The Federal Budget dropped Tuesday night. Treasurer Jim Chalmers called it the most significant personal tax change in decades. He’s not wrong.

If you own property, invest in property, or hold assets in a family trust, this affects you.

Here’s what you need to know.

First Home Buyers — Some Genuine Good News

This budget isn’t all bad news if you’re trying to get into the market for the first time.

Total government investment in housing hits a record $47 billion. $2 billion of that is earmarked for infrastructure — roads, power, drains — to unlock around 65,000 new homes. Supply is a long game, but this moves in the right direction.

The ban on foreign investors buying existing homes is being extended. That reduces one source of competition at the lower end of the market.

The bigger lever for first home buyers is the flow-on effect from the investor changes. With negative gearing removed for established properties and CGT overhauled, the government expects fewer highly leveraged investors competing at auctions. Budget papers estimate the changes could enable an additional 75,000 Australians to buy their own home over the next decade, with a temporary easing in house price growth of around 2 per cent.

Honest caveat: a 2 per cent moderation in price growth is not a price crash. It’s a slight reduction in how fast prices rise. And rents may tick up slightly as some investors exit the market or redirect to new builds. The government has acknowledged this.

If you’re a first home buyer, the real opportunity may be less competition and more supply over the next few years — not cheaper prices overnight.

Negative Gearing — The Big One

Negative gearing on existing residential properties is being removed. The cut-off date is Budget night — 7:30pm AEST on 12 May 2026. The laws take effect from 1 July 2027, but contracts signed after that time are already caught.

If you purchased — or had a contract signed — before 7:30pm AEST on 12 May 2026, you’re fine. Nothing changes for those properties until you sell.

If you buy an established property from here, the rules are different. Any losses you make — where your borrowing costs exceed your rental income — can only be offset against rental income or capital gains from other residential properties. You can’t use those losses to reduce your regular taxable income anymore. You carry them forward until you have residential property income to offset them against.

New builds are exempt. That’s an important distinction — and it’s deliberate. The government wants to push investor activity toward new housing supply.

Commercial property, shares, and other asset classes — as far as we can tell — appear unaffected. Negative gearing looks to remain available there.

What this means in practice: The economics of buying established investment properties have changed. The after-tax cost of holding a negatively geared property just went up. If you’re thinking about buying, it’s worth running the numbers again with your accountant before you proceed.

Capital Gains Tax — A Return to the Old Rules

From 1 July 2027, the 50% CGT discount is being replaced by cost base indexation for assets held more than 12 months. There’s also a new 30% minimum tax on net capital gains.

This is essentially a return to how CGT worked before 1999, when the Howard government introduced the 50% discount.

What does cost base indexation mean? Instead of halving your capital gain and paying tax on that, your cost base gets adjusted for inflation (CPI) over the time you held the asset. You pay tax on the real gain — what the asset increased in value above inflation. If inflation was high during your holding period, your taxable gain could be lower. If inflation was modest, it could be higher than under the old 50% discount.

The 30% minimum tax is designed to stop people timing asset sales for low-income years — such as early retirement — to minimise their CGT.

The transitional arrangements matter:

• Assets bought and sold before 1 July 2027: no change.
• Assets you already own: the 50% discount applies to gains up to 1 July 2027. Indexation and the minimum tax apply to gains after that date.
• Assets bought after 1 July 2027: fully under the new rules.

New residential properties get a choice — you can elect either the 50% discount or cost base indexation and the minimum tax. That flexibility isn’t available for established residential property.

What this means in practice: If you’re holding assets with significant embedded gains, there may be a window before 1 July 2027 where selling under the current 50% discount rules makes sense. That’s a conversation worth having with your accountant now, not later. This is not advice — it’s a prompt to get advice.

Discretionary Trusts — A 30% Minimum Tax

If you hold assets in a family trust, this is relevant.

From 1 July 2028, the Government will apply a 30% minimum tax on the taxable income of discretionary trusts. Beneficiaries will receive credits for the tax paid, but those credits are non-refundable.

The government estimates there are over 900,000 family trusts in Australia. Many will be affected.

Fixed trusts, superannuation funds, special disability trusts, charitable trusts and deceased estates are excluded. Some farming income and income relating to vulnerable minors is also excluded.

There’s a three-year window from 1 July 2027 during which small businesses can restructure from discretionary trusts into a company or fixed trust with rollover relief. That’s worth watching.

What this means in practice: The trust structure that’s worked for many property investors for years is becoming less tax-effective. If your investment portfolio sits in a discretionary trust, you’ll want to review that with your accountant and legal adviser before 2028. Estate plans with testamentary trusts are also worth revisiting.

The Bottom Line

This is a significant budget for property investors. The removal of negative gearing for established properties and the overhaul of CGT will change how many people think about building and holding investment portfolios.

None of this is legislated yet. It still needs to pass Parliament. But the direction is clear, and some changes — specifically around negative gearing — effectively start now.

If you have questions about how this affects your borrowing capacity, portfolio structure, or next property purchase, reach out.

This article is general information only and does not constitute financial or tax advice. Please consult a qualified accountant or financial adviser regarding your specific circumstances.