Key Insights into Australia's Latest Tax Reforms: Major Changes to Negative Gearing and CGT
Today, let's briefly walk through the core points of Australia's latest tax reform.
1. Changes to Negative Gearing rules
Current rules
Under the current system, once the rental income from an investment property is offset against various expenses (including interest, management fees, maintenance costs, etc.), any resulting 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 that case, tax is only calculated on 170,000 of income. This is one of the most important tax advantages 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 incurred investment losses can no longer be directly offset against income in the current period. Under the new policy, future investment losses will no longer be offset against salary income in the current period, but may instead be carried forward 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 makes a specific distinction between "new properties" and "established properties", with "new residential premises" generally including:
New homes built on vacant land
Rebuilding a duplex after demolishing an old house
Multiple new dwellings built after a subdivision
Apartment development projects
But note:
If you simply demolish one old house and rebuild a single dwelling, it will no longer be classified as "new residential premises".
3. Adjustments to the Capital Gains Tax (CGT) concession
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 is actually included in taxable income. This policy generally applies to Australian PRs or citizens.
New policy changes
The CGT rules will undergo structural adjustments in the future:
Gains accrued before 1 July 2027:
Will still be calculated under the current rules
Gains accrued after 1 July 2027:
Will instead be calculated using inflation indexation
New properties: The current CGT concession policy continues to apply
4. Summary of the overall trend
This tax reform reveals a very clear direction:
The policy is gradually reducing the tax advantages of established investment properties
While comparatively encouraging new residential assets
Going forward, both the negative gearing and capital gains tax structures are gradually "tilting towards new properties".