Is It Still Worth Buying an Investment Property After Australia's New Tax Changes?
Updated: Sep 30
For years, Australian property investment had a fairly familiar tax story.
Buy an investment property. Rent it out. If it makes a loss, you may be able to negatively gear it. Hold it for the long term and, if you qualify, receive the 50% capital gains tax (CGT) discount when you eventually sell.
Australia's new tax changes make that story more complicated.
So, if you're thinking about buying an investment property, you might reasonably ask:
Is property still worth it?
The short answer is it can be.
But the tax benefits shouldn't be the reason you buy.
Let's explain the changes as simply as possible.
What's Actually Changing?
There are two big changes property investors need to know about:
1. Negative gearing is changing for certain established investment properties.
2. The way capital gains are taxed is changing.
The important thing is that the new rules don't affect every property investor in exactly the same way.
When you bought the property and whether you're buying an established property or qualifying new property can make a difference.
First, What's Happening to Negative Gearing?
Negative gearing simply means your investment property costs you more than it earns.
For example:
Rent received: $35,000Deductible property expenses: $50,000Rental loss: $15,000
Under the traditional rules, an eligible $15,000 rental loss may generally be used to reduce other assessable income, such as your salary.
That can reduce your tax bill.
But remember:
You've still lost $15,000.
The tax deduction only reduces some of the financial impact.
What's Changing?
The Government has restricted negative gearing for certain established residential properties acquired after 7:30 pm AEST on 12 May 2026.
The restrictions apply from the 2027-28 financial year.
Broadly, affected rental property losses will no longer be available to reduce unrelated income, such as your salary, in the same way.
Instead, relevant unused losses may need to be carried forward and used against eligible residential property investment income in the future.
In simple terms:
Old approach:
Property makes a loss → loss may reduce your salary and other assessable income → you may pay less tax now.
New approach for affected properties:
Property makes a loss → you generally can't use that loss against your salary → relevant loss may instead be carried forward for use against eligible property investment income.
That's a significant difference if you were buying a property specifically for the negative gearing benefit.
What If I Already Own an Investment Property?
This is where there is some good news.
If you acquired your property before the Government's 12 May 2026 cut-off, transitional rules protect existing investments from the new negative gearing restrictions.
So don't read headlines about negative gearing changes and assume your existing investment property has suddenly lost its tax treatment.
When you bought the property matters.
What If I'm Buying an Investment Property Now?
You need to pay much more attention to whether you're buying an established property or qualifying new property.
The new rules are designed to provide more favourable treatment for qualifying investment in new housing.
The idea is to encourage investors to help increase Australia's housing supply rather than simply competing for existing homes.
That doesn't automatically mean a new property is a better investment.
You still need to consider:
purchase price
rent
interest
strata
maintenance
location
vacancy risk
capital growth.
A tax concession cannot rescue a bad property investment.
What Is Changing With Capital Gains Tax?
This is the more complicated part, so let's keep it simple.
Under the traditional CGT rules, an eligible Australian resident individual who owns an investment property for at least 12 months may generally qualify for the 50% CGT discount.
For example, if you made an eligible $200,000 capital gain, the 50% discount could potentially reduce the gain to $100,000 before the resulting net capital gain is included in your taxable income.
That doesn't mean you pay $100,000 in tax.
It means $100,000 is the discounted gain in this simplified example.
What Happens Under the New CGT Rules?
From 1 July 2027, relevant future capital gains move to a new system.
Instead of simply relying on the familiar 50% CGT discount, the new system takes inflation into account when calculating the real gain on an investment.
A minimum tax treatment also applies to relevant real capital gains.
That sounds complicated because it is.
But as a property investor, you don't need to calculate inflation yourself.
The simplest way to understand it is:
OLD SYSTEM
Work out your eligible capital gain → potentially apply the 50% CGT discount.
NEW SYSTEM
Work out how much the investment has really increased in value after allowing for inflation → apply the new CGT rules.
What If I Bought My Property Before 1 July 2027?
This is an important point.
The Government isn't simply applying the new system to all of the capital growth your property has made in the past.
Broadly, gains accrued before 1 July 2027 retain the existing CGT treatment, while relevant gains accruing after that date move into the new system.
So if you bought an investment property years ago and sell it after 1 July 2027, you may effectively have both the old and new CGT rules to consider.
That's where the calculation can become complicated.
The practical takeaway is very simple:
If you own a property with a substantial capital gain, speak to your accountant before you sell it.
Should I Sell My Property Before the New CGT Rules Apply?
Not necessarily.
Don't sell a good investment simply because the tax rules are changing.
Selling a property can itself cost a significant amount of money.
You may have:
CGT
real estate agent fees
advertising costs
conveyancing fees
mortgage discharge costs.
And once you've sold, you no longer receive the rent or any future capital growth.
The tax consequences should be calculated as part of the decision, but tax shouldn't make the decision for you.
So, Is Investment Property Still Worth It?
Potentially, yes.
Property still has some attractive characteristics.
You can receive rental income.
You may benefit from long-term capital growth.
And property allows investors to use leverage, meaning you can control a large asset without having to provide the entire purchase price yourself.
But property also comes with substantial costs.
These can include:
interest
stamp duty
council rates
insurance
strata
maintenance
property management
land tax where applicable
vacancies
buying and selling costs.
The property needs to earn enough over time to justify those costs and risks.
Don't Buy Property Just for Negative Gearing
This is probably the most important point in this article.
Losing money to save tax is still losing money.
If your investment property loses $15,000 during the year, a tax deduction does not magically give you the $15,000 back.
It may reduce your tax.
But you still funded the loss.
Negative gearing can form part of an investment strategy, but it should never be the reason a poor investment suddenly looks attractive.
The Same Applies to CGT
The old 50% CGT discount was valuable.
The new CGT rules may also provide benefits by recognising inflation when calculating relevant real gains.
But neither tax system guarantees that your property will be a good investment.
If you pay too much for the property, receive poor rental returns and spend years covering interest and other expenses, favourable CGT treatment at the end doesn't automatically fix the problem.
Before You Buy, Ask These Questions
Instead of asking:
"How much tax will this property save me?"
Ask:
How much rent will I receive?
How much will the mortgage cost me?
What are the annual property expenses?
Can I afford it if interest rates rise?
Can I afford periods without a tenant?
What happens if the property doesn't increase substantially in value?
How will the new tax rules affect me?
And finally:
Does this property still make financial sense without the tax benefits?
If the answer to the last question is no, think carefully before buying it.
The Bottom Line
Australia's new negative gearing and CGT rules don't mean investment property is dead.
But they do mean investors need to be more careful.
Existing investors may have transitional protection.
People purchasing certain established properties face different negative gearing rules.
Qualifying new properties may receive more favourable treatment.
And from 1 July 2027, the way relevant future capital gains are taxed changes.
You don't need to become an expert in the legislation.
You just need to understand one thing:
The tax rules are changing, so run the numbers before you buy and calculate the tax consequences before you sell.
Investment Property Tax Advice
Dolman Bateman assists property investors with:
investment property tax advice
negative gearing
rental property deductions
capital gains tax
property ownership structures
tax planning before buying
CGT calculations before selling.
If you're thinking about buying or selling an investment property, getting the tax advice before you sign the contract can make a significant difference.
Contact Dolman Bateman to discuss the tax implications of your investment property.
This article provides general taxation information only and does not constitute financial, investment or legal advice. Tax treatment depends on your individual circumstances.
Disclaimer: The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. All content relates to the current financial year only. Future changes to tax laws, thresholds or administrative requirements may affect the accuracy or relevance of this information, so you should always confirm that the guidance remains current. While every effort has been made to ensure accuracy at the time of publication, Dolman Bateman accepts no responsibility or liability for any loss or damage arising from reliance on this information. You should seek professional advice tailored to your circumstances before making any financial or tax decision.
