The Budget changes are now law — and three things have moved since Budget night.

The headline in May was "negative gearing is gone." That was never quite right, and now that the legislation has passed it is worth being precise, because the detail is where the decisions sit.

If you already own it, nothing changes

Residential property held — or under a binding contract — at 7:30pm AEST on 12 May 2026 is grandfathered. It can continue to be negatively geared under the current rules until it is sold, regardless of how many properties are held.

If you buy established property from here

• From 1 July 2027, net rental losses can no longer be offset against salary or other personal income.
• Those losses are quarantined — usable only against residential rental income or gains from residential rental property.
• Excess losses carry forward to future years, so the deduction is deferred rather than destroyed.
• Purchases made after Budget night can still be negatively geared through to 30 June 2027.

The capital gains change is broader than property

The 50% CGT discount is replaced by cost base indexation plus a 30% minimum tax rate on gains accruing from 1 July 2027. Gains that accrued before that date are assessed under the current rules. This applies across CGT assets held at least twelve months by individuals, partnerships and trusts — not only residential property. Superannuation funds keep their existing CGT treatment, and the main residence exemption is untouched.

New builds sit on the other side of the line

Eligible new builds are exempt from the negative gearing restriction, and investors in them can choose either the 50% discount or indexation plus the minimum tax when they sell. The existing discount of up to 60% for qualifying affordable housing is fully retained.

Commercial property and shares are outside the negative gearing changes entirely. Recipients of certain government payments are exempt from the minimum tax on gains.

This is the change most likely to catch investors out, because it was not in the Budget papers at all. As the price of Greens support in the Senate, the Government agreed to ban self-managed super funds from entering new limited recourse borrowing arrangements to buy residential property.

If your plan involved buying inside an SMSF with borrowed money, that route is closing for new arrangements. This is a structural question, not a timing tweak, and it is worth raising with your accountant and adviser now rather than at contract stage.

The Act establishes the principle: new builds that add to housing supply keep negative gearing and keep the choice on CGT. What it does not yet do is settle the boundary. The Government has said it will remove ministerial discretion and legislate the definition separately, following consultation, later this year.

For anyone buying between now and then, the practical position is straightforward: the direction of policy is clear and the incentive is unambiguous, but whether a specific property satisfies the eligibility test is a question for your own accountant, on the final legislation.

For two decades, a very common Australian investment plan looked like this: buy an established house, fund a weekly shortfall out of your salary, claim the loss at tax time, and wait for capital growth to do the real work. This reform narrows both legs of that plan at once — the annual refund and the discount on the eventual gain.

Purpose-built co-living sits differently for two reasons, and it is worth separating them honestly. The first is structural: it is a new build, which is the side of the line the legislation deliberately protects. The second matters more. Renting by the room is designed to be cash-flow positive from the outset — the return comes from rent received each week, not from a loss claimed each June. Losing access to negative gearing is a smaller event for a strategy that was not relying on it.

That is not an argument that tax should be ignored. It is an argument that the reform has made cash flow the more durable foundation of the two — which is the case we have been making since 2017, for reasons that had nothing to do with this Budget.