Quick answer: From 1 July 2027, negative gearing on established residential investment properties bought after 7:30pm on 12 May 2026 is restricted, and the 50% capital gains tax discount is being replaced with inflation indexation and a 30% minimum tax. New builds are exempt. If you’re the first buyer of a genuinely new home, including a new house on vacant land, you keep full negative gearing and can choose the old 50% CGT discount.
That makes the tax rules one of the strongest reasons investors are now looking at house and land packages. This guide explains the changes, how depreciation works on a new build, and what to check before you buy.
What Changed in the 2026 Federal Budget?
The Government announced the changes in the Budget on 12 May 2026, and both start on 1 July 2027. According to the Government’s Budget factsheet:
- Negative gearing: losses on existing residential investment properties bought from 7:30pm AEST on 12 May 2026 “will only be deductible against other income from residential properties, including capital gains.” Excess losses can be carried forward.
- Grandfathering: properties held at that time keep the current rules. Established properties bought between budget night and 30 June 2027 can be negatively geared only until 30 June 2027.
- Capital gains tax: the 50% discount is replaced with cost base indexation using CPI, plus a 30% minimum tax rate. For assets held before 1 July 2027, gains up to that date keep the 50% discount and later gains use the new method.
- New builds: “New builds can continue to be negatively geared before and after 1 July 2027,” and first purchasers of new builds can choose either the 50% discount or the new indexation method.
Industry reporting indicates the changes were legislated in mid-2026, with some details, such as the edges of the new build definition, still being clarified.
What Counts as a New Build?
The Government describes new builds as residential properties “which genuinely add to supply”. Based on the factsheet and published tax commentary, that generally includes:
- A new home built on vacant land, which covers most house and land packages
- A newly built apartment bought off the plan
- A knock-down rebuild that replaces one dwelling with two or more
It generally doesn’t include:
- An established, second-hand home
- A knock-down rebuild that replaces one house with one house
- A “new” home bought from someone else who was the first owner, or one that has been sold or occupied for more than 12 months
The exemption is for the first purchaser. Check the occupation certificate and first-sale history, and confirm eligibility with your accountant before you sign. Contract dates matter.
Comparing a new build with an established property?
We’ll check whether the package price stacks up, so the tax benefit isn’t swallowed by an inflated price.
Why the Tax Benefit Doesn’t Fix an Overpriced Package
Tax benefits are worth having, but they’re a percentage of your costs. Paying too much for the property is a dollar-for-dollar loss. On house and land packages sold through third parties, the builder or developer commonly pays the seller a commission that’s built into the price. Builder commissions can run into tens of thousands of dollars.
Expect more marketing that leads with “new builds keep negative gearing”. That’s true, but it says nothing about whether a specific package is fairly priced. Here’s how hidden commissions in house and land packages work.
How Negative and Positive Gearing Work
A property is negatively geared when its deductible costs, such as interest, rates, insurance, management and depreciation, are more than the rent. The loss reduces your taxable income. You’re still out of pocket, so negative gearing only makes sense if you expect capital growth to more than cover the losses over time.
A property is positively geared when rent exceeds costs. You pay tax on the profit, but the property supports itself and is easier to hold through rate rises.
Most investors balance two goals: cash flow, so you can afford to hold the property, and capital growth, which builds wealth. A new build with strong depreciation can narrow the gap between the two in the early years.
Depreciation on a New Build
Depreciation is a non-cash deduction, and new builds offer the most of it. The ATO allows two types:
- Capital works (Division 43): generally 2.5% of eligible construction costs each year for 40 years on residential buildings
- Plant and equipment (Division 40): items like ovens, hot water systems and carpets. Since 2017, investors generally can’t claim these on second-hand residential property, but the first owner of a new build can
That second rule is a big part of why new builds deliver larger deductions in the early years. To claim them, you’ll need a tax depreciation schedule from a qualified quantity surveyor, and the cost of the schedule is itself deductible.
Capital Gains Tax When You Sell
When you sell an investment property, the profit is a capital gain. Under the current rules, individuals who hold a property for more than 12 months generally get a 50% discount. Under the new rules, the discount is replaced with indexation and a 30% minimum tax for most investors, but first purchasers of new builds can elect to keep the 50% discount.
Depreciation you claim reduces your cost base, which increases your capital gain when you sell. Factor that in, and get advice before you sell.
Questions to Ask Before Buying for the Tax Benefits
- Will I be the first purchaser, and has the home been occupied?
- Does this property qualify as a new build under the 2027 rules? Ask your accountant to confirm.
- What depreciation can I expect? Ask for an estimate from a quantity surveyor.
- What will it cost me each week to hold after tax, at today’s interest rate and at 2% higher?
- Is the package price fair compared with recent land and build prices in the estate?
- Is any commission built into the price, and who receives it?
How REIN Helps
REIN acts only for buyers of new house and land packages. We check the price, the contract and any commission built in before you sign.
REIN charges a service fee for our work, agreed in writing before you start. Where REIN receives a builder or developer commission on your purchase, we disclose it and rebate 100% (excluding GST) of it to you. The rebate typically covers the fee and more.
Common Questions
Can I still negatively gear a new build after 2027?
Yes. Under the 2026 Budget changes, new builds can continue to be negatively geared before and after 1 July 2027 with no new restrictions. The exemption applies to the first purchaser of a genuinely new home, including a new home on vacant land. Confirm eligibility with your accountant before you sign.
Does a house and land package count as a new build?
Generally, yes. A new home built on vacant land adds to housing supply, which is the test the Government uses. You need to be the first purchaser, and the home shouldn’t have been previously sold or occupied for more than 12 months. Edge cases are still being clarified, so get advice.
What happens to the 50% CGT discount?
From 1 July 2027, the 50% discount is replaced with inflation indexation and a 30% minimum tax for most residential investment property. For assets held before then, gains up to 1 July 2027 keep the 50% discount. First purchasers of new builds can choose the old discount or the new method.
Is my existing investment property affected?
Properties held at 7:30pm AEST on 12 May 2026 keep their current negative gearing treatment. For CGT, gains up to 1 July 2027 keep the 50% discount and later gains use the new method. Speak to your accountant about your situation.
Before you sign anything…
Send us the package. We’ll check the price, any commission built into it and the contract terms, and tell you straight whether it stacks up. Free, no obligation.
GET MY PACKAGE CHECKED → or call 1300 446 445
Written by the REIN Editorial Team. Researched with the help of AI tools, then fact-checked against the sources below. Last updated 1 October 2026.
Reviewed by Scott Fraser, founder of REIN, licensed real estate agent (NSW) with 10 years on the developer side of house and land.
Sources
- Australian Government – Budget 2026–27 tax explainer: Negative Gearing and Capital Gains Tax Reform, accessed 1 October 2026
- ABC News – How federal budget negative gearing and CGT changes will affect you (13 May 2026), accessed 1 October 2026
- Acumentis – Passed: what the new CGT and negative gearing laws mean (30 June 2026), accessed 1 October 2026
- The Property Accountant – Negative gearing 2026: new builds keep full deductibility (25 July 2026), accessed 1 October 2026
- ATO – Work out your capital works deductions, accessed 1 October 2026
- ATO – Second-hand depreciating assets, accessed 1 October 2026
About this article: This article is published by Real Estate Investors Network Pty Ltd (REIN). Statements of opinion are ours. If you believe anything in this article is inaccurate or out of date, please call us on 1300 446 445 and we will review it and correct it promptly. This is general information only. It does not take into account your objectives, financial situation or needs, and is not financial, credit, legal or tax advice. Rules differ between states and change over time. Consider seeking independent advice from a licensed professional before acting. A REIN service fee applies to our services, and where REIN receives a builder or developer commission in connection with a client’s purchase, it discloses and rebates 100% (excluding GST) of that commission to the client under its written service agreement.