land value;
• vacancy risk;
• holding costs;
• debt structure;
• future buyer appeal; and
• after-tax cash flow.

2. New builds will attract more investor demand

This is almost certain.

If new builds retain negative gearing and better CGT optionality, investors will pay more attention to them.

That may support new dwelling demand, but it may also create risk.

When tax settings favour a particular asset class, some developers, marketers and spruikers will lean heavily into the tax benefits.

Investors need to be careful not to overpay for tax treatment.

3. Established property may create opportunities for stronger buyers

If some investors step away from established property, competition may reduce.

That could create opportunities for buyers with strong cash flow, larger deposits, better yields or a longer-term strategy.

In softer parts of the market, a buyer who is not reliant on negative gearing may be able to negotiate better.

4. The market may split

We may see a clearer divide between:

• established properties favoured by owner occupiers and first home buyers;
• new builds targeted by tax-sensitive investors;
• high-yield established properties that still attract investors;
• lower-yield established properties that become harder to justify; and
• SMSF or commercial property strategies considered by more sophisticated investors.

5. Advice will matter more

The wrong response is to rush into a new build.

The right response is to assess the numbers properly.

For future investors, the decision should be based on:

• asset quality;
• rental yield;
• cash flow;
• tax treatment;
• borrowing capacity;
• ownership structure;
• future exit strategy; and
• whether the property supports your broader financial position.

Worked example 1: buying an established investment property after Budget night

Scenario

David is a PAYG employee earning $150,000 per year.

He buys an established investment property after Budget night for $850,000.

He borrows $680,000.

The property produces:

• rent: $650 per week
• annual rent: $33,800
• interest, rates, insurance, repairs and other deductible costs: $50,000
• annual rental loss: $16,200

For simplicity, assume David’s marginal tax rate is 37% plus Medicare levy and ignore other deductions.

Before the Budget changes

Under the current negative gearing rules, David could generally deduct the $16,200 rental loss against his salary income.

Approximate tax benefit:

$16,200 × 39% = $6,318

So although the property loses $16,200 before tax, the tax benefit reduces David’s after-tax cash cost.

Approximate after-tax cash loss:

$16,200 – $6,318 = $9,882

This makes the property easier to hold.

After the Budget changes

Because David bought an established residential property after Budget night, from 1 July 2027 he is expected to lose the ability to deduct that rental loss against salary income.

The $16,200 loss may instead be carried forward and used against future residential property income or capital gains.

Approximate immediate tax benefit:

$0

Approximate after-tax cash loss:

$16,200

What this means

Under the old rules, David’s annual after-tax holding cost was approximately $9,882.

Under the new rules, his annual cash cost may be closer to the full $16,200.

That is a difference of approximately $6,318 per year in cash flow.

For some investors, that may be manageable.

For others, it may affect borrowing capacity, buffer requirements and the willingness to buy established investment property.

Worked example 2: buying a new build investment property after Budget night

Scenario

Emma is a PAYG employee earning $150,000 per year.

She buys an eligible new build investment property after Budget night for $850,000.

She borrows $680,000.

The property produces:

• rent: $650 per week
• annual rent: $33,800
• interest, rates, insurance, depreciation and other deductible costs: $55,000
• annual rental loss: $21,200

For simplicity, assume Emma’s marginal tax rate is 37% plus Medicare levy and ignore other deductions.

After the Budget changes

Because Emma bought an eligible new build, she is expected to continue being able to deduct the rental loss against other income.

Approximate tax benefit:

$21,200 × 39% = $8,268

Approximate after-tax cash loss:

$21,200 – $8,268 = $12,932

What this means

Emma’s new build still receives the annual negative gearing benefit.

This may make the new build easier to hold than an established property with the same level of loss.

However, this does not automatically mean Emma’s investment is better.

She still needs to consider:

• whether the purchase price is fair;
• whether there is a new-build premium;
• vacancy risk;
• depreciation assumptions;
• strata costs, if applicable;
• location quality;
• rental demand;
• resale appeal; and
• whether the property is likely to grow after inflation.

Worked example 3: CGT comparison — established property versus new build

Scenario

Two investors each buy an investment property for $850,000 after Budget night.

Investor A buys an established property.

Investor B buys an eligible new build.

Both sell in 2032 for $1,150,000.

Assume:

• purchase price: $850,000
• sale price: $1,150,000
• gross capital gain: $300,000
• inflation over the holding period increases the indexed cost base to $970,000
• both investors are on a marginal tax rate above 30%
• selling costs and other cost-base adjustments are ignored for simplicity

Investor A: established property

Under the new indexation method:

Sale price: $1,150,000
Indexed cost base: $970,000
Real taxable gain: $180,000

Investor A does not automatically receive the 50% CGT discount.

Taxable capital gain: $180,000

Investor B: new build

Investor B may be able to choose between the new indexation method and the existing 50% CGT discount.

Option 1: Indexation method

Sale price: $1,150,000
Indexed cost base: $970,000
Real taxable gain: $180,000

Option 2: 50% CGT discount

Gross capital gain: $300,000
50% CGT discount: $150,000
Taxable capital gain: $150,000

In this example, the 50% CGT discount gives the better outcome.

What this example shows

The new build has two potential advantages:

1. it may retain negative gearing; and
2. it may allow the investor to choose the better CGT outcome.

That makes new builds more attractive under the proposed rules.

But the investment still needs to be sound.

A poor-quality new build with weak growth can still underperform a strong established property, even with better tax treatment.

Exempt categories and those less directly impacted

Based on the announced measures, the following categories may be exempt, grandfathered or less directly impacted:

• Properties held before Budget night – grandfathered for negative gearing while held.
• Eligible new residential properties – expected to retain negative gearing.
• Build-to-rent developments – expected to be treated favourably under the housing supply policy.
• Complying superannuation funds, including SMSFs – excluded from the CGT discount changes.
• Main residence / owner-occupied home – remains exempt from CGT under the main residence exemption.
• Small business CGT concessions – expected to remain unchanged.
• Certain government-supported affordable housing investments – may receive specific treatment.
• Widely held trusts – excluded from the discretionary trust minimum tax rules.

Investors should confirm their position with a qualified tax adviser before relying on any exemption.

What should future investors do now?

Future investors should not simply ask, “Can I still negatively gear this property?”

That is too narrow.

The better questions are:

• Does this property work without annual negative gearing benefits?
• Is the rental yield strong enough?
• Is the purchase price justified?
• Is it better to buy established, new or not buy at all?
• Will lenders treat my borrowing capacity differently?
• Should I use personal names, a trust, company or SMSF?
• What is my exit strategy?
• How will the property be taxed if I sell later?
• What happens if I convert a home into an investment property?
• Am I buying a strong asset, or am I being pulled toward a tax-driven product?

Tax treatment should support the strategy.

It should not be the strategy.

How Evolve Lending & Finance can help

Evolve Lending & Finance does not provide tax, legal or financial planning advice.

However, we can help investors understand the lending side of the decision.

That includes reviewing:

• borrowing capacity;
• deposit requirements;
• equity release options;
• investment loan structure;
• lender appetite;
• rental income treatment;
• new build versus established property lending policy;
• interest-only versus principal-and-interest options;
• fixed versus variable strategy;
• loan-to-value ratio and mortgage insurance implications;
• whether the property still works without negative gearing benefits; and
• how the purchase fits your broader lending position.

For investors buying after Budget night, the loan structure matters more than ever.

The right lender, repayment structure and cash flow plan may be the difference between a property that is manageable and one that becomes a drag on your finances.

Thinking about buying an investment property after Budget night?

The rules are changing, and the difference between buying an established property and buying a new build may be significant.

Before you sign a contract, it is worth reviewing your borrowing capacity, cash flow, loan structure and property strategy.

Book a Budget Lending Review

Or speak with Evolve Lending & Finance before you commit to your next investment property purchase.

Related Budget guides

• I held an investment property before Budget night
  Understand how the grandfathering rules may apply to existing property investors.
• I am a first home buyer
  See how the changes may affect competition, buying conditions and property strategy.
• I hold investment assets other than property
  Learn how the CGT changes may affect shares, business interests and other non-property assets.
• Speak with a broker
  Review your lending position before buying, refinancing or restructuring.

Disclaimer

This article is general information only and does not take into account your personal objectives, financial situation or needs. Evolve Lending & Finance is not a tax adviser, financial planner or legal adviser. You should seek advice from a qualified accountant, financial planner or solicitor before making decisions about tax, investments, property ownership or asset sales. The Budget measures discussed are based on announcements made in the 2026 Federal Budget and may be subject to legislation, clarification and further guidance.