The latest Federal Budget has delivered some of the most significant proposed changes to Australian property investment taxation in decades, with reforms aimed at reshaping investor behaviour, increasing owner-occupier opportunities and encouraging the construction of new housing.

While many of the measures are not scheduled to take effect until July 2027, the announcement has already sparked strong discussion across the property industry.

The following insights are based on commentary provided by the Real Estate Institute of Australia CEO, Scott Rollason, following the Federal Budget release.

Capital Gains Tax Changes Proposed

One of the biggest changes announced is the proposed overhaul of Capital Gains Tax (CGT).

Under the proposal:

• The current 50% CGT discount will remain in place until 1 July 2027
• From that date, the system would move to an inflation-indexation model similar to the pre-1999 framework
• New dwelling builds will retain access to the existing 50% CGT discount option

Another major surprise is the proposal for all capital gains to be subject to a minimum 30% tax rate from July 2027.

This means investors may no longer benefit from strategically selling assets during lower-income years to reduce CGT obligations.

Importantly, newly built housing appears to receive preferential treatment under the proposed system, further signalling the Government’s focus on encouraging additional housing construction.

Negative Gearing to Be Restricted to New Dwellings

The Budget also proposes major changes to negative gearing.

From July 2027:

• Investors would only be able to negatively gear newly built dwellings against other forms of income
• Existing investment properties purchased before Budget Night would be grandfathered and unaffected
• Properties purchased after Budget Night would still be able to negatively gear until 1 July 2027 under transitional arrangements

After July 2027, losses generated from existing residential investment properties purchased after Budget Night would no longer be offset against wage or other income. Instead, those losses could only be carried forward to offset future residential property income.

This represents a substantial shift in how many investors structure and assess property purchases.

Potential Impact on Housing Supply

The Government forecasts these measures could help an additional 75,000 Australians become owner-occupiers over the next decade.

However, there are also concerns around housing supply.

Modelling referenced in the Budget suggests the changes may result in approximately 35,000 fewer homes being built over 10 years due to reduced investor participation.

To counter this, the Government announced:

• A $2 billion investment into enabling infrastructure
• Funding for water, sewerage and essential services to support housing developments
• Fast-tracked approval conditions tied to state and territory funding agreements

The Government forecasts this infrastructure investment could support the delivery of an additional 65,000 homes over the next decade.

Foreign Investment and Housing Affordability

The Budget also extends restrictions on foreign investors purchasing existing homes, alongside additional measures aimed at youth housing support.

Funding has been allocated to help secure housing for approximately 4,000 young Australians at risk of homelessness.

What Could This Mean for Property Owners and Investors?

While many details will continue to evolve, the proposed changes clearly signal a shift toward encouraging:

• Construction of new housing
• Owner-occupier participation
• Reduced reliance on established property investors

For investors, the distinction between established properties and new builds is becoming increasingly important from both a taxation and long-term strategy perspective.

At the same time, there are growing industry concerns about how reducing investor incentives may impact rental supply and affordability in already tight markets.

As always, property decisions should be based on your individual circumstances, long-term goals and professional financial advice.

At MIX Property Group, we’ll continue monitoring these proposed changes closely and keeping our clients informed as further detail emerges.