Negative Gearing Changes: Why Property Investors Shouldn’t Panic

Wednesday, 15th of July 2026

The recent Federal Budget announcement has raised questions for many property investors, and that’s entirely understandable. Whenever negative gearing changes and capital gains tax reforms enter the headlines, it’s natural to wonder what it means for your investment.

But before making any major decisions, here is what you actually need to know: for many existing property owners, the impact may be considerably less immediate than the media coverage suggests.

What Are Negative Gearing and Capital Gains Tax? 

Let’s start with the basics, because understanding how these two arrangements work is essential before assessing what is changing.

Negative gearing occurs when the costs of holding your investment property, including interest, rates, insurance, maintenance and management fees, exceed the rental income it produces. Many investors have used the ability to offset those losses against other income, such as salary or wages, to reduce their overall tax liability.

Capital gains tax (CGT) applies when you sell an investment property for more than you originally paid for it. Under the current system, if you have held the property for at least 12 months, you are generally only taxed on half of the profit you made.

One point worth keeping in mind: negative gearing should not be treated as the foundation of a property investment strategy. Many properties start turning a profit over time as rents rise and loan amounts reduce, which is exactly why focusing on long-term income and asset performance matters so much, particularly right now.

 

Negative Gearing Changes: Existing Owners May Be Less Exposed Than They Think 

From 1 July 2027, the Government has announced that negative gearing for residential property will be limited to new builds. But the rules for existing owners are important here, and they provide meaningful protection for many current investors.

Under the proposed negative gearing changes:

• Established residential properties held before 7:30pm AEST on 12 May 2026 are expected to keep their current arrangements in place, meaning existing owners can continue to negatively gear those properties until they sell.
• Established residential properties purchased between the Budget announcement and 30 June 2027 may be negatively geared during that period, but not from 1 July 2027.
• New builds retain negative gearing eligibility before and after 1 July 2027.

If you already owned an established residential investment property before the Budget was announced, the proposed negative gearing changes are not expected to affect your current arrangement. For most existing investors, the immediate cashflow impact may not be what you feared. The more significant consequence of the changes is likely to fall on investors who purchase established properties after the announcement and plan to offset rental losses against other income.

These remain proposed changes, subject to legislation passing through Parliament. We encourage all owners to seek independent advice about how the reforms may apply to their specific circumstances.

 

CGT Changes: Not as Immediate as Many Investors Fear 

The capital gains tax changes have understandably generated the most concern. But the detail of what is actually proposed tells a less alarming story.

From 1 July 2027, the current system, where you’re only taxed on half your profit, is proposed to be replaced. Under the new method, your original purchase price would be adjusted upward for inflation to reduce your taxable profit, and a minimum tax rate of 30 per cent would apply to any remaining gain. This applies to most types of investments, not only property.

Several important points limit the immediate impact for existing investors though:

• The reform is proposed to apply to profits made after 1 July 2027, not to all the growth your property has accumulated over the years.
• CGT does not apply until you actually sell and walk away with a profit. Simply holding the property does not trigger a tax bill.
• Investors whose capital gains are already taxed at rates of at least 30 per cent may not be significantly affected by the minimum tax component.

The Government’s Budget explainer confirms that for properties you owned before 1 July 2027 and sell after that date, any profit made before 1 July 2027 will be treated under the current rules, whilst profit made after that date falls under the new rules. In plain English: long-term owners are not simply losing the current tax discount on all of their past growth.

 

Why the CGT Impact May Be Smaller Than You Think 

There are three straightforward reasons why many existing investors may find the proposed CGT changes less damaging than initially assumed.

CGT only applies when you sell. If you continue to hold your property, you do not create a tax bill simply because the rules have changed. The profit is not counted, and therefore not taxed, until you actually sell.

Your gains before July 2027 remain under the current system. For long-term owners, the historical growth built up before the transition date is expected to continue being treated under the existing 50 per cent discount arrangements. The new method applies to future growth after that point, not to everything accumulated during your years of ownership.

Valuation advice will matter when the time comes. The Government has indicated that you may be able to establish your property’s value on 1 July 2027 through a formal valuation or a formula to split the gains between the pre- and post-2027 periods, with ATO tools expected to be made available. Getting the right professional advice will help ensure that split is calculated accurately and in your favour.

For long-term property owners, the impact is considerably more spread across time than many investors realise, and none of it is triggered simply by holding.

 

 

Short-Term Impact: The Biggest Risk Is a Reactive Decision 

In the short term, uncertainty is generating more concern than the tax changes themselves, and we see this directly in the conversations we are having with owners across our portfolio.

Many investors are speaking with accountants, reassessing strategies and modelling hold-versus-sell scenarios, which is entirely the right approach. What is not the right approach is making a major financial decision based on headlines alone.

As we explored in a recent article on why selling now could be a costly mistake, Perth’s rental market continues to show strong fundamentals that do not disappear because of a federal Budget announcement. According to REIWA, rental yields across Perth sit at five to six per cent, vacancy rates remain well below the national average, and rents have grown by approximately 66 per cent over the past five years. These are the conditions that make holding a well-managed Perth investment property a genuinely compelling long-term position, and a tax announcement does not change that underlying reality.

For most owners, the more sensible first step is to review the property’s current rent, lease terms, outgoings, maintenance position and long-term performance potential before concluding that selling is the right move.

 

Long-Term Impact: Property Fundamentals Matter More Than Ever

Over the longer term, the proposed changes are likely to shift investment strategy further towards the fundamentals of the asset: rental demand, tenant quality, vacancy risk, rent positioning, maintenance and long-term capital growth.

Future investors may show greater preference for new builds, which retain more favourable treatment under the proposed reforms. For owners of established properties, this means how well your property generates rental income will matter more: consistent rent, low vacancy, a well-maintained condition and market-rate rent all strengthen the long-term investment case.

A property that is actively managed, regularly reviewed and kept in excellent condition is better positioned for this environment than one that is passively held and underperforming on rent.

 

 

Where Proactive Property Management Protects Your Returns 

Whilst tax policy is outside your control, your property’s performance is not, and this is where a proactive property manager can make a genuine difference.

At PPM, we are already working with owners across our portfolio to review their properties in the context of these proposed reforms. Not to provide tax advice, but to make sure the investment itself is working as hard as it can for your long-term position. That means ensuring your property is achieving market rent, lease renewals are timed strategically, vacancy is minimised, maintenance is addressed before it becomes costly, and the asset remains attractive to quality tenants.

Whilst your accountant should advise on the tax implications, your property manager plays an equally important role in making sure the property is performing at its best.

 

Should Property Investors Sell Before July 2027? 

For some investors, selling may still be the right decision, based on personal cashflow, debt levels, retirement planning or a broader reassessment of strategy. That is a legitimate conclusion, and one your accountant and financial adviser are best placed to guide you through.

But selling purely because of the proposed CGT changes may be premature, particularly for long-term owners whose pre-July 2027 gains are expected to remain under the current system. Acting on a worst-case reading of changes that have not yet been legislated is one of the most common ways investors make decisions they later regret.

If selling is ultimately the right path for you, PPM’s dedicated sales arm, Selling Perth Property, was built specifically to support investors in this position. Led by our in-house sales specialist, Selling Perth Property focuses exclusively on selling tenanted investment properties to other investors, protecting your rental income stream and minimising disruption to your existing tenants throughout the process.

 

What to Do Next

The proposed Budget changes are significant, but they do not mean every property investor needs to rush for the exit. Many existing owners may be far less exposed than they initially assumed, particularly where negative gearing arrangements are expected to keep their current treatment and CGT changes are proposed to apply only to profits you make when you sell in the future.

The practical response is not to sell in haste. It is to understand your specific position, get qualified tax advice, and make sure your property is being actively managed for rental income, tenant retention and long-term value.

Our award-winning team is here to help you navigate what comes next. Concerned about how your investment property is performing in the current market? Get in touch with the team at PPM to arrange a rental market review and property performance check.