The Federal Government’s changes to negative gearing and capital gains tax have now passed Parliament and are awaiting Royal Assent from the Governor-General, expected in early July 2026. Once signed, the changes take effect from 1 July 2027.
Here is what property investors – including those looking at opportunities in regional Queensland – need to understand.
What Is Changing from 1 July 2027?
Negative Gearing – Limited to New Builds
Under current rules, if the costs of running a rental property exceed your rental income, those losses can be used to reduce the tax you pay on all income – including your wages.
From 1 July 2027, this changes for properties purchased after 7:30pm AEST on 12 May 2026 (Budget night). Rental losses from established properties will no longer be deductible against ordinary income. Instead, losses can only be applied against:
- Rental income from other residential properties, or
- Capital gains from residential property sales
Unused losses must be carried forward and applied against future residential property income or gains.
New builds are exempt. Investments in newly constructed dwellings retain the full negative gearing rules, provided the property genuinely adds to housing supply.
Capital Gains Tax – The 50% Discount Is Being Replaced
Currently, when you sell an investment property held for more than 12 months, only 50% of your capital gain is taxable. From 1 July 2027, the 50% CGT discount will be replaced with an inflation-indexed cost base.
A minimum 30% tax rate will also apply to realised capital gains accruing from 1 July 2027.
Your main residence remains fully exempt. Small business CGT concessions are unchanged.
Self-Managed Super Funds – Borrowing to Buy Residential Property Banned
As part of the final legislation passed by Parliament, SMSFs will no longer be able to borrow to purchase residential property using a limited recourse borrowing arrangement (LRBA). This is a significant change from the original Budget announcement.
Key points on the SMSF change:
- SMSFs can still invest in residential property – they just cannot use borrowed funds to do so
- Existing SMSF borrowing arrangements are protected – only new arrangements after commencement are affected
- A 45-day contract window after Royal Assent protects contracts already in progress
- SMSFs can still borrow to purchase commercial property (business real property under the SIS Act)
Who Is Affected?
These changes apply to individuals, companies, partnerships, most trusts, and SMSFs (for new residential borrowing arrangements). The changes do not affect superannuation fund tax arrangements more broadly.
What Stays the Same?
- Grandfathered properties: If you owned a property before 7:30pm AEST on 12 May 2026, the current negative gearing rules apply for as long as you hold it
- New builds: Full negative gearing and either the 50% CGT discount or indexed cost base on sale
- Main residence exemption: Unchanged
- Small business CGT concessions: Unchanged
- Existing SMSF borrowing arrangements: Protected
What This Means for Regional Queensland Investors
Regional Queensland – including towns like Blackall, Tambo, Charleville, and Barcaldine – has long attracted investors drawn to lower entry prices, consistent rental demand from agricultural and government workers, and strong yields relative to capital city markets.
Now that these changes are law, the key questions for anyone considering a regional property investment become:
- Is the property a new build that qualifies for continued negative gearing?
- How does the removal of the 50% CGT discount affect your long-term return on an established property?
- Is the property cash flow positive – and does the rental yield still make sense without the tax offset?
- If you were planning to buy residential property through an SMSF using borrowed funds, what is your alternative strategy?
Regional properties with strong rental yields and affordable purchase prices may actually become more attractive in this new environment – particularly for investors less reliant on negative gearing to make the numbers work.
Get Advice Before You Act
These changes are now law but do not take effect until 1 July 2027. There is still time to review your position and plan accordingly. Speak with a qualified accountant or financial adviser who understands your personal situation before making any investment decisions.
Sources: ABC News | Australian Taxation Office | Federal Budget 2026-27
Thinking about buying or selling in Central West Queensland? Call David Hardie Real Estate on 0427 575 974 or email info@davidhardierealestate.com.au
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