Key Highlights of Australia's Latest Tax Reforms: Major Changes to Negative Gearing and CGT
Today let's take a quick look at the key points of Australia's latest tax reforms.
1. Changes to Negative Gearing rules
Current rules
Under the current system, if an investment property's rental income minus expenses (including interest, management fees, maintenance costs, etc.) results in a loss, that loss can be used to offset your personal salary income.
Here's a simple example:
Annual salary income: 200,000
Investment property loss: 30,000
In this case, tax is calculated on income of only 170,000. This is a very important tax advantage in Australian property investment.
New policy (effective from 1 July 2027)
Under the new arrangements, the negative gearing rules for established properties will be adjusted:
Established properties already held before 7:30pm on 12 May 2026:
Can continue to enjoy the existing negative gearing policy
Established properties purchased between 13 May 2026 and 30 June 2027:
Can still enjoy negative gearing in the short term, but from 1 July 2027, newly generated investment losses will no longer be directly deductible against current income. Under the new policy, future investment losses will no longer offset salary income in the current period, but will instead be allowed to accumulate and used to offset capital gains tax (CGT) when the property is sold.
New properties:
The current negative gearing policy remains unchanged
2. What is a "New Residential Premises"
The policy specifically distinguishes between "new properties" and "established properties", with "new residential premises" generally including:
Building a new dwelling on vacant land
Demolishing an old house and rebuilding as a duplex
Building multiple dwellings after subdivision
Apartment development projects
However, please note:
Simply demolishing one old house and rebuilding it as a single dwelling is no longer classified as a "new residential premises".
3. Adjustments to Capital Gains Tax (CGT) concessions
Current rules
Under the current system: assets held for more than 12 months are eligible for a 50% capital gains tax discount
For example:
If a property appreciates by 1,000,000, only 500,000 actually needs to be included in taxable income. This policy generally applies to Australian PRs or citizens.
New policy changes
The CGT rules will undergo structural changes in the future:
Gains generated before 1 July 2027:
Will still be calculated under the existing rules
Gains generated after 1 July 2027:
Will be calculated using inflation indexation instead
New properties: The existing CGT concessions continue to apply
4. Summary of the overall trend
From these tax reforms, a very clear direction can be seen:
The policy is gradually reducing the tax advantages of established investment properties
While relatively encouraging new residential assets
In the future, both the negative gearing and capital gains tax structures will gradually "tilt in favour of new properties".