The Federal Budget introduced significant changes for property investors, business owners and SMSF trustees. With key commencement dates approaching, it is important to understand how the new rules may affect existing structures, future acquisitions and long-term tax outcomes.

Here’s a summary of the key measures following Royal Assent on 26 June 2026, noting that some related concession details remain subject to further guidance.

Broadly, the changes affect three areas: how rental losses are deducted, how future capital gains are taxed, and whether SMSFs can borrow to acquire residential property.

Negative gearing

From 1 July 2027, negative gearing will generally no longer be available for established residential properties purchased after 7:30pm AEST on 12 May 2026. Affected investors will not be able to offset rental losses against salary, business income or other personal income. Instead, those losses will generally only be deductible against income from residential rental properties, including related capital gains. These changes will apply to individuals, partnerships, companies and most trusts.

Where losses exceed residential property income in a year, the excess can be carried forward and used to offset residential property income in future years. This is intended to ensure investors can still obtain a future deduction for ongoing property costs, such as maintenance, even where those costs cannot be used immediately against other income.

Existing property owners, including those already under contract before the announcement, are grandfathered and can continue to access negative gearing under the current rules. The changes only apply to residential property; commercial property and other asset classes, such as shares, retain the existing treatment.

Eligible new builds remain an important exception. Investors may continue to access negative gearing, and may also receive more favourable CGT treatment, where the property genuinely adds to housing supply. For example, replacing one dwelling with one dwelling is unlikely to qualify, while replacing one dwelling with two separately titled duplexes may qualify.

CGT changes

From 1 July 2027, the existing 50% CGT discount for individuals and trusts will generally be replaced with an indexation system and a 30% minimum tax rate on capital gains accruing after that date, subject to limited exceptions. Assets bought and sold before 1 July 2027 are unaffected, while assets acquired after that date will be fully subject to the new rules.

For assets already held at 1 July 2027, the current rules continue to apply to gains accrued up to that date. Any later gain is expected to be taxed under the new indexation and minimum tax system. The asset’s value at 1 July 2027 will therefore be important and may need to be supported by a valuation or ATO-approved apportionment method when the asset is sold.

As noted above, eligible new residential builds that genuinely add to housing supply receive more favourable treatment. For CGT purposes, investors may choose between the existing 50% discount and the new indexation/minimum tax rules when they sell.

The Government has also flagged a new Innovative Business CGT Concession, which would preserve a 50% CGT discount for certain early-stage investors, founders and employee share scheme participants in innovative start-up businesses. This measure remains subject to consultation and further detail.

Separately, from 1 July 2027, the turnover threshold for the 50% active asset reduction under the small business CGT concessions is proposed to increase from $2m to $10m. The existing $2m threshold remains for the 15-year exemption, retirement exemption and small business rollover, although the $6m net asset value test may still provide an alternative pathway.

SMSF Borrowing Arrangements

From 10 August 2026, SMSFs will generally be restricted from entering into new limited recourse borrowing arrangements (LRBAs) to acquire residential property. In practical terms, SMSFs will no longer be able to borrow to purchase residential houses, units or apartments once the rules commence.

Existing SMSF residential property loans are generally grandfathered. Funds with an LRBA in place before 10 August 2026 can continue to hold the property and meet repayments. Refinancing should also remain available, provided the principal loan balance is not increased.

For SMSFs already in the process of buying residential property, timing will be critical. The key date is generally when the contract is entered into, not settlement. A contract exchanged before 10 August 2026 should generally be protected, even if settlement occurs later, but trustees should seek advice where finance approval, bare trust documentation or settlement timing remains unresolved.

The restriction applies to residential property only. SMSFs can still acquire residential property without borrowing, and borrowing for commercial or business real property is expected to remain available where the relevant superannuation law requirements are satisfied.

We will keep you updated as further guidance becomes available. Please contact us on 1300 743 267 if you would like to discuss how these changes may affect your structure or investment plans.