Federal Budget 2026 Property Tax Guide
The Federal Budget 2026 property tax changes have raised big questions for Australian property investors.
What happens to negative gearing?
How will the Capital Gains Tax change?
Are family trusts still useful?
What about bucket companies, SMSFs and company ownership?
It can feel confusing.
Let’s break it down.
These changes are still proposed. They are not all law yet. The detail will matter. Draft legislation will matter. The next Federal Election may also matter.
But smart property taxpayers ask questions early.
Here’s what you need to know.
The Big Picture for Property Investors
The Government is clearly trying to push investment toward new housing supply.
This is not a maybe.
The announced reforms are aimed at limiting negative gearing benefits for residential property investments to new builds, replacing the 50% CGT discount for individuals, trusts and partnerships with cost base indexation, and introducing a 30% minimum tax rate on capital gains. The ATO has also stated that this measure is not yet law and is intended to apply from 1 July 2027.
In plain English, the Government wants more investment dollars flowing into properties that add housing supply.
That means new builds are clearly favoured.
But that does not mean every new build is a good investment.
More on that shortly.
Negative Gearing Changes
Negative gearing happens when your rental property makes a tax loss.
That means your property costs exceed your rent.
For example:
| Item | Amount |
|---|---|
| Rent received | $35,000 |
| Interest and property costs | $52,000 |
| Tax loss | $17,000 |
Under current rules, many investors can use that loss to reduce other taxable income, such as salary.
That has helped reduce tax bills for many property investors.
Pay your tax, but don’t tip.
The proposed rules change this for some investors.
The Budget material says the Government will limit the benefits of negative gearing to new residential properties, while reintroducing capital gains tax cost base indexation and a 30% minimum tax on capital gains.
For existing investors who already held property before Budget night, current arrangements are expected to be protected.
That is important.
In plain English, this means many existing investors should not panic.
But new investors buying established residential property after Budget night may need to model their cash flow more carefully.
If losses are quarantined, the tax benefit may still have value.
But it may be delayed.
And delayed tax relief can still affect your cash flow.
New Builds Are Clearly Favoured
Eligible new build properties are expected to keep stronger tax benefits.
This may include:
- New apartments
- New townhouses
- New homes
- Duplexes
- Projects that increase dwelling numbers
But be careful.
Not every “new-looking” property will qualify.
A knockdown rebuild may not be enough if it does not increase housing supply.
A project that creates extra dwellings may be stronger.
Here’s what you need to know.
Tax benefits should never drive the whole investment decision.
The property still needs the right ingredients:
- Good location
- Strong tenant demand
- Sensible debt
- Fair price
- Long-term resale appeal
- Good cash flow numbers
These make the cake.
Tax planning is the cream.
A bad cake with lots of cream is still a bad cake.
So before buying a new build, ask better questions.
Is the area oversupplied?
Will tenants want to live there?
Is the price fair?
Is the body corporate too high?
Will the property still appeal to buyers in 10 years?
That is where good advice matters.
Capital Gains Tax Changes
This is one of the biggest proposed changes.
Currently, many Australian residents can access a 50% CGT discount if they hold an asset for at least 12 months. The ATO explains that this means you pay tax on only half the net capital gain on that asset.
The proposed rules may replace that discount with cost-based indexation and a 30% minimum tax floor.
Indexation means the asset’s cost base is adjusted for inflation.
In simple terms, it tries to tax the real gain.
That sounds fair.
But whether you pay less or more will depend on:
- How long have you held the property
- Inflation during that period
- Capital growth
- Your tax rate
- Whether the property is new or existing
- Whether the property is owned personally, in a trust, in a company, or in an SMSF
Let’s break it down with a simple example.
If you bought a property for $800,000 and sold it for $1,200,000, your gain is $400,000.
Under the current 50% discount, only $200,000 may be taxable.
Under indexation, your cost base may be increased for inflation.
If inflation lifts your indexed cost base to $1,100,000, your real gain is only $100,000.
In that case, indexation may yield better results.
But if the property grows very strongly and inflation is low, indexation may produce a worse result than the current 50% discount.
This is why investors need to model the numbers.
Do not guess.
Pre-CGT Assets and 30 June 2027 Valuations
Pre-CGT assets are assets acquired before 20 September 1985.
Under current rules, they are generally exempt from CGT.
The Budget material states that the CGT reforms will apply only to gains arising after 1 July 2027.
That makes the value on 30 June 2027 very important.
This could matter for:
- Pre-CGT properties
- Long-held investment properties
- Business assets
- Trust assets
- Family wealth structures
- Properties with uneven growth
- Renovated or rezoned properties
Between 1 July 2027 and the couple of years that follow, investors with major assets should consider ordering a fair market valuation as at 30 June 2027.
Why?
Because years later, you may need evidence.
Do not rely on memory.
Do not rely only on a rough online estimate.
A proper valuation may help protect your future tax position.
Pay your tax, but don’t tip.
Trust Tax Changes
The proposed trust changes are also significant.
The ATO has stated that the Government announced a 30% minimum tax on discretionary trusts from 1 July 2028. It has also stated that this measure is not yet law, and that the minimum tax would apply at the trustee level. Non-corporate beneficiaries would be able to claim a non-refundable income tax credit for tax paid by the trustee on that income.
Let’s put that in plain English.
The trust may pay 30%.
The beneficiary still declares the income.
The beneficiary may get a credit.
But the credit may be non-refundable.
That means it may reduce tax payable.
But it may not create a refund.
That is very different from normal refundable franking credits.
Family trusts are still useful.
They can help with:
- Asset protection
- Estate planning
- Succession planning
- Business risk
- Flexible family wealth planning
But trusts have also been used for income splitting.
The proposed rules may reduce that benefit.
This does not mean trusts are dead.
It means many trust structures need to be reviewed.
Do not panic.
But do not ignore it either.
Bucket Companies Need Review
A bucket company is a company that receives income from a family trust.
For many years, this has been used to cap tax and retain after-tax cash for later use.
But the proposed minimum tax on trusts may change the maths.
Many people say companies pay 25%.
That is not always true.
The ATO says base rate entity passive income includes items such as rent and net capital gains, and companies that do not qualify for the lower base rate entity rate are taxed at 30%.
Rental income is passive income.
Net capital gains are passive income.
Many trust distributions are passive income.
So a passive property bucket company will often need to be modelled at 30%.
Now consider what may happen if income is taxed in the trust first, then distributed to a company, then eventually paid to shareholders.
You can end up with too many tax layers.
That does not mean bucket companies are useless.
But it does mean yesterday’s strategy may not be tomorrow’s best answer.
Smart Property Taxpayers ask questions early.
SMSFs Were Largely Unaffected
SMSFs did not turn out as many investors expected.
That means some investors may look more closely at SMSFs for established residential property.
But be careful.
An SMSF loss does not reduce your personal salary.
The benefit stays inside the SMSF.
An SMSF may use losses against other taxable income inside the fund, such as:
- Other rental income
- Interest
- Dividends
- Concessional contributions
- Other taxable SMSF income
SMSFs can be powerful.
But they are also highly regulated.
You need to consider:
- Borrowing rules
- Contribution caps
- Liquidity
- Pension planning
- Related party rules
- The sole purpose test
- The fund’s investment strategy
SMSF property can work very well.
But the structure must be right from the start.
Should a Company Buy Property Directly?
This is one of the biggest planning questions after the Budget.
For years, many investors used a family trust and a bucket company.
The trust owned the asset.
The bucket company received income.
That strategy may still have a place.
But now we need to ask a different question.
Should the company own the property directly?
A company does not get the 50% CGT discount.
A company also may not receive the proposed CGT indexation benefit.
That is a disadvantage.
But company ownership may still help with:
- Tax deferral
- Retained profits
- Franking credit planning
- Retirement income planning
- Flexibility outside super
- Possible depreciation benefits on some existing residential property
- Avoiding the proposed trust minimum tax layer
This is not for everyone.
For high-growth assets, a company may create more tax on sale.
But for some long-term investors, especially those planning retirement income, direct company ownership may deserve a closer look.
There is no perfect structure.
There is only the right structure for the goal.
Download the Full Property Tax Guide
We have prepared a plain English booklet for clients and property investors. Negative gearing, CGT, trusts, bucket companies, SMSFs and company structures explained.
Federal Budget 2026 Property Tax Guide
It includes:
- Key dates and timelines
- Negative gearing changes
- CGT worked examples
- Pre-CGT asset planning
- 30 June 2027 valuation tips
- Trust tax changes
- Bucket company issues
- SMSF planning points
- Direct company ownership strategies
- New versus existing property comparison
- Practical strategy checklist
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