Negative Gearing & CGT Changes 2026: What Agents Need to Know

Your phone is about to light up.

If it wasn’t already, Wednesday morning is looking kind of busy – right after Treasurer Jim Chalmers hands down the federal budget on Tuesday May 12 and confirms what’s been leaked, debated, and furiously tweeted about for the past week.

Negative gearing is changing. Capital gains tax is changing. And your investor clients and your tenants will be asking questions.

Here’s the thing, though. Most of what’s circulating on social media right now is either incomplete, exaggerated, or flat-out wrong. The actual detail – which started leaking over the weekend – is maybe a little more nuanced than some of the headlines suggest.

So before you pick up that call, here’s what you need to know.

What’s actually changing: negative gearing

The headline version: negative gearing for investment properties is being restricted to new builds only.

The detail that most headlines are burying: existing landlords who currently negatively gear are grandfathered. Their tax concessions stay. All of them.

That’s roughly 1.28 million Australians who won’t lose a thing.

What changes is this: from budget night, if you don’t already own an investment property you’re negatively gearing, you won’t be able to buy an existing property and claim negative gearing deductions against it. You can still negatively gear – but only on new builds and new apartments. (The exact grandfathering mechanism – whether it’s a blanket exemption or involves property number caps – will be confirmed on budget night.)

The government’s argument is straightforward. They want investors putting money into new housing supply, not competing with first-home buyers for the existing stock.

For your clients who already own investment properties, the short answer is: nothing changes for you. Your deductions stay. Your structure stays.

For clients thinking about buying their next investment? The rules just shifted. New builds are in. Established homes are out – at least for negative gearing purposes.

The bigger change we’re talking about: CGT

Here’s where it gets more complicated – and arguably more significant for your investor clients’ bottom line.

The capital gains tax discount is being wound back. Since 1999, investors who held a property for more than 12 months could discount their capital gain by 50 per cent. That flat discount is changing – the most widely reported model is a return to inflation-indexing (the pre-1999 system), though reduced flat rates of 25-35 per cent have also been canvassed. The final model will be confirmed on budget night.

What’s consistent across all the options being discussed is that the CGT calculation will be split. For gains accrued up to the date the changes come into force, the old 50 per cent discount applies. For gains accrued after that date, the new discount (whatever form it takes) applies.

This does affect existing investors – unlike the negative gearing changes. Anyone holding an investment property will see a different CGT outcome when they eventually sell.

The family home remains completely exempt from CGT. That hasn’t changed and isn’t changing.

To put the scale of this in perspective: in 2022-23, over 1.1 million individual tax filers realised a net capital gain. The government says the current discount costs the budget billions annually and disproportionately benefits higher-income earners.

What’s NOT changing

It’s worth being clear about what the changes don’t touch, because your clients will have questions about all of it:

The family home. Completely exempt from CGT. No change.
Existing negative gearing arrangements. Grandfathered. If you’re already negatively gearing, you keep your deductions.
The ability to negatively gear new builds. Still available. The government wants investors in the new build market.
Other investment deductions. Depreciation, maintenance, property management fees – the standard rental deductions aren’t going anywhere.

The timeline gap

This is where agents and property managers should pay close attention.

The changes kick in on budget night. But the government’s supply-side answer – a $2 billion Local Infrastructure Fund to support 65,000 new homes – spans ten years. And that’s infrastructure (roads, water, power, sewerage), not houses.

So there’s a gap. Investor demand for existing stock is being deliberately cooled right now. New supply won’t materialise for years. Realestate.com.au reported this week that landlords are already dumping thousands of rentals ahead of the budget, and investor activity in Southeast Queensland has fallen sharply.

If you’re in property management, this is the part that matters most. Fewer investors buying existing rental stock doesn’t automatically mean fewer rentals in the short term – the grandfathering protects current landlords. But the pipeline of new investor-owned rentals entering the market from established housing is about to slow significantly.

The question for your rent roll isn’t what happens this month. It’s what the portfolio looks like in 2028.

The NZ cautionary tale

It’s worth knowing – because your clients may bring it up – that New Zealand tried something similar in 2021. The Ardern government removed the ability for residential property investors to deduct mortgage interest as a tax expense.

The result? Rents surged to an average of $600 per week. Rental supply tightened. Many investors were paying tax on paper profits that didn’t exist because of rising interest rates.

The policy was so unpopular that it became an election issue. The National Party won in 2023 promising to restore interest deductibility, and did so in April 2025.

Australia’s version is designed differently – the grandfathering is more generous, and new builds remain incentivised – but the NZ experience is worth understanding when your clients raise it. The differences are genuine, and so are the parallels.

What the public thinks (and why it matters)

Here’s a number that might surprise you: according to the AMPLIFY Home Truths index, which surveyed more than 4,000 Australians, 64 per cent support tax reforms targeting CGT and negative gearing to boost housing supply. Nearly half – 49 per cent – blame the Federal Government for rising housing costs.

Home ownership for 25-29 year olds has dropped from 43 per cent to 26 per cent over two decades. For 30-34 year olds, it’s gone from 57 per cent to 50 per cent. Millennials and Gen Z now make up 47 per cent of the electorate – more than baby boomers.

This context matters because it tells you something about the political durability of these changes. The Coalition’s Deputy Leader Jane Hume called it “a tax grab” but when asked directly whether the Coalition would repeal the changes, said “No, I want to see what exactly it is that Labor are proposing.” Opposition Leader Angus Taylor has described a full reversal as “highly unlikely”.

Your investor clients may be hoping for a reversal at the next election. The political signals from both sides suggest that’s far from guaranteed.

The checklist: what to say when the phone rings

To your investor clients who already own property

Your negative gearing deductions are not changing. You are grandfathered.
The CGT discount is changing, but only for gains accrued after the new rules take effect. Gains up to that point are calculated under the old rules.
Talk to your accountant before making any decisions. The split calculation means selling now vs. later has different tax outcomes – and that’s a conversation for a tax professional, that understands your entire financial picture.
If you’re thinking about buying another investment, you can still negatively gear – but only on new builds.
Watch for the detail on how losses are treated if you hold multiple properties. Some models being discussed would cap the number of properties eligible for negative gearing – and require rental losses on properties beyond that cap to be carried forward rather than offset against other income in the same year. That’s a significant cash flow difference. Your accountant will need to see the final legislation before advising on portfolio strategy.

To your first home buyer clients

These changes are designed to reduce investor competition for established homes. In theory, that means less competition at auction for you.
But don’t expect overnight price drops. The grandfathering means existing investors aren’t being forced to sell, and supply constraints haven’t changed.
The government’s 5 per cent deposit scheme is still in play. Pair that conversation with this one.

To your property management clients (landlords)

Your rental deductions and negative gearing arrangements are staying. Nothing changes for current landlords.
If you’re considering selling, speak to your accountant about the CGT split calculation first. The timing of a sale now has different tax implications than it did a week ago.
If you’re considering buying additional investment properties, the tax incentive now points toward new builds.
If you hold multiple investment properties, pay close attention to budget night. A property cap on negative gearing could mean losses on some properties are quarantined – carried forward against future rental income rather than deducted against your salary this year.
Investor expectations are shifting – new data shows landlords want more from their PMs in 2026, and these tax changes will only intensify that.

To your tenants

These changes should not directly affect your lease or your rent.
The government has grandfathered existing investors specifically to avoid a mass sell-off that would disrupt rental supply.
The medium-term rental supply picture is less certain – but that’s a market-level question, not something that changes your tenancy today.

The bottom line

The industry commentary on X, in the media, and around the office is running hot. Some of it is warranted. Some of it is theatre.

The actual changes are more targeted than “negative gearing is dead.” Existing investors are protected. New builds are incentivised. The CGT change is the one with broader reach – and the one your clients need professional tax advice on, not just your opinion over coffee.

Your job this week probably isn’t to have a political view. It’s to be the calmest, most informed voice your clients hear. That’s what they’ll remember.

This article was published ahead of the federal budget on 12 May 2026. We will update with confirmed details as they are released on budget night. All statistics sourced from ATO data (2022-23), ABS Census, news.com.au, ABC News, realestate.com.au, SMH, 9News, Property Update, and the AMPLIFY Home Truths Index.