After months of speculation, Treasurer Jim Chalmers has pulled the trigger on sweeping property tax changes. Here’s what it means for you.

Treasurer Jim Chalmers has handed down his fifth consecutive budget this evening, unveiling sweeping changes to Australia’s property tax regime and ending months of speculation.

“This is the most important and ambitious budget in decades,” Chalmers said.

Despite ruling out changes to the capital gains tax discount and negative gearing on multiple occasions, the government will move to replace the 50 per cent capital gains tax (CGT) discount with an inflation-indexed discount and a minimum 30 per cent tax on gains from 1 July 2027.

Those investors purchasing new builds will have the choice of a 50 per cent CGT discount or the new arrangements.

Meanwhile, negative gearing will be limited to new builds from 1 July 2027, with the federal government confirming that existing arrangements will remain unchanged for all properties held before budget night.

For purchases after budget night, losses will be deductible against residential property income; unused losses can be carried forward but cannot be deducted against wages.

The measures have sparked concern among real estate industry leaders, who warn they could drive rents up by as much as 30 per cent due to reduced supply, fewer rental listings, and landlords passing on higher costs.

The budget also includes National Disability Insurance Scheme (NDIS) reforms, which are forecasted to save $37.8 billion in the next four years through increasing oversight and permanently extending the $20,000 instant asset write‑off from 1 July 2026.

Here’s what it means for you.

Negative gearing

From tonight, changes to the negative gearing tax regime will take effect, reshaping how investors build their property portfolios.

Under the new policy, negative gearing will apply only to new dwellings, in a bid to boost supply.

The Treasurer said that the move will help younger Australians access the property ladder.

The changes mean that anyone who doesn’t already own a property won’t be able to purchase and negatively gear an existing dwelling to access the short-term tax concessions in the same way as before.

Investors who buy established housing after Budget night will still be able to deduct losses against residential property income for unused losses to future years, but won’t be able to offset them against other income, such as wages.

However, landlords currently negatively gearing properties in Australia will be “grandfathered” and exempt from the changes, as the reforms won’t apply retrospectively, sparing existing investors.

Investors buying new builds will still be able to offset losses against other income.

“This will help rebalance a system which is more generous to assets than it is to labour,” Chalmers continued.

“And help rebalance a system where house prices have decoupled from incomes.”

Capital gains tax

The federal budget also targets the CGT discount, which previously applied a flat 50 per cent reduction to taxable capital gains on assets held over 12 months.

Under the new reforms, the government will scrap the flat 50 per cent discount and return to an inflation-indexed system similar to the Hawke-Keating era and introduce a minimum 30 per cent tax on gains from 1 July 2027.

As the transition phase takes effect, assets purchased after budget night will continue to receive the 50 per cent discount until 1 July next year, before shifting to the new indexation model.

Similarly to negative gearing, new builds will be exempt and will still benefit from the current regime, with a 50 per cent discount to support housing supply.

“We’re replacing the 50 per cent capital gains tax discount with inflation‑adjusted indexation, to restore the taxation of real gains,” the Treasurer said when delivering the Budget.

“These changes will be prospective, and new builds will retain the option to use the 50 per cent discount.

“We’ll also introduce a minimum 30 per cent tax rate on capital gains from July next year, and on discretionary trusts from July the year after.”

Trusts

In addition to the negative gearing and CGT changes, the budget also extends to families using discretionary trusts to minimise tax.

From 1 July 2028, the Government will introduce a 30 per cent minimum tax rate on discretionary trusts, with some exceptions.

Currently, trusts allow families to distribute income flexibly among beneficiaries, directing earnings to those on lower tax rates, enabling high-income households to reduce their overall contribution compared to “average” wage earners.

The government said rollover relief will be available for three years, from 1 July 2027, to help small businesses and others restructure.

“This is about better aligning the taxes paid on these types of income with the taxes paid on wages.”

“These changes will level the playing field for workers and first home buyers, and support investment in productive assets, including new housing supply.”

“And they will fund our new round of tax relief for more than 13 million Australian workers.”

Tax benefits

Ahead of the budget, the government had already announced a series of tax changes, including an instant $1,000 tax deduction without needing receipts, a long-promised measure that will be formally legislated later this year.

The policy was designed to give taxpayers the option of a simplified deduction instead of tracking individual work-related expenses, with around 6.2 million workers expected to benefit through a more streamlined tax return process.

In addition, all Australian taxpayers are set to receive further rounds of tax cuts in 2026 and 2027, building on earlier relief measures.

From 2027–28, the government will introduce a $250 Working Australians Tax Offset, delivering an ongoing annual tax cut to more than 13 million workers.

From July 2026, the 16 per cent tax rate on income between $18,201 and $45,000 will be reduced to 15 per cent, followed by a further cut to 14 per cent from July 2027.

These changes will deliver additional savings across the board, with taxpayers earning above $45,000 receiving extra annual cuts of $268 in 2026–27 and $536 from 2027–28.

For someone on average earnings of around $79,000, this equates to the same additional benefit, with total tax relief increasing further when combined with existing cuts.

“Tonight, we choose the hard road of reform, not the path of least resistance,” the Treasurer concluded.

More coverage to come.

This article was first published on Smart Property Investment, a sister-brand of Property Buzz.