The implications of the 2026 federal budget's negative gearing and capital gains tax changes for property investors, and why superannuation has emerged as the structurally favoured vehicle.
What changed on budget night
On the evening of 12 May 2026, the Treasurer announced two of the most significant changes to property tax in a generation.
The first concerns negative gearing. From 1 July 2027, investors who purchase established residential property after 7:30pm AEST on 12 May 2026 will no longer be able to offset rental losses against their personal income. Losses can still be carried forward and applied against rental income from the property or against future capital gains, but the immediate tax shield that has long underpinned the established residential investment market has been removed for new purchases. Properties already owned on budget night are grandfathered for this purpose. Newly built residential property, qualifying build-to-rent developments, widely held trusts, and superannuation funds (including self-managed super funds, or SMSFs) are also outside the new regime.
The second concerns capital gains tax (CGT). The 50% CGT discount, in place since 1999 for assets held longer than twelve months, is being replaced with a cost-base indexation method and a 30% minimum effective tax rate on net capital gains. This change also commences on 1 July 2027.
It is important to recognise that the CGT change is not confined to new purchases. It will apply to gains accrued from 1 July 2027 on all existing assets held by individuals, partnerships, and trusts, with gains accrued before that date continuing to enjoy the 50% discount on an apportioned basis. The reform also brings pre-CGT assets, those acquired on or before 19 September 1985 and previously fully exempt, into the net for future gains, with a deemed market-value cost base set at 1 July 2027. The only carve-outs are for widely held trusts and superannuation funds, which continue to apply the existing super CGT rules.
So the two reforms have different reach. The negative gearing change captures new purchases only. The CGT change captures everyone outside super, including investors who thought their property was settled long ago.
It is the super carve-out, common to both reforms, that most occupies us in this note.
The personal investor’s new arithmetic
Consider a hypothetical investor purchasing an established investment property in their personal name on 1 August 2027, after the new rules have taken effect. They borrow $800k against the purchase, paying around $50k in interest in year one. They earn $30k in rent after rates, agent fees, and maintenance. Their cash-flow loss for the year is $20k.
Under the old rules, that $20k loss would have flowed straight against the investor’s salary. At the top marginal rate, it produced an after-tax benefit close to $9k, materially softening the cash-flow gap.
Under the new rules, the same $20k loss has nowhere to go in the current year. It is quarantined, available only against future rental income from the property or against the eventual capital gain on sale. That capital gain, when it arrives, will itself be taxed under the new indexation regime with a 30% effective floor, rather than the 50% discount our investor had quietly assumed.
The economics of buying to negatively gear an established property in your own name have, in effect, been hollowed out.
What did not change inside superannuation
The budget’s exclusion of superannuation funds is not incidental. It is the policy choice. The intention was to redirect personal tax preferences toward new housing supply, not to disturb the super system’s existing settings.
Inside a self-managed super fund (SMSF), the relevant rules continue to operate as they have:
- Rental income earned by the fund is taxed at 15% during accumulation, and at 0% if the property is supporting a pension
- Interest paid on a complying limited recourse borrowing arrangement (LRBA) remains fully deductible against fund income
- Capital gains on assets held longer than twelve months are effectively taxed at 10% during accumulation, and at 0% in pension phase
- The new personal CGT regime does not apply
It is worth noting that within an SMSF, you have never been able to negatively gear against personal income. Losses inside the fund have always stayed inside the fund. So in a sense, the personal world has just moved closer to the super world, not the other way around. But the relative position has shifted decisively. The tax disadvantage of owning established residential property outside super has grown. The tax position of holding the same asset inside super has not changed at all.
A relative comparison
Take the same investor and the same property, but held in their SMSF this time. Rental income of $30k is taxed at 15%, costing the fund $4.5k. Interest of $50k is fully deductible against fund income. The cash-flow loss is similar, but it shelters other fund income (concessional contributions, dividends, distributions) at the fund’s 15% rate. Held to retirement, the asset moves into pension phase, where rental income becomes tax-free and any capital gain on disposal is taxed at zero.
The same investor in their personal name, post-1 July 2027, gets none of this. Their $20k loss is quarantined. Their eventual gain attracts the new 30% minimum rate. The two paths to property ownership now look very different.
We are not suggesting that the SMSF path is right for every investor, or for every property. But for the right client, with the right asset, the relative shift is large enough that it warrants a fresh conversation.
Who this matters most for
In our view, the post-budget shift is most consequential for three groups.
The first is investors with a meaningful super balance who were already drawn to direct property but had not committed to a structure. The relative case for using their SMSF has strengthened.
The second is younger high-income earners with growing super balances and a long runway to retirement. The compounding benefit of buying property inside super, holding it across decades, and ultimately drawing tax-free rent in pension phase has always been the long-game argument. That argument is stronger today.
The third is existing property investors looking at what to do next. Their current holdings are sheltered from the negative gearing change, but the CGT reform reaches further. Gains accrued from 1 July 2027 will be taxed under the new regime, including, for some investors, on assets that were previously fully exempt as pre-CGT holdings. Any new purchases will be made under both changes.
How Rivkin can help
Rivkin Securities runs two relevant capabilities under one roof. Our financial planning team works through the personal and structural questions, including whether an SMSF is appropriate and how it fits into a broader retirement plan. Our SMSF accounting and administration team handles set-up, ongoing compliance, audit coordination, and reporting.
We are happy to walk through any of this with you, whether you are weighing up a first property purchase, reviewing an existing portfolio, or simply wanting to understand how the new rules apply to your circumstances… Call us on 1300 RIVKIN (1300 748 546), or fill out a form here so a member of our team can get in touch with you shortly.
