Australia’s property investment landscape is set for a significant change, with new negative gearing and Capital Gains Tax (CGT) reforms changing how future residential property investments will be treated.

For investors considering their next purchase, the reforms may influence the type of property they choose, how they assess cash flow and how they think about long-term returns.

While the legislation has now passed Parliament, some implementation details are still being finalised ahead of the changes taking effect. So, what could this mean for property investors?

What is changing?

Under the Federal Government’s reforms, from 1 July 2027:

Negative gearing for residential investment properties will be limited to new-build properties.

The existing 50% CGT discount will be replaced with cost-base indexation and a 30% minimum tax rate on capital gains.

Importantly, properties purchased before 7:30pm AEST on 12 May 2026 will be protected from the negative gearing changes. The CGT changes will apply to capital gains accruing from 1 July 2027.

For investors, this creates an important distinction between existing properties and future purchases.

Are investors changing their strategy?

The reforms have already prompted some investors to reconsider their approach, although it is still too early to know exactly how they will affect the broader property market over the long term.

Investor sentiment appears to have softened following the announcement. One survey of more than 1,400 Australian investors found that more than 80% considered residential investment property less attractive following the 2026 Federal Budget. At the same time, 51.5% said they intended to hold their existing investments and wait to see how the changes develop.

This suggests that many investors are not necessarily exiting property altogether. Instead, they may be reassessing what they buy, where they buy and how the investment performs without relying as heavily on tax benefits.

New builds could become more attractive

One of the biggest potential shifts is the increased focus on newly constructed properties.

From July 2027, negative gearing benefits for residential investment properties will be limited to new builds. This could encourage some investors to consider newly constructed houses, apartments and other eligible properties.

There are already signs of increased investor interest in new-build property in some parts of Australia.

For investors, however, the tax treatment should not be the only consideration. Location, rental demand, purchase price, vacancy risk, ongoing costs and the property's long-term growth prospects all remain important.

Existing properties may become more valuable to some investors

Investors who purchased established properties before 12 May 2026 may be able to retain the existing negative gearing treatment under the grandfathering arrangements.

This could influence decisions around selling or holding established investment properties.

Rather than selling simply because the rules are changing, some investors may choose to hold existing assets and continue assessing their performance based on rental income, expenses, debt levels and long-term capital growth potential.

The right decision will depend on each investor's circumstances and should be considered alongside appropriate tax and financial advice.

Cash flow could become even more important

Historically, negative gearing has allowed investors to offset certain investment property losses against other taxable income, subject to the applicable rules.

With future purchases of established residential properties no longer receiving the same treatment, investors may place greater emphasis on the property's underlying cash flow.

This could increase interest in properties with:

• Strong rental yields
• Lower ongoing holding costs
• Consistent rental demand
• Potential for rental growth

A pathway towards positive cash flow over time

In other words, investors may increasingly ask:

"Does this property make financial sense on its own?"

rather than relying primarily on the potential tax benefit to support the investment strategy.

What about SMSF property investment?

Separate changes to SMSF borrowing arrangements are also relevant for investors considering property through their self-managed super fund.

From 10 August 2026, SMSFs can no longer use Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property, although existing arrangements are grandfathered.

SMSFs can still acquire residential property outright using cash, while LRBAs can continue to be used in certain circumstances to acquire business real property.

Because SMSF property investment involves complex superannuation, tax and lending considerations, investors should seek specialist professional advice before making a decision.

What does this mean if you're considering an investment property?

The new reforms don't necessarily mean that property investment is no longer attractive.

Instead, they may mean that investors need to assess opportunities differently.

Before purchasing an investment property, it can be useful to consider:

1. Your borrowing capacity
How much can you comfortably borrow under current lending requirements?

2. Cash flow
Can the rental income reasonably support the property's ongoing costs and loan repayments?

3. Property type
Does an established property or new build better suit your investment strategy?

4. Long-term potential
What are the property's rental demand, location fundamentals and potential for capital growth?

5. Your overall financial position
How does the investment fit alongside your existing debts, income, properties and broader financial goals?

How can a mortgage broker help?

Tax and investment strategies should always be discussed with your accountant or financial adviser. However, the finance structure is another important part of an investment property decision.

At Medico Loan, we can help you understand the lending side of your investment strategy.

We can assess your borrowing capacity, compare suitable loan options and help you understand how different loan structures and property scenarios may affect your repayments and overall finance position.

The property market and tax rules may be changing, but the fundamentals of good borrowing decisions remain important.

Considering your next investment property?

Talk to Medico Loan about your finance options and take your next step with a clearer understanding of your borrowing position.

This article provides general information only and does not constitute tax, financial or investment advice. Tax and legislative rules can change.

Speak with your accountant, financial adviser or other qualified professional about how the reforms may apply to your individual circumstances.