Negative Gearing and CGT Changes From July 2027: What They Mean for Apartment Owners

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• The changes start on 1 July 2027. Negative gearing on residential property will be limited to new builds. For individuals, trusts and partnerships, the 50% capital gains tax (CGT) discount will be replaced with cost base indexation and a 30% minimum tax on real capital gains.
• If you held an investment property at 7:30pm AEST on 12 May 2026, you can keep negatively gearing it until you sell. That includes a property you had signed a contract for but not yet settled.
• If you buy an established apartment as an investment after that time, from 1 July 2027 your rental losses can only be used against residential property income, including capital gains. Losses you can't use carry forward to later years.
• A new build has to add to the number of homes on the site. Treasury told realestate.com.au that six three-bedroom apartments built to replace 12 one-bedroom units would not count.
• Only the first buyer of a new build gets the new-build treatment. The next investor who buys that apartment is on the standard rules, and that may affect what new apartments resell for.
• Your own home stays exempt from CGT. The negative gearing change does not apply to commercial property.

What the ATO says is now law

The Government announced the package in the Budget on 12 May 2026. The ATO's page on the measure, last updated 29 June 2026, says the measures are now law. It lists two Acts, the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026.

The ATO page is short and points readers to the Treasury tax explainer for the detail. Most of the figures and examples below come from that explainer. It says the ATO will provide guidance and tools for indexation and for estimating what an asset was worth on 1 July 2027.

Negative gearing: the purchase date decides

Negative gearing means using a loss on a rental property, where interest and costs exceed rent, to reduce tax on your salary and other income. Under the new rules, whether you can still do that depends on when you bought.

When negative gearing isn't available, the loss doesn't disappear. It can only be deducted against other income from residential property, which includes rent from other properties and capital gains on residential property. Any excess carries forward. The explainer says this means investors can still claim costs such as maintenance, just later.

The rules cover individuals, partnerships, companies and most trusts. Widely held trusts, such as most managed investment trusts, and super funds, including SMSFs, are excluded.

Treasury's own example shows the overall cost can be small. Yoonseo earns $100,000 and buys an established investment property for $519,000, including stamp duty, after the start date. She builds up $22,879 in losses over five years. Over the next five years she uses most of that to cancel out her net rent. When she sells, she uses the rest to reduce her capital gain. Over ten years she pays $186 more tax than she would have under the old rules.

The total barely moves, but the timing does. In the loss years, Yoonseo pays the interest, levies and other holding costs without a tax refund to help. CBA senior economist Trent Saunders made the same point to realestate.com.au. A deduction you get years later is worth less, and it doesn't help with the bills while you are paying them.

What this changes inside a strata building

Nothing here changes how an owners corporation sets levies or what it can charge. It does change the cash position of some owners.

For an investor in an apartment, levies are a fixed cost, along with loan interest. Take an investor who buys an established unit after 12 May 2026 and runs it at a loss. From 1 July 2027 that investor no longer gets a tax refund each year to absorb a levy increase or a special levy. The loss carries forward instead. Those owners will feel a large special levy sooner, and committees may hear more about timing and payment plans.

Most investors already in your building were grandfathered by owning before the cutoff, so for them nothing changes until they sell. The change arrives one sale at a time. Each established unit sold to a new investor loses negative gearing for that buyer. Treasury's modelling has around 75,000 more owner-occupiers across the country over the next decade, so in many older buildings the mix of owners and investors may shift slowly towards owner-occupiers.

What counts as a new build

The explainer says a new build must "genuinely add to supply". That means either:

• a dwelling built on vacant land, or
• existing properties demolished and replaced with a greater number of dwellings.

Knock-down rebuilds and substantial renovations that don't increase the number of dwellings are not eligible. The explainer gives these examples:

A new build also can't have been sold before, unless the builder owned it first and it wasn't occupied for more than 12 months.

The count is of dwellings, not bedrooms. realestate.com.au reported that a Treasury spokesperson confirmed the 12-into-6 example above. The new block would have 18 bedrooms instead of 12, but it has fewer dwellings, so it is not a new build for these rules.

This matters for collective sales and strata renewal. When an older block is sold for redevelopment, investors buying into the new building only get the new-build treatment if it has more dwellings than the one it replaced. A developer planning fewer, larger apartments for downsizers would be selling apartments that investors can't negatively gear.

realestate.com.au also reported CBA modelling on what the miss could cost. On a $650,000 new apartment, negative gearing might be worth almost $5,000 a year in upfront tax benefit, and more than $10,000 on a $1 million property, assuming a 39% marginal rate including the Medicare levy. An investor who bought expecting the new-build treatment and didn't get it would lose that yearly benefit.

A new apartment is only new once

Later buyers of a new build get neither the 50% CGT discount nor negative gearing on that property. Treasury compares this to state stamp duty concessions that only apply to the first purchase of a new home.

For apartment owners, the effect shows up at resale. A five-year-old apartment in a recent building will be competing with brand-new stock that investors can still negatively gear. Cate Bakos, president of the Property Investment Professionals of Australia, told realestate.com.au that because the next buyer won't get the same tax benefit, the first owner can't expect the same price when they sell. "Don't pay a premium," she said. REA Group senior economist Anne Flaherty compared it to a new car losing value when it leaves the dealership.

Nobody knows yet how large that effect will be. The likely buyers of resale apartments will be owner-occupiers and investors willing to carry their losses forward. If you are buying off the plan, the usual risks still apply. You can't inspect the finished apartment, and defects in new buildings are common enough that our guide to structural defects after completion is worth reading before you sign.

CGT: the 50% discount goes and indexation comes back

The CGT change is wider than property. It applies to all CGT assets, including shares, held for at least 12 months by individuals, partnerships and trusts.

• Gains made up to 1 July 2027 keep the 50% discount.
• For gains made after that date, the cost base is indexed by CPI, much like the system in place from 1985 to 1999. Tax is then paid on the real gain, the part above inflation.
• A minimum tax rate of 30% applies to those real gains.

To split an existing asset's gain into before and after, you need its value at 1 July 2027. You work this out in the tax return for the year you sell. You can either get a valuation as at 1 July 2027 or use a formula, with ATO tools, that estimates the value from the asset's growth over the whole time you held it.

The formula assumes steady growth. If your apartment rose sharply before 2027 and then stayed flat, or the other way round, a valuation could give a quite different 1 July 2027 figure. A higher figure puts more of the gain under the 50% discount. Ask your tax agent which method suits your property before you sell.

In Treasury's example, Michael bought an investment property before 12 May 2026. ATO tools put its value at $500,000 on 1 July 2027, and he sells two years later for $560,000. With two years of 2.5% inflation, his taxable gain for the period after 1 July 2027 is $34,688. A 50% discount would have given $30,000. At a 47% tax rate, he pays $16,303 on that part of the gain instead of $14,100. He keeps the 50% discount on everything he gained before 1 July 2027.

Whether indexation costs you more depends on how fast the asset grows. Treasury modelled a $500,000 asset bought in July 2027 and held for 10 years, with 2.5% inflation and $100,000 of other income each year:

Indexation favours assets that only keep pace with inflation. Assets that grow quickly pay more.

The 30% minimum tax

The minimum tax matters most to people who sell in a low-income year, such as a retiree selling an investment apartment. Treasury's example is Jack, with $25,000 of taxable income and a $10,000 capital gain. His normal tax on the gain is $1,400, or 14%, so he pays another $1,600 to bring it up to 30%. Tax offsets may reduce that.

People who receive a means-tested income support payment, such as the Age Pension or JobSeeker, at any point in the financial year they make the gain are exempt from the minimum tax.

What stays the same

• Your main residence remains exempt from CGT.
• Buyers of a new build can choose either the 50% discount or indexation with the minimum tax when they sell.
• The four small business CGT concessions are unchanged.
• The 60% CGT discount for qualifying affordable housing stays.
• Gains on pre-1985 assets made before 1 July 2027 remain exempt.
• Negative gearing on commercial property and shares is unchanged. A commercial lot in a mixed-use strata scheme can still be negatively geared, but the CGT changes apply to it.

What Treasury expects to happen

Treasury expects house price growth to be about 2% lower over a couple of years than it would have been without the change. It expects rents to rise by less than $2 a week for a household paying the median rent. It also expects about 75,000 more owner-occupiers over the next decade. In 2022-23, about 230,000 people bought a negatively geared property and about 1.1 million reported a net capital gain.

These are Treasury's estimates, published to support the policy. realestate.com.au has also reported property industry warnings that the overhaul could make the housing shortage worse.

What to do before 1 July 2027

1. If you owned an investment unit before 12 May 2026, keep the contract and settlement documents together. They show you are grandfathered.
2. If you plan to sell after July 2027, ask your tax agent whether a valuation as at 1 July 2027 would give a better result than the ATO formula.
3. If you are buying a new apartment as an investment, confirm in writing that the development adds dwellings to the site and that the apartment hasn't been sold or occupied for more than 12 months. Don't rely on the word "new" in the listing.
4. If you are buying an established apartment as an investment, work out your cash flow with no tax refund on the losses. Include ordinary levies and any special levies coming up. A strata report will show the capital works fund balance and any special levies already approved.
5. If you sit on a committee, give owners plenty of notice of large special levies. Some investors will now be paying them with no tax refund to soften the cost.

Where UnitBuddy fits

Tax agents and buyers both ask owners for the building's numbers. UnitBuddy keeps levies, budgets, the 10-year capital works plan and notices about special levies in one place that owners can see. An investor working out their cash flow can check upcoming levies without waiting for the strata manager to reply.

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The negative gearing change will reach most strata buildings slowly, one sale at a time, because current investors keep the old rules. The part to watch now is the new-build definition. A new apartment that doesn't add dwellings, or that has already had an owner, gets the standard rules, and the first investor buyer's tax advantage is gone when they resell.

Sources and further reading

• Tax reform: Boosting home ownership, reforming negative gearing and capital gains tax, Australian Taxation Office, last updated 29 June 2026
• Negative Gearing and Capital Gains Tax Reform (tax explainer), Budget 2026-27, Australian Government
• Budget Paper No. 2, Budget 2026-27, Australian Government
• Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Parliament of Australia
• Income Tax Rates Amendment (Tax Reform No. 1) Act 2026, Parliament of Australia
• The budget fine print that could cost property investors thousands, Sarah Dowling, realestate.com.au, 29 May 2026

Keep the scheme file in one place the committee and the manager can both open. Features, pricing, or book a tour.