Negative Gearing and CGT Are Changing: What Perth Property Investors Need to Understand About 1 July 2027

Investing

This is the biggest proposed change to Australian property investment tax in a generation, and there is an enormous amount of nonsense being written about it. Let’s be precise.

First: this is not law yet

The measures were announced in the 2026–27 Federal Budget. On 28 May 2026 the government introduced the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 to Parliament, and it was referred to the Senate Economics Legislation Committee.

It has not passed. Budget announcements do not always survive Parliament in their original form, and important details are still undefined — including, remarkably, what precisely counts as a “new residential dwelling”.

Anyone telling you to make an urgent property decision because of this, right now, is getting ahead of the facts. But the direction of travel is clear enough that you should understand it.

What’s proposed — negative gearing

From 1 July 2027, negative gearing on established residential investment properties would be restricted.

Rental losses on those properties could no longer be offset against your salary or other income. They could only be offset against residential rental income, or carried forward against future gains from residential property.

New builds are exempt. Investors in eligible new residential dwellings would keep both negative gearing and the existing 50% CGT discount.

The date that actually matters: 7:30pm, 12 May 2026

Properties held at 7:30pm AEST on 12 May 2026 — including those under contract but not yet settled — are grandfathered. They can continue to be negatively geared under existing rules until they’re sold.

If you already own an investment property, you are, on the current proposal, protected.

There’s also a transitional window: an established property bought after Budget night but before 1 July 2027 can still be negatively geared against wages up until 1 July 2027, after which it falls under the new rules.

Note one useful subtlety: the grandfathering is based on when you acquired the property, not whether you happened to be negatively geared on Budget night. An investor who was positively geared then, but tips into negative gearing later because rates rose, is still covered.

What’s proposed — capital gains tax

The 50% CGT discount would be removed for resident individuals, trusts and partnerships from 1 July 2027, replaced with cost base indexation — your cost base is uplifted by CPI, so you’re taxed only on the real (inflation-adjusted) gain.

Alongside it, a 30% minimum tax on net capital gains has been proposed.

Gains that accrued before 1 July 2027 keep the 50% discount, preserved via a market-value split at the transition date. Only gains accruing after that date fall under the new method.

Whether indexation leaves you better or worse off than the 50% discount depends on your holding period, inflation over that period, and your marginal rate. For long holds in a high-inflation environment, indexation can be competitive. For shorter holds, it’s usually worse.

What this actually means for Perth investors

1. Existing portfolios are largely protected. If you already hold, don’t panic-sell on the basis of an unlegislated Bill.

2. The new-build exemption is a real signal. If the Bill passes as drafted, the tax system will actively favour new construction over established stock. In WA — the strongest home-building market in the country — that is a significant tilt.

3. Loan structure matters more now, not less. If losses on established property can only be quarantined against rental income, then how your loans are structured, whether you’re interest-only or P&I, how you split debt across properties, and which entity holds what all become materially more important. This is where we can help — the loan side of the decision is ours; the tax side is your accountant’s.

4. Don’t let tax drive the whole decision. Location, yield, price, and your own cash flow still matter more than tax treatment. A bad property with good tax treatment is still a bad property.

5. Watch the Bill. We’ll update this article as it moves.

Frequently asked questions

Is negative gearing being abolished? No. On the current proposal it’s being restricted — limited to new builds for properties acquired after Budget night, from 1 July 2027. Losses on established property aren’t lost; they’re ring-fenced to residential property income.

I already own an investment property. Am I affected? On the current proposal, no — properties held at 7:30pm on 12 May 2026 are grandfathered and continue under existing rules until sold.

Should I buy an established investment property before 1 July 2027 to use the window? Possibly, but not on the strength of a tax rule alone, and not on the strength of a Bill that hasn’t passed. Model it properly with your accountant and with your loan structure considered at the same time.

Will this push prices up or down? Honestly, nobody knows. Reasonable arguments exist in both directions. Be sceptical of anyone who sounds certain.

Rethinking your portfolio structure? We can model what different loan structures do to your cash flow under both the current and proposed rules — and coordinate with your accountant.

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