Negative Gearing and CGT Changes in the 2026 Budget: What They Mean for Queensland Buyers and Investors
The 2026–27 Federal Budget, handed down on 12 May 2026, made the biggest changes to property tax settings in decades. Negative gearing is being limited for established homes, and the 50% capital gains tax (CGT) discount is being replaced. Together with record-low rental vacancies and a housing supply shortfall, the changes will shape how people buy and invest in Queensland for years.
This guide explains what changed, who it affects, and what it could mean if you are buying a home, investing or renting in South East Queensland.
These are budget measures as announced on 12 May 2026. They need to pass Parliament and the details may change. This article is general information, not tax or financial advice: speak to your accountant about your own situation.
What changed in the 2026 Budget
The announced changes fall into two parts: negative gearing and capital gains tax.
- Negative gearing on established homes: for established residential properties bought after 7:30pm (AEST) on 12 May 2026, rental losses will no longer reduce tax on salary, wages or business income from 1 July 2027. The losses are quarantined: they can only be offset against residential property income and gains, and any excess is carried forward.
- Existing investments are grandfathered: properties bought before the cut-off, including contracts signed but not yet settled, keep the current treatment until they are sold.
- New builds keep negative gearing: newly built homes remain fully negatively gearable, as do investments that support government affordable-housing programs.
- CGT discount replaced: for gains accruing from 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced with indexation of the cost base for inflation, plus a 30% minimum tax on real capital gains. Investors in new builds can choose, when they sell, between the 50% discount and indexation.
The stated aim is to steer investment towards new housing and give owner-occupiers more of a chance against investors for established homes.
Why investors and first home buyers may now compete for the same new homes
One practical consequence gets less attention than it deserves. New builds are now where negative gearing still applies, and most first home buyer incentives are also built around new homes: Queensland’s First Home Owner Grant for new homes, no transfer duty for first home buyers on new homes, the 5% deposit Home Guarantee Scheme, and shared-equity schemes such as Queensland’s Boost to Buy and the federal Help to Buy.
That points two large groups of buyers at the same product, often in the same places: house-and-land packages and new estates in the growth corridors on the urban fringe. When demand for one type of property rises from two directions at once, developers price accordingly, and some of the value of the incentives can be absorbed by higher land and build prices.
Investors who would rather buy an established home close to jobs, schools and transport now face a different trade-off: weaker tax benefits on established property, or a new build in a newer area. Neither choice is wrong, but new estates need careful due diligence on supply pipelines, build quality, land size and resale demand. If you are weighing up your first purchase, our guide to rentvesting vs first home buyer grants compares the options.
As the tax benefits of holding established investment properties shrink, some landlords may choose to sell. That frees up homes for owner-occupiers, which is part of the policy’s intent. But every established rental sold to an owner-occupier is one less rental home, and South East Queensland’s rental market has very little room to absorb that.
The REIQ’s Residential Vacancy Rate Report for the December quarter 2025 classified every region in South East Queensland as “tight”:
| SEQ region | Vacancy rate (Dec Q 2025) | REIQ classification |
| Sunshine Coast | 0.7% | Tight |
| Ipswich | 0.9% | Tight |
| Logan | 0.9% | Tight |
| Moreton Bay | 0.9% | Tight |
| Greater Brisbane | 1.0% | Tight |
| Redland | 1.0% | Tight |
| Gold Coast | 1.1% | Tight |
| Brisbane LGA | 1.2% | Tight |
The REIQ treats a vacancy rate below 2.5% as undersupplied and below 1.5% as tight. With every SEQ region at or under 1.2%, even a modest fall in rental supply would put further pressure on rents. When negative gearing was last restricted, from 1985 to 1987, rents rose in some capital cities and the change was reversed; economists still debate how much of that was caused by the policy. For more on the local numbers, see what the vacancy data is telling buyers in 2026.
Higher rents don’t just cost more each month. They slow down deposit saving, and that compounds. A couple renting a modest three-bedroom home in Greater Brisbane can easily spend $2,400 to $2,800 a month on rent. After tax, groceries, transport and utilities, building a meaningful deposit becomes difficult, and the target keeps moving while prices are supported by demand.
Shared-equity schemes are designed to close that gap. Under Help to Buy, the federal government can take an equity share of up to 40% in a new home; Queensland’s Boost to Buy offers a state equity share. They can get you into the market years sooner with a smaller deposit and smaller loan. The trade-offs are real too: you share part of any capital growth with the government when you sell or buy it out, and there are rules on eligibility, income and what you can do with the property. Model both paths with your broker before you commit. Our guide to first home buyer schemes in 2026 covers the options.
Build-to-rent (BTR) projects are large developments built to be rented out long term, usually by a single institutional owner. Governments at both levels offer incentives to increase rental supply:
- Faster depreciation: eligible BTR projects can claim a 4% annual capital works deduction, compared with 2.5% for most residential investors.
- Lower withholding tax: eligible foreign investors in BTR through managed investment trusts pay a concessional 15% withholding rate.
- Queensland land tax relief: eligible BTR developments receive a 50% reduction in the taxable value of their land and an exemption from the foreign land tax surcharge.
- Foreign investment fees: application fees for BTR projects have been reduced.
Many of the larger BTR platforms are backed by global investors, including pension funds, alongside listed Australian developers. Supporters argue BTR adds purpose-built rental supply and longer, more secure tenancies. Critics question tax concessions that individual investors don’t receive. For buyers, the practical points are that BTR competes for the same land and construction capacity as new homes, and that institutional landlords are a growing part of the rental market. Our look at Australia’s housing pipeline to 2029 goes deeper on BTR and construction constraints.
Underneath the tax debate is a simpler problem: Australia is not building homes as fast as its population is growing. According to analysis by the Institute of Public Affairs, the population grew by nearly 1.5 million people between 2023 and 2025, while 527,222 homes were completed. National targets call for 1.2 million new homes over five years, and the industry is building well short of that pace.
While demand from population growth keeps outpacing new supply, a large, lasting fall in Queensland property prices is unlikely, whatever the tax settings. Some established segments may soften as investor demand shifts, but the shortage puts a floor under the market overall.
How the changes affect you depends on what you are buying and why:
- Owner-occupiers: over time, you may face less investor competition for established homes, particularly in middle-ring suburbs. Pick a home that suits your life first, and buy on value, not on tax settings.
- First home buyers: compare a new home with incentives against an established home without them, on the total cost and the long-term growth prospects. Incentives that are priced in are not a saving.
- Investors: existing holdings bought before the cut-off are grandfathered, which may make some worth holding longer. For new purchases, weigh the after-tax return of new builds (negative gearing kept) against established property (stronger land content, quarantined losses). Yield matters more than it did: our rentvesting guide and suburb reports are good starting points.
- Everyone: get advice from your accountant before you sign. The rules are still to be legislated, and the right structure depends on your income, holding period and plans.
In a tight market, how you buy matters as much as what you buy. See our guide to on-market, pre-market and off-market property in Queensland, or talk to us about a buying strategy that fits the new rules.
- Law Society Journal: Federal budget 2026, limits to negative gearing and capital gains tax reform
- William Buck: Federal Budget Analysis 2026, negative gearing
- REIQ: Residential Vacancy Rate Report, December quarter 2025
- Australian Taxation Office: Build-to-rent development tax incentives
- Queensland Revenue Office: Land tax relief for build-to-rent
What are the 2026 negative gearing changes?
For established residential properties bought after 7:30pm AEST on 12 May 2026, rental losses will no longer reduce tax on salary or other income from 1 July 2027. They can only be offset against residential property income and gains, with any excess carried forward. New builds keep negative gearing, and properties bought before the cut-off keep the current rules until sold.
What is replacing the 50% CGT discount?
For gains accruing from 1 July 2027, the 50% discount for individuals, trusts and partnerships is replaced with indexation of the cost base for inflation, plus a 30% minimum tax on real capital gains. Investors in new builds can choose either method when they sell.
Do the changes affect properties I already own?
Under the announced rules, established properties bought (including contracts signed) before 7:30pm AEST on 12 May 2026 keep the current negative gearing treatment until sold. The CGT change applies to gains accruing from 1 July 2027. Ask your accountant how this applies to you.
Will the changes make Queensland property prices fall?
A large, lasting fall is unlikely while housing supply remains well short of population growth. Some established segments may soften as investor demand shifts, but tight vacancy rates and construction constraints continue to support prices across South East Queensland.
What is build-to-rent?
Build-to-rent (BTR) developments are large projects built to be rented out long term, usually by a single institutional owner. Governments offer BTR tax concessions to increase rental supply.