The 2026-27 Federal Budget has made some of the most significant changes to property investment taxation in decades – and for investors, developers, and buyers in the new build space, the timing could not be better.
The rules have shifted. New residential builds now sit in a uniquely advantaged position, and the opportunity that creates is real and immediate. Here is what changed and why it matters.
What Changed
Two changes were announced on Budget night, 12 May 2026, both taking effect from 1 July 2027.
Negative gearing on established residential investment properties bought after Budget night will be redirected from 1 July 2027 – losses will apply to property income rather than wages or salary.
Capital gains tax is being restructured. The 50% CGT discount is replaced by cost-base indexation and a 30% minimum tax on net gains, for established properties acquired after 12 May 2026.
New residential builds are fully exempt from both changes – and come out of this budget in the strongest tax position of any investment property category in Australia.
New Build vs Established – Side by Side
|
Established Property (bought after 12 May 2026) |
New Build / Off-the-Plan |
|
|
Negative gearing against wages |
Redirected from 1 July 2027 |
Fully preserved |
|
CGT method |
Indexation only |
Choose 50% discount OR indexation |
|
30% minimum CGT tax |
Applies |
Not mandatory – choose the better outcome |
|
Tax position |
Changed under new rules |
Unchanged – and now relatively stronger |
The Benefits of Buying Off-the-Plan
Full Negative Gearing – Completely Preserved
Off-the-plan investors retain the full ability to offset rental losses against all income, including wages and salary. For a high-income earner, the tax refund mechanism that has driven property investment for decades continues to work exactly as it always has. Nothing has been taken away – and relative to established property, this benefit now stands out even more clearly.
CGT Flexibility – A Choice Unique to New Builds
When selling a new build, investors can elect whichever CGT method produces the lower tax at the time of sale. This optionality is exclusive to new residential properties, and it is a meaningful financial advantage.
- The 50% discount works best when property growth significantly outpaces inflation.
- Cost-base indexation works best when inflation is running above approximately 3.25% to 3.5% per annum over the hold period.
In the current inflation environment of approximately 3.5% to 3.75%, the two methods produce broadly comparable results – which means new build investors are well positioned under either scenario. The ability to choose at the time of sale, when the better outcome is already known, adds genuine value.
The Indexation Advantage Grows Over Time
For longer hold periods in a moderate-inflation environment, indexation consistently produces a stronger result than the 50% discount – and the advantage compounds over time. Having access to both methods means investors can capture that benefit when conditions favour it.
Worked example from the Budget paper:
A buyer purchases a new townhouse in June 2025 for $950,000. After 10 years growing at 6.5% per annum, it sells for approximately $1,782,000. Total capital gain: approximately $832,000.
|
50% Discount |
Indexation |
|
|
Taxable gain |
$416,000 |
~$389,000 |
|
Approximate tax |
~$175,000 |
~$165,000 |
|
Result |
|
Indexation saves ~$10,000 |
Based on a $120,000 salary and 3.75% average inflation over a 10-year hold. Illustrative only.
The saving grows as the hold period extends – a compelling advantage for long-term investors.
Depreciation – An Additional Layer of Tax Efficiency
New residential properties generate significant depreciation deductions that older established stock simply cannot match. On top of the negative gearing and CGT advantages, depreciation on new builds adds meaningful annual tax savings – making the overall financial case even stronger.
Losses Apply Now, Not Later
For new build investors, every dollar of rental loss offsets income in the year it is incurred. There is no deferral, no carry-forward required, and no waiting. The tax benefit is immediate, which is exactly how investors have always planned their returns.
The Transition Window – A Smooth Path Forward
The new rules take effect from 1 July 2027, creating a transition window of approximately 13 months. This is good news for buyers considering off-the-plan purchases right now.
- Properties settling before July 2027 benefit from the full transition window.
- Properties settling after July 2027 step directly into the new, fully favourable, build framework.
- Either way, new build investors are not negatively affected at any point.
What This Means for the Market
The budget has created a clear, legislated preference for new housing investment. Investor demand that has historically flowed to established property is expected to shift meaningfully toward new construction as the changes are understood.
For developers, this is a strong tailwind at a time when project fundamentals are already compelling. For investors building or repositioning portfolios, the financial case for new builds has arguably never been clearer.
Let’s Talk About Your Opportunity
Whether you are a developer assessing a new project, an investor building a portfolio, or a buyer weighing up your options, the Kapalua Advisory team is here to help you understand exactly where the opportunity sits.
Get in touch with us today. We would love to walk through your situation and help you move forward with a clear, confident plan.
Call us, email us, or request a consultation – we welcome the conversation.
This article is for general information purposes only and is based on Budget Paper No. 2, 2026-27 as announced on 12 May 2026. Final legislation may differ from the budget announcement. This is not tax or financial advice. All clients should seek independent advice from a qualified accountant or tax adviser regarding their specific circumstances. Kapalua Advisory does not provide tax advice.