OD #21 - What Everyone's Got Wrong About the 2026 Property Changes

Negative gearing is “gone” is the loudest headline, and it is also the fastest way to make a bad decision. We sit down and sort the facts from the noise around the 2026 property tax changes and what flows into 2027, including who is actually affected, which investors are grandfathered, and why the definition of a “new build” matters more than most people realize.

We walk through the new negative gearing rules for residential property, how quarantining rental losses changes cash flow, and what kinds of developments may still qualify for full tax treatment. Then we unpack the capital gains tax shake-up: moving away from the 50% CGT discount toward cost base indexation plus a minimum tax rate, and why inflation and your holding period can flip the result from better to worse. If you are thinking about selling, holding, or buying again, the math has changed and timing now matters.

We also cover the SMSF bombshell: self managed super funds can still own residential property, but new limited recourse borrowing arrangements for residential purchases are off the table. That pushes many investors toward paying cash inside super or considering commercial property, which remains borrowable but demands careful tenant and location due diligence. Our bottom line is simple: tax rules change, but great property investing still comes down to fundamentals, not chasing deductions.

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Transcript

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Headlines Versus Reality

Oscar Don 0:00

Negative gearing's gone, except it hasn't. Your Superfund can't buy property, except it can. There's been a lot said about the 2026 changes, and a fair bit of it is wrong. So today, what actually changed, what didn't, and what it means for your next move. Tune in, you don't want to miss this one.

Housekeeping And General Advice

SPEAKER_01 0:30

Welcome back to another episode of the Finance Bible Podcast.

Oscar Don 0:34

Zeke here and your co-host Oscar. But before we get into it, please note that nothing in this podcast should ever be considered as personal financial advice.

SPEAKER_01 0:43

Although, if financial advice is what you're seeking, let us know and we can get you in touch with the correct team. But for now, sit back, relax, and enjoy the show. Let's get into it.

What Changed And Why It Matters

Oscar Don 0:56

So if you've been anywhere near property investment this year, you'll know the ground has shifted completely. We've had the biggest change to property tax in a generation, and on top of that, a change to how Superfunds can buy property that landed last month in August. I've had the same conversation about 40 times in the last month, so I figured I'd just record it once. And today I want to do three things. I want to walk through what's actually changed, not just the headlines and the mechanics, clear up two things that almost everyone has wrong, and then talk about where that leaves you, depending on what you're trying to do personally. And look, quick disclaimer before we start everything here is general advice. Your accountant needs to look at your situation before you act on any of it or your financial

Negative Gearing Rules And Grandfathering

Oscar Don 1:39

advisors. So let's start with the big one: negative gearing. In the May budget, the government announced that from 1st of July next year, so 2027, negative gearing on residential property is limited to new builds only. Now, here's where people panic unnecessarily. If you already own an investment property and if you held it before 7:30 p.m. on the budget night, which was the 12th of May, you're grandfathered. So that means nothing changes. You keep the negative gearing under the existing rules for as long as you hold that property. If you hold it for 10 years to 90 years, if you last and you live that long, doesn't change at all whatsoever. Same goes if you'd exchanged contracts before that time but hadn't settled yet. So let's say you settled on the 12th of May before 7:30 p.m., let's say 6 p.m., you're fine. There's no issues whatsoever, or you signed a contract on that day and you settled two months later. You're fine. So the first thing I'd say to most listeners is your existing portfolio is not affected. What is affected is established property bought after budget night. And even then, there's a runway. You keep negative gearing until next year, the 30th of June. But after that, your rental losses get basically wiped out and quarantined, meaning you can still claim them, but only against the residential property income, not against your wage. And if you've got excess losses, you carry them forward, they're not lost, they just sit there until you've got property income or capital gain to offset them against. So the news is new builds are exempt. So if you buy an eligible new build, you keep the negative gearing against your salary before and after 2027. So that is the new rules. Negative gearing will stay only for new builds. So what counts as a new build, this is where it gets a bit interesting and it's a bit worth paying attention to. So broadly, a new build needs to just add to supply. Australia is severely undersupplied. A knockdown rebuild that replaces one dwelling with one dwelling doesn't count. Substantial renovations don't count. And critically, the property can't have been previously sold unless the first owner was the builder and it hasn't been occupied for more than 12 months. That last point is quite important. If you buy a new build and then sell it on, the next buyer doesn't inherit the treatment. It works a bit like the stamp duty concessions in some states. The benefit attaches to the first buyer, not to the property forever. Off-the-plant apartments, house and land packages, qualifying duplex developments. These are the ones generally in the scope that you can claim the negative gearing post next 20, next June. One more thing on scope. This is residential only. So commercial property as a whole is completely untouched and shares

CGT Discount Replaced By Indexation

Oscar Don 4:20

are untouched. The second half of the budget package was all about capital gains tax. The 50% discount, which is now being replaced with cost-based indexation plus a minimum tax rate. So instead of halving your gain, you index your cost base to inflation and pay tax on what's left with a flaw on the rate. So what that means in practice depends enormously on your holding period and the inflation environment at the time of when you sell the property. In a low inflation decade with strong capital growth, indexation is worse for you than the 50% discount. In a high inflation period with modest growth, indexation can actually be better. It's not universally worse, it's just completely different, and it changes the maths on the whole period. So for eligible new builds, investors can choose either the 50% discount or the new indexation arrangement. And that's a genuine advantage, and it's not getting talked about enough. So that's what I like about it. You can kind of pick, but still, it's a it's a massive change in the whole landscape of property investment.

SMSF Borrowing Ban Explained Clearly

Oscar Don 5:24

And number three, one which blindsided every single basically Australian and property investor is superannuation. From last month to 10th of August, a super fund, or more importantly, a self-managed super fund can no longer enter a new limited recourse borrowing arrangement to buy residential property. So what a limited recourse borrowing arrangement is, it's basically getting a loan for your super fund, for your self-managed super fund. So you can no longer get a loan in your SMSF to buy residential property. Now let me be precise. So that does not mean your super fund can't own residential property. Your SMSF can still buy residential property, but it has to be outright with cash. You cannot get a loan for residential property. So you can buy it and have one in your super fund, that's fine, but you've got to have to have full cash, which in today's environment is very hard. And if that fits the funds investment strategy as well. For individuals who were currently in the purchase process for an SMSF before the 10th of August, or have just signed a contract like on the 8th or 9th of August, that didn't affect anyone's arrangements. So we're clients who were signing contracts maybe two days before the ban got in place, and they literally settled you know a couple days ago. So that's a month after the ban took place. So they weren't affected at all. So if you've got residential LRBA in place from before August, it just continues. So going forward, they're fine no matter what. You don't have to force a sale, there's no compliance problem. So you can even refinance it on substantially the same terms. Um, but obviously be careful there and speak to your broker. Now, what's still available for SMSFs and the shifts started to happen is as I said before, commercial property is untouched personally with the negative gearing, and that's the same with your superannuation. So, commercial property for a lot of property investors is now where they're looking towards because the changes didn't affect them. So you can still buy commercial properties and get loans in your super fund for commercial properties. But if you're not so comfortable with commercial properties, there are individuals who are a bit wary about it because um if you obviously, like with any property, same with the residential, if you buy in the wrong place, there may be some issues getting tenants. But if you do in the if you buy in the right place, you will mitigate that risk. So you can still purchase, so you can still purchase commercial properties, which thank the Lord. Now, all these changes are pretty drastic. It was across the media for probably two months, three months. It still is on you know front page of newspapers here and then. So it's it's massive in the landscape of you know your your young generation who are just trying to get ahead, and then your your younger families who might have one or two kids in their 30s to 40s who are trying to leverage and use their current equity in their home to buy property and then get a bit of a tax break, which now they can't. And even those individuals who are nearing retirement and wanted to invest in property, get the tax breaks and sell it on retirement. So it does affect everyone and every single stage.

How These Rules Change Your Plan

Oscar Don 8:28

But where does this all leave you? So I'll break it down to four situations. So, number one, if you already own an investment property, like we mentioned earlier, you're grandfathered, the main things that change for you is the selling decision. So the CGET change alters when it makes sense for you to exit. And if you've been holding something marginally and thinking about selling, the maths is different now. So it's definitely worth a conversation with your accountant to figure out does it make sense to sell now? Should you wait 12 to 18 months, or when you know, when is the line best for your overall strategy or retirement planning? If you're if you're buying next, the new build pathway is where the tax treatment sits now. But in terms of like buying property, a lot of people saying they're not going to buy a property anymore because you don't get a tax break. But the main thing about property is you don't buy property to get a refund at your tax return. You buy property to reap the benefits of being in a market and and gaining capital growth over the next 10, 20, 30, 40 years. And I guarantee the money you make on a property with capital growth over how many years you hold it is going to be far greater than the amount of money you might get back. So if you're on the fence and you're wanting to buy property, but now the new tax changes are making you a bit skeptical about it, you've got to think about the bigger picture. What is your overall 20 to 30 year plan? If it's to hold a property for the long term and then sell it down the track, then I don't think the current changes should scare you away. And we've seen based on other governments and time before us, these changes have been reversed in two to three years after they make them because the government realizes that it's actually done the opposite and everyone is cooked. So they look at actually reversing these changes so then you'll get your benefits back. But don't make these small changes impact your long-term strategy because that's where a lot of people will miss the boat. And when you get to the other end of when you wanted to retire, it could really impact you on your overall retirement

New Build Risks And Deal Discipline

Oscar Don 10:26

income. And that's another thing. Don't just buy a new build because of the tax break and the tax outcome. Because new builds carry their own risks. You've got the build costs, you've got the builders as a whole. So that's a that's a risk there. If you're signing up with a building you're not very aware of, that lots of builders have gone bust. So you need to look at you know their financials, their history, their track record, or speak to a trusted, like a property advisor like ourselves, who have these good relationships with builders who they know are actually good and going to finish the build. You've also got their completion timelines and the fact you're often paying a premium over an established property. Um, only in some circumstances, if you find the right new build, you you can be better off. But with saying that, there's a lot of companies out there literally just pushing horrible, dodgy, average new builds down people's throats without even you know taking into account their overall position, their goals, what they want to achieve in the next 20 years, just because they make money on it and that's it. So be careful, be wary. If the deal only works because of the deduction, it is not a deal. So the tax treatment should be a tiebreaker between two good options, not the reason you've literally picked something ordinary. If you're a big SMSF investor or you were a big SMSF investor, your realistic options at the moment, one, buy residential outright with your cash and your fund. If the balance supports it, so that's where you'll speak to a mortgage broker, figure out what your balance is, what you can afford, what you can't afford, or at the moment look to explore commercial opportunities that are becoming more popular, more options are coming as well. So that's where you sit. And if you're in in the mid-process on something, get your dates checked. Whether your grandfather on a purchase or court turns on specific dates and specific documents, don't just assume it, get someone to actually look at the contract.

Fundamentals Still Win Long Term

Oscar Don 12:21

So, what I'd say to you is that fundamentals haven't changed. If you buy in the right location, you buy something with genuine rental demand and you don't overpay and it's structured properly. All those things determined whether an investment worked before the budget night, and I guarantee you they'll determine it after and for the next 30 odd years. The tax treatment might have changed, but the overall investment strategy for buying good solid investment properties didn't. If you want to talk through where you sit with any of this, you know where to find us. Thanks for listening, and I'll see you on the next episode.

SPEAKER_01 12:59

Well, that is the end of the episode. We hope you enjoyed it. And if you did, you know exactly what to do. Hit that follow button, like button, subscribe, share it to your friends, families, or even a co worker. If you're really feeling different, you can send it off to an ex. But catch you next time. Hope you enjoyed it. Down.