Property vs Shares After the 2026 Budget: What Actually Changed
Author: Tepuy Solutions | Published: August 2, 2026 | Category: Property Investing, Investment Taxation
The Quick Summary
In the 2026-27 Federal Budget, the government abolished negative gearing for established residential property purchased after 7:30pm AEST on 12 May 2026, effective from 1 July 2027, and replaced the 50% CGT discount for the same group of assets with CPI cost-base indexation plus a 30% minimum tax on real gains. Both changes are now legislated law — Acts No. 49 and 50 of 2026 — not proposals.
If you already own investment property, or you bought before 12 May 2026, none of this affects you: your negative gearing and your 50% CGT discount are both grandfathered indefinitely. The same is true if you buy a new build at any point — new builds are exempt from both changes and keep the old tax treatment (or, for CGT, get to choose whichever method suits them better).
For anyone deciding today whether to buy an established property or invest in shares, the two tax advantages that used to tilt the comparison toward property — the immediate salary offset from negative gearing, and the flat 50% CGT discount — are gone for that specific purchase from 1 July 2027 onward. The decision now rests more heavily on the factors that were always there in the background: leverage, liquidity, transaction costs, and how much capital growth you actually expect.
What Negative Gearing Is and Was
An investment is negatively geared when the costs of holding it — loan interest, rates, maintenance, management fees — exceed the income it produces. For a rental property, that means the rent doesn't cover the costs, and the shortfall is a net rental loss.
Under the rules that have applied for decades, that net rental loss could be deducted against the investor's other income — salary, wages, anything — in the same financial year. A $10,000 rental loss for someone on a 34.5% marginal rate (including Medicare levy) turned into roughly $3,450 back at tax time, straight away, regardless of whether the property ever sold for a gain.
This mattered enormously for the property vs shares comparison, because share investors using a margin loan never had access to the same mechanism. If a leveraged share portfolio produced a net investment loss — interest costs exceeding dividends — that loss was quarantined: it could only offset other investment income, or be carried forward, never salary. Negative gearing gave property a cash flow advantage in the early years of ownership that shares structurally couldn't match.
That advantage was never "free" — it depended on capital growth eventually outweighing the accumulated losses. But it was real, and it's the specific thing the 2026-27 Budget targeted.
What the Budget Changed for Negative Gearing
The change was announced in the 2026-27 Federal Budget, handed down on 12 May 2026, and takes effect from 1 July 2027. It applies to established residential properties purchased after 7:30pm AEST on 12 May 2026 — Budget night.
- What happens to losses now: from 1 July 2027, net rental losses on affected properties can no longer be deducted against salary or other non-rental income. They're quarantined — usable only against rental income, or carried forward to offset future rental income or a capital gain on that property.
- Grandfathering: properties purchased before 7:30pm AEST 12 May 2026 keep the old rules indefinitely. This is not being phased out retrospectively.
- Exempt — new builds: a new build purchased at any time keeps full negative gearing, regardless of purchase date.
- Not affected: commercial property and shares. The quarantining rule for share losses via margin lending hasn't changed — it was already the position before this Budget.
What the Budget Changed for CGT
The second change applies to the same group of assets — those purchased after 12 May 2026 — and affects gains accruing from 1 July 2027 onward.
- Gone: the flat 50% CGT discount for individuals, trusts, and partnerships, for gains accrued from 1 July 2027 on assets bought after 12 May 2026.
- What replaces it: CPI cost-base indexation — the purchase cost is adjusted upward for inflation over the holding period — combined with a 30% minimum tax on the resulting real (inflation-adjusted) gain.
- Not affected — superannuation: super funds keep their existing CGT treatment unchanged (15% in accumulation phase, 0% in pension phase).
- Not affected — companies: companies never received the 50% discount under the old rules either, so nothing changes for them.
- New builds — a genuine choice: a new-build purchase can elect whichever method — the old 50% discount or the new indexation-plus-minimum-tax approach — produces the better result.
- Transition rule: for an asset held across the commencement date, the gain is split. The portion accrued up to 30 June 2027 still gets the old 50% discount; only the portion accrued from 1 July 2027 is taxed under the new method.
The New Property vs Shares Comparison
Putting both changes together produces four distinct positions, not two. The table below sets them out.
| Factor | Established property, pre-Budget owner | Established property, bought after 12 May 2026 | New build buyer | Shares investor |
|---|---|---|---|---|
| Negative gearing | ✅ Full salary offset | ❌ Quarantined from 1 Jul 2027 | ✅ Full salary offset | ❌ Always quarantined |
| CGT discount | ✅ 50% after 12 months | ❌ CPI indexation + 30% min tax | ✅ Can choose either method | ❌ CPI indexation + 30% min tax (post-12-May-2026 purchases) |
| Leverage available | ✅ Yes | ✅ Yes | ✅ Yes | ✅ Yes (margin lending) |
| Liquidity | ❌ Low | ❌ Low | ❌ Low | ✅ High |
| Transaction costs | ❌ High | ❌ High | ❌ High | ✅ Low |
The tax gap between property and shares has narrowed dramatically for new buyers. Previously, a property investor had two structural tax advantages over a share investor: the immediate salary offset from negative gearing, and a flat 50% CGT discount that was simpler and, in most cases, more generous than an indexation-based method. Someone buying an established property today, for settlement after 12 May 2026, now has neither advantage from 1 July 2027 onward — on the tax-treatment-of-losses-and-gains question specifically, they're in essentially the same position as a share investor using a margin loan.
New builds are the clear exception, and likely to become more attractive as a result. A new-build purchase retains full negative gearing and gets to choose the more favourable of the two CGT methods. If a property strategy depends on the tax treatment rather than pure capital growth conviction, new construction is now the only property path that keeps the old settings intact.
Existing property owners are unaffected by either change, in full, permanently. If you already hold an established property bought before 12 May 2026, nothing in this Budget changes your tax position — the grandfathering is not a temporary transition, it's the ongoing rule for that asset.
What hasn't changed is everything the tax code was never responsible for: leverage magnifies both gains and losses the same way it always did, property remains illiquid and expensive to transact in, and shares remain liquid, cheap to trade, and easy to diversify. Those differences were always the bulk of the property vs shares decision for most investors, and they still are — the tax changes remove two specific advantages property used to have, they don't invert the comparison entirely.
What This Means for Different Types of Investors
"I already own investment property"
Your negative gearing is grandfathered — nothing changes. Your CGT treatment depends on when you bought: if it was before 12 May 2026, the old 50% discount still applies to you in full, indefinitely. There's no need to sell before any deadline to "lock in" the old rules — grandfathering isn't time-limited. The one thing worth reviewing is the timing of a future sale if your holding period happens to straddle 1 July 2027 for an asset that isn't grandfathered (see the transition rule above); for a grandfathered pre-12-May-2026 asset, this doesn't apply to you at all.
"I'm deciding whether to buy property or shares now"
For an established property, the tax advantages that used to tip the scales are gone from 1 July 2027. The comparison now rests more on non-tax factors: how much leverage you want, how much liquidity you need, how concentrated you're comfortable being in a single asset, and — most importantly — what capital growth rate you actually believe the property will deliver, since that's no longer being subsidised by an immediate tax refund. New builds keep the old tax structure, so they're worth a closer look if the tax treatment matters to your strategy. For shares, the CGT discount change applies too, but there's no new negative-gearing-style loss either way, because share losses were always quarantined. The honest answer is that this now depends on your specific numbers — purchase price, expected rent, expected growth, and how long you plan to hold — more than it depends on a generic tax rule of thumb.
"I was planning to use negative gearing as part of my strategy"
If you already bought before 12 May 2026, your strategy is unchanged — the rules you planned around still apply to you. If you're buying an established property now, model your cash flow under the post-1-July-2027 rules before committing: the annual shortfall that negative gearing used to subsidise through your tax return will instead need to be covered from your own cash flow, or carried forward against future rental income rather than claimed this year. If the tax benefit is central to why the strategy works for you, a new build keeps you eligible for it in full.
Run Your Numbers
The impact of these changes varies significantly depending on purchase price, rental yield, expected capital growth, holding period, and marginal tax rate. The Tepuy Property vs Shares Calculator models all of these factors — enter your scenario to see the comparison under current law.
Disclaimer
This article reflects Australian tax law as at August 2026, including changes from the 2026-27 Federal Budget (Acts No. 49 and 50 of 2026), which are now legislated law. This is general information only — not financial or tax advice. Seek independent advice for your specific circumstances.