If you own an investment property in Queensland or you’re planning to buy one, the 2026 Federal Budget just changed the rules in a big way.
On 12 May 2026, Treasurer Jim Chalmers announced the most significant reform to property investment tax settings in nearly 30 years. Two strategies that Australian investors have relied on for decades, negative gearing and the 50% capital gains tax (CGT) discount, are being restructured from 1 July 2027.
However, here’s what most headlines are missing: these changes do not treat all properties equally. New builds, including house and land packages, keep their full tax advantages. Established properties bought after Budget night do not.
If you want to understand exactly what changed, who is protected, and what this means for property investors in Queensland, this guide covers everything you need to know.
Negative gearing in Australia means your investment property costs more to run than the rent it brings in. When that happens, you record a net rental loss.
Those costs typically include:
Until now, Australian tax law has allowed you to offset that rental loss directly against your salary or other income. This reduced your total taxable income and your annual tax bill along with it.
For example, imagine you earn $110,000 a year. Your investment property runs at an $8,000 loss. Under the old rules, your taxable income drops to $102,000; for someone in the 37% tax bracket, that translates to roughly $2,960 in annual tax savings.
It is important to understand that negative gearing does not eliminate your loss. You are still out of pocket. The strategy works because investors expect long-term capital growth to outweigh those short-term cash shortfalls. When combined with the 50% CGT discount on sale, that long-term equation made sense for millions of Australians.
Australia introduced capital gains tax in 1985. From 1985 to 1999, the system used inflation-based indexation, meaning you only paid tax on your real gain above the rate of inflation.
In 1999, the Howard Government replaced that system with a simpler approach, the 50% CGT discount. If you held an asset for more than 12 months before selling, only half of your capital gain was taxable.
So if you sold an investment property and made a $300,000 profit, you only paid tax on $150,000 of that gain. For investors in higher tax brackets, this represented a substantial benefit.
That system has been in place for 27 years. The 2026-27 Federal Budget is replacing it.
The 2026-27 Federal Budget announced two major changes, both taking effect from 1 July 2027.
From 1 July 2027, investors who purchase established residential properties after 7:30 PM on 12 May 2026 can no longer offset rental losses against their salary or other personal income, as confirmed by the Australian Taxation Office.
Instead, those losses become quarantined. You can carry them forward and use them against future residential rental income or capital gains from property. However, you cannot reduce your wage income with them in the same year the loss occurs.
It is worth noting that these rules apply only to residential property. Shares, commercial property, and other asset classes are not affected by this change.
From 1 July 2027, the 50% CGT discount for individuals, trusts, and partnerships will be replaced by two things:
The Government describes this as taxing “real gains” rather than inflation-driven profits. In practice, the outcome depends heavily on inflation rates and how long you hold the asset.
* Proposed measures from the 2026–27 Federal Budget. Not yet legislated. Please consult a registered tax adviser for personal advice.
If you already own an investment property, you can take a breath. The Government has built in strong protections for existing investors.
Any residential property you held at 7:30 PM on 12 May 2026, including properties under contract but not yet settled, is fully grandfathered under the old rules. The key date is your contract date, not your settlement date.
This means you can continue to negatively gear those properties against your salary income for as long as you hold them. Nothing changes for your existing portfolio.
On the CGT side, a transitional split system applies when you eventually sell. Capital growth you accumulated up to 1 July 2027 remains eligible for the existing 50% CGT discount. Only gains that accrue after 1 July 2027 fall under the new indexation and minimum tax rules.
A few other important exemptions apply:
The bottom line for existing investors is clear: your current investments remain on the same tax footing they always have been.
The Government designed these reforms with a specific goal in mind, redirecting investor demand away from established housing and towards new construction. That goal explains why new builds sit in a very different category under the new rules.
For investors purchasing eligible new builds after Budget night, full negative gearing remains available. You can still deduct rental losses against your salary income. On top of that, when you eventually sell, you get a choice that established property buyers simply do not have: you can use either the existing 50% CGT discount or the new indexation method, whichever delivers the better tax outcome for your situation.
So what qualifies as a new build definition under the 2026 Budget rules? Here is what the Government has confirmed.
* Source: Australian Government Budget 2026–27 fact sheet. Final definitions subject to legislation passing Parliament.
For investors in the higher tax brackets who rely on negative gearing to manage cash flow, this distinction matters significantly. The annual tax saving from full negative gearing on a new build can run into several thousand dollars, depending on your income level, loan size, and rental yield.
Queensland investors are paying close attention to these changes, and for good reason. Research conducted before the Budget found that 42% of Queensland property investors said a CGT discount reduction would cause them to pull back from the market. That is one of the highest rates of any state in Australia.
However, the fundamentals driving the Queensland property market have not changed. Budget settings have shifted, but the underlying demand story remains the same.
Consider what is driving Queensland right now:
Because the Budget changes make established properties less attractive for new investors, competition for new builds in growth corridors is likely to increase. For investors who act now, this could mean better long-term positioning in areas experiencing genuine housing undersupply.
South East Queensland growth corridors, including Park Ridge, Greenbank, and the Ipswich region, continue to attract strong rental demand. House and land packages in these areas qualify as eligible new builds under the Budget rules, which means investors who purchase them retain the full tax benefit package that established property buyers can no longer access.
The 2026 Federal Budget has genuinely reshaped the investment property tax landscape. Established properties purchased after Budget night face reduced tax benefits. However, new builds, house and land packages, off-the-plan apartments, and qualifying new construction retain every advantage that has made property investment attractive to Australians for decades.
For investors focused on Queensland, the combination of full negative gearing, CGT flexibility, strong rental demand, and a structurally undersupplied housing market creates a compelling case for new build investment in the current environment.
The most important thing to understand is this: the market conditions that drive long-term property returns in Queensland have not changed. Only the tax settings around how you invest have.
Important disclaimer: The changes outlined in this article are proposed measures announced in the 2026-27 Federal Budget. They have not yet been legislated and remain subject to parliamentary approval. This article is general in nature and does not constitute financial or tax advice. Please consult a registered tax adviser or financial planner regarding your specific circumstances before making any investment decisions.
Landmark Property Group QLD helps investors across South East Queensland access house and land packages in high-growth areas, including Park Ridge, Greenbank, and Beaumont Rise Estate. Contact our team today to explore what is available and how the new tax settings may work in your favour.
Yes. Negative gearing is fully available for new builds purchased after Budget night. For established residential properties purchased after 7:30 PM on 12 May 2026, rental losses can no longer be offset against salary income from 1 July 2027. Existing investment properties held before that cut-off date remain fully protected.
Your existing investment property is grandfathered under the old rules. When you sell, capital gains that accumulated before 1 July 2027 remain eligible for the 50% CGT discount. Only gains that accrue after that date fall under the new indexation and minimum tax system.
House and land packages on vacant land, off-the-plan apartments, and new construction that genuinely adds to housing supply all qualify. Knock-down rebuilds, granny flats on established properties, and renovation projects do not qualify under the current proposed definitions.
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