Tuesday the 12th May 2026, saw the release of the latest Federal budget. It seems that budget time for some politicians is a time to start shooting fish in a barrel. For many years there was the continued hike on alcohol and tobacco. The current government has chosen a different barrel this year. This year they have decided to go after property investors.
These days property investors are made up of average, hard working Australians who are doing their best to secure their future, so as hopefully not having to rely on the pension.
Here is a brief summary of what has been implemented:
The 2026-27 Federal Budget introduces major reforms to the capital gains tax (CGT) system, set to take effect from July 1, 2027. The current 50% CGT discount will be replaced with an indexation method (adjusting for inflation) and a 30% minimum tax rate on gains, aimed at targeting long-term investment tax concessions.
Key 2026 Federal Budget Capital Gains Tax Changes:
- Removal of 50% Discount: For assets acquired after budget night, the blanket 50% CGT discount will be removed for gains realized after July 1, 2027.
- New Indexation Method: From July 1, 2027, taxable gains will be calculated by adjusting the asset’s cost base for inflation, rather than receiving a flat 50% discount.
- Minimum 30% Tax Rate: A minimum tax rate of 30% will apply to real capital gains realized from July 1, 2027, to ensure investors pay a minimum level of tax regardless of their marginal rate.
- Transition Rules: Assets purchased before 7:30 PM (AEST) on Budget Night (May 12, 2026) are grandfathered. Those sold after 1 July 2027 will use a combination of the old 50% discount system and the new indexation method.
- Negative Gearing: Restricted to new-build residential properties. Investors buying established housing after 12 May 2026 can only deduct rental losses against other residential property income, not against salary income.
- Exceptions: The main residence CGT exemption is not affected, and special rules will apply to new builds.
- Discretionary Trusts: A minimum 30% tax will be applied to trust income from 1 July 2028
- Start-ups Sector: Following industry concerns, the government is consulting on specific applications for the start-up sector to ensure investment is not unfairly hindered.
There is the stereotype that property investors are baby boomers, forcing young families out of the market. I can tell you the property investors I deal with come in quite a broad range of ages.
I get that the Australian economy is in an absolute mess (who caused that, is a whole other conversation), and measures need to be taken to turn things around, But surely, going after Aussies who are trying to secure a future, by trying to turn a property market around and throw people into negative equity, is not the way to go.
They can put all the spin they want to on this. They say that they are creating “housing affordability”. Do they really believe Australians are that gullible.
By housing affordability, they mean, they want to bring property prices crashing down. The reality is, an extremely small percentage of people might then be able to buy something, however this comes at the cost of a much, much larger percentage of homeowners (not just investors), having tens and even hundreds of thousands of dollars knocked off the value of their properties, and creating a situation whereby their homes are worth less than they owe on their mortgage.
Now it’s not all doom and gloom. Things to consider;
- Firstly, if their cunning plan works and the property market does head into decline to create affordable housing, investors will continue to invest.
- Then we must remember that we live in a democratic society and in two years we will go to the polls again. So, if this budget turns out to be an absolute failure, you can bet other parties will campaign on repealing it (in fact that has already started).
This budget like so many government decisions, divide’s opinion. The test of whether it is right or wrong, is time. No matter how much spin any politician puts on their agenda, we Australians know how it affects us financially and make our decisions accordingly.
It must be noted that this article only deals with one part of the Federal Budget, there are many more changes which can be found online.
This article is in no way meant as financial advice nor a preference to any political party. It is written with my own personal view as I see it. Your view may be totally different and I totally and 100% respect that.