Two questions have landed in my inbox more than any others since Budget night on 12 May 2026: “Should I sell now?” and “Is it even worth buying anymore?”

The answer to both is no. But the reasoning matters more than the headline. Let me walk you through exactly what changed, what didn’t, and where the numbers are actually pointing.

What actually changed on Budget night and when does it take effect?

From 7:30pm AEST on 12 May 2026, negative gearing on established residential property was quarantined for new purchases. That means rental losses from eligible established properties can no longer be used to offset wage and salary income for any purchase made after that moment. Losses can still be carried forward and used against rental income or capital gains from rental property — they don’t disappear — but they no longer act as a tax offset on your day job.

From 1 July 2027, the 50% CGT discount that investors have relied on for decades is replaced. In its place: cost-base indexation and a 30% minimum tax on capital gains. These CGT changes apply to gains that accrue from 1 July 2027 onwards — not retrospectively on gains already locked in.

For the full mechanics of how the CGT calculation shifts, see our dedicated breakdown of capital gains tax changes in Australia 2026.

Those are the confirmed rules. Not proposed. Not “likely.” Law.

Who is grandfathered and who isn’t?

If you contracted to buy a property before Budget night — or already own one — you are fully protected. Existing investment properties retain the old negative gearing rules indefinitely. The 50% CGT discount also applies to gains accrued before 1 July 2027 under the grandfathering provisions.

This matters because a lot of commentary has been catastrophising the impact on existing investors. For anyone holding a well-selected property purchased before 12 May 2026, nothing changes on their current position. The rules apply to new behaviour, not existing holdings.

The affected group is simple to define: anyone settling on an established residential property after Budget night who has not already exchanged contracts. That’s it.

Situation	Negative Gearing	CGT Discount
Property purchased before 12 May 2026	Fully retained (grandfathered)	Old 50% discount applies to pre-July 2027 gains
New build purchased after Budget night	Fully retained	Investor can elect old discount or new indexation at sale
Established property purchased after Budget night	Quarantined — losses offset rental income only	30% minimum tax on gains accruing from 1 July 2027
SMSF, widely held trust, build-to-rent	Exempt from new rules	Consult your adviser

Are new builds still eligible for negative gearing after the 2026 Budget?

Yes. New builds retain full negative gearing. This is the single most important structural shift for investors to understand. Not only do new builds retain the ability to offset losses against wage income, but investors purchasing new builds also get to choose between the old 50% CGT discount method or the new indexation approach at the time of sale. You keep both tools.

The ATO’s definition of a qualifying new build covers off-the-plan apartments never previously occupied, knock-down and rebuild projects that add a net new dwelling, construction on vacant land, and brand-new approved townhouses that have not been tenanted before. A property that has been rented out previously does not qualify, even if it looks new.

I want to be direct about something here. I’ve spent years telling clients to be very careful about buying new builds purely for depreciation and tax benefits, because the shiny depreciation schedule often came at the cost of inferior capital growth. That warning hasn’t gone away entirely. But the policy settings have shifted the calculus enough that new builds warrant a fresh look — provided you are selecting them on fundamentals, not just the tax wrapper.

The distinction now is this: a new build townhouse in a high-demand regional corridor with genuine yield and supply constraints is a different animal from a high-rise off-the-plan apartment sold by a developer’s marketing team in a suburb with 800 competing completions scheduled.

Why does the cash flow calculation look so different now?

The core appeal of negative gearing on established property was always the ability to have the tax system subsidise your holding costs while you waited for capital growth. For a high-income earner in the 47% tax bracket, a $15,000 annual rental loss effectively cost only about $7,950 out of pocket after the tax rebate. That was a real number with real value.

That subsidy is gone for new established-property purchases.

Which means the yield now has to carry its own weight. A property generating a 3.2% gross yield in a capital city suburb where you were relying on 1.5% to 2% of that being clawed back through tax offsets is now simply a low-yielding asset. Full stop.

The threshold has shifted. Properties running at 5% gross yield or better now look structurally different in a post-Budget environment. The tax benefit gap is closed, so yield quality becomes the primary underwriting variable. For a $700,000 investment property, a 5% gross yield delivers $35,000 in annual rent. At current interest rates around 6.3% on investment loans, that’s a manageable holding position without the wage-offset crutch.

Run your own numbers using our cash flow positive property guide and the Deal Crunch Calculator to see how the yield equation changes for your specific tax bracket and borrowing profile.

For a deeper view of how the yield-versus-growth tradeoff has been permanently recalibrated, see rental yield vs capital growth in Australia.

Which property types and markets benefit most from the new rules?

This is the question competitors aren’t answering. The policy change is well-documented. The WHERE is the gap in almost every analysis I’ve read since Budget night.

Let me give you the honest buyer’s agent view on where the numbers are pointing.

Units and townhouses in the sub-$650,000 price range have the best yield characteristics of any asset class right now. A two-bedroom unit in regional Queensland or regional NSW returning 5.5% to 6.2% gross yield, structured as a new build or duplex development, hits every criterion the new rules favour: full negative gearing retained, depreciation schedule intact, yield high enough to run near-neutral without wage offsets, and a tenant pool anchored by genuine local demand rather than speculative investor activity.

CoreLogic data from Q1 2026 shows median gross rental yields for units nationally at 4.8%, compared to 3.6% for houses. That yield gap is significant under the new rules and it’s widening as house prices continue to outpace rent growth in capital city markets.

Market	Asset Type	Indicative Gross Yield	New Build Availability
Regional NSW (Orange, Tamworth, Dubbo)	Units, townhouses	5.2% – 6.5%	Moderate
Regional QLD (Toowoomba, Bundaberg, Mackay)	Houses, duplexes	5.5% – 6.8%	High
Tasmania (Launceston, Devonport, Burnie)	Units, townhouses	5.0% – 6.2%	Moderate
Sydney metro units (outer ring)	Units	3.8% – 4.5%	High (pipeline)
Melbourne inner city apartments	Units	3.2% – 4.1%	Very high (oversupplied)

Tasmania sits in an interesting position. Launceston in particular has been running average gross yields above 5.5% for medium-density assets while prices remain well below southeast mainland equivalents. Vacancy rates in inner Launceston have held below 2% since mid-2024. That’s a functional rental market with genuine scarcity, not manufactured yield.

For a practical guide to purchasing in these markets, see how to buy investment property interstate in Australia.

What does the 30% minimum CGT tax and indexation actually mean for long-term holders?

Indexation adjusts your cost base to account for inflation using the Consumer Price Index. If you paid $500,000 for a property in 2026 and CPI-adjusted that cost base to $620,000 by 2035, you only pay tax on the gain above $620,000. In a high-inflation environment, indexation can be genuinely favourable for long-term holders.

The catch is the 30% minimum tax floor. Even where indexation reduces the nominal gain, you pay a minimum of 30 cents in the dollar on the remaining taxable portion. For a high-income earner who previously received the 50% CGT discount and effectively paid around 23.5% tax on gains, the 30% minimum represents a meaningful increase in tax drag on exit.

CommBank modelling published post-Budget estimated established house prices running approximately 3% lower than they would have otherwise, based on this reduced after-tax return profile for investors. The ATO has published full guidance on the new negative gearing and CGT rules if you want to verify the mechanics directly. That’s not a crash. It’s a recalibration of the investor premium baked into pricing.

The practical implication: hold periods now favour new-build assets where you retain the election between methods. For established grandfathered properties, there is no reason to panic sell before 1 July 2027 — your gains up to that date are calculated under the old rules. The 30% minimum only applies to gains accruing from 1 July 2027 forward.

Should you rush to buy before some kind of cut-off?

No. That urgency is manufactured.

The grandfathering cut-off already happened at 7:30pm on Budget night. Anyone telling you there is a “window closing” on something is either misinformed or selling something. The rules are now fixed and known. What investors need is not speed — it’s clarity about which strategy fits the new settings.

I’d rather see a client take four months to select the right regional townhouse development with a 5.8% yield than rush into an established house in a capital city suburb that now offers worse after-tax returns and no particular competitive advantage.

Rushing into property because of tax urgency is one of the most reliable ways to end up with the wrong asset. The investors who do best from this policy shift will be the ones who take the time to reframe their selection criteria around yield quality, supply constraints, and local demand — rather than chasing the same assets as before while wondering why the numbers don’t stack anymore.

For background on how negative gearing worked and why the old framework shaped investor behaviour the way it did, see our explainer on negative gearing in Australia.

The investor checklist: navigating your next purchase under the new rules

Here is the practical framework I’m walking clients through right now.

• Audit your existing portfolio first. Grandfathered properties are untouched. Confirm your existing hold positions before changing anything.
• Run yield before you run tax. Any new purchase needs to work on a near-neutral or positive cash flow basis without wage offset. 5%+ gross yield is the starting point for most borrowers at current rates.
• Prioritise new builds if you want the full tax toolkit. Off-the-plan townhouses, duplex builds, and vacant-land constructions that qualify under the ATO definition retain both negative gearing against wages and the CGT election choice.
• Look at regional markets seriously. Regional NSW, regional Queensland, and Tasmania offer the best yield-to-price ratios in the country right now for investment-grade assets.
• Don’t confuse cheap with good value. A $350,000 unit in a regional centre with 5.8% yield and a 1.5% vacancy rate is better than a $650,000 unit in a capital city with 3.9% yield and growing supply pressure.
• Check the SMSF rules separately. SMSFs, widely held trusts, and build-to-rent arrangements are exempt from the quarantining provisions. If you’re investing through a fund structure, the rules are different and you need specialist advice.
• Model the CGT impact on your existing holdings. There is no urgency to sell grandfathered properties. But it’s worth running the numbers on what your post-1 July 2027 exit looks like under the 30% minimum versus holding longer under indexation.

The investors who came out ahead after the 1999 CGT discount was introduced were the ones who understood the change early and positioned deliberately. The same will be true here. The policy settings now explicitly favour new supply, higher-yield assets, and markets where rental demand outpaces ownership supply. That’s a very specific filter — and it narrows the field in ways that actually make selection easier, not harder.

Book a free discovery call and we’ll map your next purchase against the new rules. Whether that’s a new build, a unit in a regional corridor, or a review of your existing portfolio against the CGT changes, the conversation takes about 45 minutes and gives you a clear direction.