How Will Negative Gearing & CGT Reform Affect Property Investors?

Negative gearing and capital gains tax have long influenced the way Australians think about investment property.

For many investors, the ability to deduct rental losses against other income, combined with the capital gains tax discount, has helped shape decisions about buying, holding and selling residential investment properties.

Following the 2026–27 Australian Federal Budget, the Government has announced proposed reforms to negative gearing and capital gains tax arrangements. According to the Australian Taxation Office, these changes are intended to apply from 1 July 2027, but they are not yet law.

For property investors, the important question is not simply whether negative gearing or CGT rules are changing. It is what those changes could mean for future investment decisions, cash flow, long-term returns and the role property plays in a broader financial strategy.

This article explains the proposed reforms, what they may mean for existing and prospective investors, and why the debate may also prompt some homeowners to rethink how they use property wealth.

What Is Negative Gearing? Negative Gearing Explained

Negative gearing is a common investment strategy in Australia. A property is negatively geared when the costs of owning the property are greater than the rental income it generates.

For example, if an investment property earns $30,000 in rent over a year but costs $38,000 in interest, maintenance, insurance, council rates and other deductible expenses, the property has produced an $8,000 rental loss.

Under current rules, many investors can deduct rental losses against other taxable income, such as salary or business income, depending on their circumstances and the relevant tax rules.

In practical terms, negative gearing can reduce the after-tax cost of holding a loss-making investment property. But it does not change the underlying cash flow reality: the investor is still funding a shortfall.

That distinction matters. A negatively geared property may still be part of a successful long-term strategy if the investor expects rental income to rise, the property to grow in value, or both. But the strategy often depends on the investor being able to carry ongoing costs while waiting for future gains.

If the proposed negative gearing changes become law, investors may need to place more emphasis on whether an investment property works on its own fundamentals, rather than relying heavily on tax deductions to support the strategy.

What Is Capital Gains Tax?

Capital gains tax, or CGT, is the tax treatment that applies when you sell an asset for more than it cost you. For property investors, CGT can apply when an investment property is sold for a profit.

Although it is commonly called “capital gains tax”, the ATO explains that CGT is part of income tax rather than a separate tax.

For example, if you purchase an investment property and later sell it for more than your cost base, you may make a capital gain. Your cost base can include the purchase price and certain eligible costs associated with buying, holding and selling the property.

Currently, eligible Australian resident individuals may be able to access the 50% CGT discount if they have held an eligible asset for more than 12 months.

For investors, the key question is not only whether a property rises in value. It is what they keep after tax, interest, transaction costs, maintenance, inflation and other ownership costs are taken into account.

That is why proposed CGT changes matter. If the after-tax return from selling an investment property changes, some investors may reassess how they think about long-term property returns.

Changes to Investment Property Tax Benefits

The Government has announced proposed reforms to negative gearing and capital gains tax arrangements as part of the 2026–27 Federal Budget.

According to the ATO, the announced changes are intended to:

• limit negative gearing for residential property investments to new builds;
• replace the 50% CGT discount for individuals, trusts and partnerships with cost base indexation and a 30% minimum tax rate on capital gains;
• limit the impact on existing investments.

The Federal Budget material also states that negative gearing will be limited to new builds from 1 July 2027, with existing arrangements remaining unchanged for properties held before Budget night. Investors who buy new builds would still be able to deduct losses from other income.

This is an important point. The proposed reforms are not an immediate removal of negative gearing for all investment properties. They are proposed changes that may affect future property investment decisions depending on the type of property, timing of purchase and the investor’s circumstances.

Because the measures are not yet law, investors should treat them as a planning consideration rather than a final tax rule. Before buying, selling or restructuring an investment property, it is important to seek professional advice based on personal circumstances.

How Will These Reforms Affect Everyday Australians?

The reforms will not affect every Australian in the same way. The practical impact depends on whether someone already owns an investment property, is considering buying one, or is a homeowner thinking about using equity to fund another financial goal.

A useful way to think about the issue is to separate three groups:

• existing landlords;
• prospective property investors;
• homeowners considering how to use home equity.

Each group faces a different decision.

Reduced Investor Cash Flow

For prospective investors, the biggest issue may be cash flow.

Negative gearing can help reduce the after-tax cost of holding a loss-making property. If future access to negative gearing is limited for some established residential properties, investors may need to assess whether the property still makes sense without the same tax treatment.

That does not mean residential property investment will stop being attractive. But it may change what investors prioritise.

Investors may need to ask:

• Does the rent cover enough of the property’s costs?
• How much cash will I need to contribute each month?
• Could I still hold the property if interest rates, vacancy periods or repair costs increase?
• Am I relying too heavily on tax deductions?
• Am I relying too heavily on future capital growth?
• Would a new build or an established property better suit my strategy under the proposed rules?

The key point is that tax treatment should not be the only reason an investment property appears to work. Rental yield, location, tenant demand, maintenance requirements, borrowing costs and long-term asset quality all matter.

Considerations for Existing Property Investors

For existing landlords, the proposed reforms may not require an immediate change, especially if existing arrangements remain unchanged for properties held before Budget night, as current Budget material indicates.

However, existing investors should still pay attention.

Even where current tax arrangements are preserved, the broader investment environment may shift. Buyer demand, investor sentiment, new housing supply, rental expectations and long-term tax planning may all be affected over time.

For existing landlords, the practical response is not necessarily to sell, buy more or restructure immediately. A more useful first step may be to review the performance of the property itself.

That includes:

• rental income;
• vacancy periods;
• tenant quality;
• maintenance costs;
• compliance obligations;
• insurance;
• loan costs;
• capital growth potential;
• after-tax cash flow.

This is where professional property management can play a meaningful role. A well-managed investment property is not only about collecting rent. It is about protecting the asset, reducing avoidable vacancy, managing tenant relationships, keeping maintenance under control and helping the property perform over time.

If tax concessions become less central to future investment decisions, property fundamentals become even more important. For existing landlords, strong management and disciplined asset oversight may be one of the most practical ways to respond to a changing tax environment.

Impact on Long-Term Property Returns

Property investment returns usually come from two main sources: rental income and capital growth.

Negative gearing affects the holding period by reducing the after-tax cost of rental losses for eligible investors. CGT treatment affects the eventual sale outcome by influencing how much of a capital gain is taxed.

If the proposed reforms become law, some investors may need to reassess the after-tax return they expect from residential property. This may be particularly relevant for investors who have relied on a combination of tax deductions during ownership and discounted capital gains on sale.

The Budget material says the Government intends to limit negative gearing to new builds from 1 July 2027 to focus tax support on new supply.

For investors, that points to a broader shift: future investment decisions may need to rely less on tax concessions and more on whether the property is genuinely strong as an asset.

That means looking closely at:

• rental demand;
• local vacancy rates;
• property condition;
• borrowing costs;
• maintenance exposure;
• tenant profile;
• suburb-level supply;
• long-term capital growth drivers;
• exit strategy.

A tax benefit can support an investment strategy, but it should not be the foundation of the whole strategy.

Selling Investment Properties Under New Tax Rules

Selling an investment property can trigger capital gains tax. For investors, proposed CGT reform may make the timing and structure of a sale more important.

Before selling, investors should consider:

• the property’s cost base;
• the expected capital gain;
• whether current CGT discount rules apply;
• whether any future indexation or minimum tax rules may apply;
• the contract date and tax year;
• available capital losses;
• transaction costs;
• loan discharge costs;
• the investor’s broader taxable income position.

Selling purely because of a proposed tax change may not be the right decision. A rushed sale can create its own costs and risks.

Equally, ignoring tax reform may not be sensible either. Investors with large unrealised gains, highly leveraged properties or plans to sell in the next few years should seek professional tax advice before making decisions.

The safest conclusion is that proposed CGT changes should become part of investment planning, not the sole driver of investment decisions.

Important Financial Planning Considerations

The proposed negative gearing and CGT changes make financial planning more important.

• For prospective investors, the central question is whether the property still works after factoring in debt, tax, expenses, vacancy risk and realistic capital growth assumptions.

• For existing investors, the question is whether the property is being managed and held in a way that supports long-term returns.

• For homeowners, there is another question: if you are thinking about using home equity, is your goal to become a property investor, or is your goal simply to access capital?

That distinction matters.

Homeowners and Home Equity Options - HomeFlex

Some homeowners use equity in their home to help fund the purchase of an investment property. For some people, that may form part of a long-term wealth strategy. But it also introduces risk: more debt, additional property exposure, tenant management, vacancies, maintenance costs, transaction costs and tax complexity.

If the real objective is to access capital for lifestyle, retirement, debt management, family support or major expenses or funding a business, buying another property may not be the only option to consider.

LongView’s HomeFlex product may be relevant for eligible homeowners who want to unlock home equity while continuing to live in their home, without additional monthly repayments or interest compounding in the way it does with a refinance or a reverse mortgage.

With HomeFlex, LongView provides money now in exchange for an agreed share in any future increase in the value of your home. That means LongView carries capital growth risk alongside the homeowner - unlike for example a reverse mortgage where interest compounds for the lender but the homeowner bears the property market risk.

 

Residential Property Options - LongView Home Equity Investment Fund

Investors wishing to gain exposure to a portfolio of Australian residential property investments, without taking on more debt and without the risk and hassles of becoming a landlord themselves may wish to consider the LongView Home Equity Investment Fund.

• With a starting investment of $100K, investors are able to invest in a fund that offers exposure to a diversified portfolio of established family homes, without the high initial capital that would traditionally be required. You can use your SMSF to invest in the Fund.

• The fund co-invests alongside homebuyers and homeowners in return for a share in the future potential capital growth of the property through a shared equity agreement. This process allows the fund to benefit from the potential capital growth of the property without contributing to mortgage, maintenance costs or land tax.

• We only invest in Robust Older Dwellings on Well-Located Land (RODWELLs), where our data analysis shows land value drives capital growth above the house price index. This strategic emphasis aligns our portfolio with the most reliable drivers of property value growth.

• Through intelligent asset selection, we utilise advanced data analytics and the deep market knowledge of our in-house buyers’ advocates to identify RODWELLs. This method ensures we target properties that exhibit potential for long-term capital appreciation.

Neither Home Equity Investment nor HomeFlex is a negative gearing strategy. Neither should be presented as a substitute for tax advice or investment advice. Their relevance is different: they may be worth comparing when a homeowner is considering whether to use property wealth to access capital, rather than taking on more debt or buying an investment property. 

Will Negative Gearing and CGT Changes Affect Rental Prices?

It is too early to say with certainty.

Rental prices are influenced by many factors, including housing supply, population growth, household formation, wage growth, vacancy rates, interest rates, construction activity and investor participation.

The Government’s stated position is that limiting negative gearing to new builds is intended to focus tax support on new housing supply.

Some investors may become more cautious about buying established residential investment properties if the proposed rules reduce the tax benefits available to them. Others may shift attention toward new builds, where negative gearing benefits are intended to remain available.

The actual effect on rents will depend on how investors, developers, renters, lenders and state property markets respond.

For landlords, the practical takeaway is not to try to predict the entire rental market. It is to focus on what can be controlled: property condition, tenant experience, maintenance, compliance, vacancy management and realistic rental expectations.

For prospective investors, it reinforces the need to stress test the numbers rather than relying on broad assumptions about rent growth.

Learn More About Property Investment With LongView

Negative gearing and capital gains tax reform may change the way Australians think about residential property investment.

For investors, the key lesson is to focus on fundamentals. Tax treatment matters, but it should not be the only reason an investment property makes sense. Rental income, borrowing costs, vacancy risk, maintenance, tenant quality, location and long-term asset performance remain critical.

For existing landlords, this may be a timely moment to review whether the property is being managed in a way that supports resilient long-term returns. Strong property management can help protect the asset, reduce avoidable vacancy, manage risk and improve the day-to-day performance of a rental property.

For homeowners, the debate raises a different question. If you are thinking about using home equity, are you trying to become a property investor, or are you trying to access capital?

That question is important. Buying another property may suit some people. Others may prefer to compare options such as refinancing, downsizing, reverse mortgages, Home Equity Investment, HomeFlex, selling other assets or using savings.

LongView works across both sides of this conversation: helping property investors manage rental assets, and helping eligible homeowners explore different ways to use property wealth.

Because the proposed reforms are not yet law, decisions should not be made on headlines alone. But they are a timely reminder to review your property strategy, understand the trade-offs and seek qualified advice before making major financial decisions.

Useful Resources

To compare LongView options in more detail, you may find these resources useful:

• Compare home equity options
• Use the HomeFlex calculator
• Check HomeFlex eligibility
• Read the HomeFlex FAQs

Government Sources

The information in this article references current Australian Government and ATO material available at the time of writing. Readers should check the latest official guidance before making financial or tax decisions.

• ATO: Tax reform — reforming negative gearing and capital gains tax
• Australian Government Budget 2026–27: Tax reform
• ATO: Capital gains tax
• ATO: CGT discount
• ATO: Rental property tax considerations