Changes to the 50% CGT Discount: What They Mean for Investors

Two long-standing rules for property investors are changing. There's been a lot of commentary since, so here's a plain summary of what the legislation actually says, to help you have an informed conversation with your accountant and broker.

What's changing

For 25 years, if you held an asset for more than a year, you were taxed on half your profit under the 50% CGT discount. From 1 July 2027, that's replaced by two things: your purchase price gets lifted in line with inflation (so you're not taxed on gains that were only ever the dollar losing value), then whatever profit is left is taxed at your normal rate, but never below 30%.

Negative gearing narrows at the same time. New builds keep the current treatment. On established property, rental losses are quarantined instead, meaning they can no longer offset your salary income and instead carry forward against future rental income or property gains.

The reach extends beyond property, too. This hits every asset class, including shares. Your own home stays exempt, unchanged.

The key dates

Both rules changed at 7:30pm on 12 May 2026, budget night, but neither takes effect until 1 July 2027. Nothing about this year's tax return is different.

If you owned a property, or were already under contract, at that 12 May cut-off, the old rules are "grandfathered", they follow that property for as long as you hold it, and the protection ends only when you sell. Established property bought after 12 May 2026 moves to the new rules, with negative gearing running until 30 June 2027 before quarantining kicks in, and indexation plus the 30% floor applying to gains from 1 July 2027. Eligible new builds get a choice between the 50% discount or indexation.

Why it matters for borrowing

This is the part we deal with daily, and it's a critical piece investors often miss. Negative gearing's tax saving has quietly helped cover the gap between rent coming in and the mortgage going out; it's part of what makes an investment property affordable to hold.

From 1 July 2027, that saving will stop for established property purchases. The rent and repayment haven't changed, but the discount from your tax return disappears, so the property costs more out of pocket each month.

That matters when you go to borrow. Banks work out how much they'll lend based on what a property really costs you to hold, and some currently count the negative gearing benefit in that sum. Once the benefit goes, those banks have to take it out, and the amount they'll lend an investor buying established property drops. No one sends a letter the day it happens; lender policy can shift before the law even takes effect.

What's still unsettled

The legislation doesn't define "new residential dwelling", the exact term the whole new-versus-established distinction turns on. Whether an off-the-plan apartment, a knock-down rebuild, or a substantially renovated house qualifies isn't yet settled. A further concession for founders and early-stage investors was announced on 18 June, a sign that more amendments are coming. Anyone giving you a confident, detailed prediction about the next 18 months is guessing.

The takeaway

There's no need to rush, but understanding where you sit now, whether you're grandfathered, buying established property, or eligible for a new build, gives you and your advisers more room to plan before lender policy or your borrowing capacity shifts.

If you'd like a review of your current borrowing capacity, alongside your accountant, book a discovery chat (fifteen minutes, no obligation) or contact Matt Cunliffe directly on 0411 799 052 or matt.cunliffe@mortgagechoice.com.au.

This article is general information only, not tax or credit advice. Tax outcomes depend on your individual circumstances; speak with a registered tax agent or accountant. Information current as at July 2026 and the relevant law may be subject to further amendment.