On 12 May 2026, Treasurer Jim Chalmers handed down the federal budget with two of the biggest property tax reforms Australia has seen in decades — changes to negative gearing and capital gains tax (CGT). Both take effect from 1 July 2027, but the cut-off for which properties are affected was Budget night itself. If you own investment property or are thinking about buying, here is what you need to know.
What is negative gearing? (quick explainer)
Negative gearing is when your rental income is less than your expenses (mortgage interest, maintenance, rates, agent fees). Under the current rules, that loss can be deducted against your salary or wages — reducing the tax you pay on your income. For example, if your investment property runs at a $10,000 annual loss and you earn $80,000 in salary, you currently pay tax on $70,000 instead of $80,000. This has made property investment attractive for many Nepali families building long-term wealth in Australia.
What is changing — negative gearing from 1 July 2027
For established residential properties purchased after 7:30 PM AEST on 12 May 2026, the rules change significantly:
- →Rental losses can no longer be deducted against your salary or wages — they are quarantined.
- →Losses can only be offset against rental income from other properties or capital gains when you sell a residential property.
- →If your losses exceed those amounts in a given year, they carry forward to future years — they are not lost, just delayed.
- →Commercial property is not affected — these changes apply only to established residential properties.
- →New builds (newly constructed residential properties) are fully exempt — you can still negatively gear a new build against your salary.
- →Widely held trusts, superannuation funds, build-to-rent developments, and government-supported affordable housing programs are also exempt.
Already own a property? You are protected. All properties purchased on or before Budget night (12 May 2026) are grandfathered — your current negative gearing rules apply for as long as you hold that property. Nothing changes for you unless you sell and buy a different established property after the cut-off date.
What is changing — capital gains tax from 1 July 2027
Currently, if you sell an investment property (or any capital asset) that you have held for more than 12 months, you only pay tax on 50% of the profit — the other 50% is discounted. This 50% CGT discount is being replaced for most assets from 1 July 2027.
- →The 50% CGT discount is replaced by cost base indexation — your purchase price is adjusted for inflation, and you only pay tax on the real gain above that.
- →A 30% minimum tax on net capital gains applies — so even if indexation reduces your taxable gain significantly, the government collects at least 30% of that net gain.
- →This applies to individuals, trusts, and partnerships — not just residential property. It covers shares, business assets, and other capital assets too.
- →Superannuation funds are not affected — the CGT discount for super remains unchanged.
- →Income support recipients are exempt from the 30% minimum tax.
- →For new residential builds, investors get a choice — use the new indexation + 30% minimum system, or keep the current 50% discount. You can choose whichever is better for your situation when you sell.
For assets you already hold: gains made up to 1 July 2027 still attract the 50% discount when you eventually sell. Only the gains that accrue after that date are subject to the new rules. A tax accountant can help you calculate the split if you sell after 2027.
Who is affected and who is not
- →Affected — investors who buy established residential properties after 12 May 2026. Both the negative gearing restriction and the new CGT rules will apply when you sell.
- →Protected — anyone who owned property before Budget night. Your current rules apply for the life of that investment.
- →Not affected — investors in new builds. Full negative gearing is maintained and you get the choice of CGT treatment.
- →Not affected — commercial property investors. These rules are residential only.
- →Not affected — superannuation funds. CGT discount in super is unchanged.
- →Partially affected — if you sell any capital asset (shares, investment property) after 1 July 2027, the CGT change applies to gains earned after that date — even for assets you bought years ago.
What Nepali property investors should do now
- →If you were planning to buy an established investment property — review your strategy urgently. The cut-off has already passed (Budget night 12 May 2026). Properties under contract before 7:30 PM AEST on 12 May 2026 are grandfathered, so check your contract date.
- →If you already own investment property — nothing changes for you. Keep your records and continue as normal. These reforms do not affect existing holdings.
- →If you were considering your first investment property — look seriously at new builds. They retain full negative gearing and the CGT discount option, making them significantly more tax-advantaged than established properties going forward.
- →If you hold shares or other capital assets — talk to an accountant about the CGT change. The 50% discount you've relied on for long-held assets changes from 1 July 2027.
- →Get your tax records in order — if you sell after 2027, you'll need clear documentation of when gains accrued before and after the cut-off date.
These changes are complex and your situation depends on your income, your property type, when you bought, and what you plan to do next. A registered tax agent or accountant is the best person to map out your specific position — especially if you hold multiple properties or are considering selling.
Calculate your CGT under the old vs new rules — free, no sign-up
Open CGT calculator →See your real annual cost under current vs new negative gearing rules
Open negative gearing calculator →Find Nepali-speaking tax and financial advisors through the Hamro Find directory
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