Property Investing
For most of the past three decades, the 50 per cent capital gains tax discount has been one of the quiet foundations of Australian property investing. The 2026-27 Federal Budget proposes to replace it. From 1 July 2027, the government plans to swap the flat discount for cost base indexation, paired with a minimum tax rate of 30 per cent on gains, according to summaries published by Treasury, BDO and Baker McKenzie. The measures were still described as proposals rather than law in the material we reviewed.
The timing matters because it lands on a soft market. Cotality's October results showed national home values down 1.2 per cent for the month, a seventh consecutive fall, leaving values 6.7 per cent below the March peak. Investors are now weighing a tax change, falling prices and a cash rate of 4.85 per cent at the same time.
Today, an individual who holds an investment property for more than 12 months pays tax on only half of the capital gain. Under the proposal, that discount would be replaced by indexation of the cost base, so that only the real, inflation-adjusted gain is taxed, with a minimum 30 per cent tax rate applying to the gain. The reported transition rules are the part most investors will care about:
| Situation | Reported treatment |
|---|---|
| Gains accrued before 1 July 2027 | Current 50% discount continues to apply |
| Gains accrued after 1 July 2027 | Indexation and the 30% minimum tax apply, using the 1 July 2027 value as the cost base |
| New residential builds | Investor can choose the existing discount or the new arrangement |
| Negative gearing | Reported to be limited to new builds from 1 July 2027 |
| Main residence | Exemption continues |
If that design holds, the change is not a retrospective hit on gains already made. It reshapes the after-tax return on growth from here, which is exactly the part of the return that many investors rely on when a property is not cash-flow positive.
Lenders do not assess your capital gains tax when they work out how much you can borrow. They assess income, expenses, existing debts and the interest rate buffer. But a tax change that lowers the expected after-tax return on a leveraged property changes the decision upstream, and it will shape demand for investment lending.
Reported conditions are already tough for investors. Net overseas migration was reported at 292,100 in the year to March 2026, and the national vacancy rate was reported at 1.3 per cent in August, which keeps rents supported in many markets. Offsetting that, Cotality's data shows Sydney down 9.4 per cent over the past year and Melbourne down 7.6 per cent, while Brisbane fell 2.0 per cent and Perth 1.7 per cent in October alone. Investors who bought near the peak in those markets are likely to be sitting on little or no gain, which blunts the tax question and raises the loan to value ratio question.
Our view as brokers: A proposed tax change is a reason to review your plan, not to act in haste. Selling into a falling market to chase a tax outcome can cost more than the tax saved. Get your loan position clear first, then take tax advice.
There is time, and the best use of it is practical rather than speculative. We suggest investors work through the following with their broker and accountant:
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The legislation still has to be drafted, introduced and passed, and details such as how indexation is calculated and how the minimum tax works in practice may shift along the way. Expect further commentary from Treasury, the accounting bodies and the property industry over coming months. In the meantime, the sound approach is to keep your loan competitive, keep your buffers healthy and keep your options open.
The Budget proposes that the change applies from 1 July 2027. Sources reviewed for this article describe the measures as proposals that were not yet law, so the detail could change as legislation is drafted and debated. Gains that accrue before 1 July 2027 are expected to keep the current 50% discount, with the new rules applying to growth after that date. Check the Treasury website and speak with your accountant before acting.
According to published Budget summaries, investors who buy a new build would be able to choose between the existing 50% discount and the new inflation-based arrangement with a minimum tax rate. Negative gearing is also reported to be limited to new builds from 1 July 2027. Whether a new build suits you depends on price, rental yield, lender policy and your tax position, which is worth modelling with a broker and an accountant.
Not automatically. Tax is only one input. Selling costs, the price you would achieve in a market where Cotality reports values 6.7% below the March peak, the cost of replacing the asset and your borrowing capacity all matter. A broker can show how your loan position, equity and serviceability look under different scenarios, and your accountant can estimate the tax. This is general information only and not personal advice.
Disclaimer: This article is general information only and does not constitute financial, tax, mortgage or credit advice. The capital gains tax measures described are proposals reported in published summaries of the 2026-27 Budget and may change before, or if, they become law. Mankin Finance does not provide tax advice. Speak with a registered tax agent or accountant and a qualified mortgage broker before making any decision. Mankin Finance Pty Ltd holds Australian Credit Licence 389087.
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