Tax planning Geelong: Understanding the new negative gearing and capital gains tax reforms

July 27, 2026

Tax planning in Geelong is becoming increasingly important for property investors following changes to Australia’s negative gearing and capital gains tax rules. The reforms are now law and will apply from 1 July 2027, giving investors time to understand how the new arrangements may affect established properties, new builds, future capital gains and long-term investment decisions.

This article is current as at 27 July 2026. Although the reforms have become law, most of the changes do not commence until 1 July 2027. Investors should obtain advice based on their circumstances before buying, selling or restructuring an investment property.

What is changing from 1 July 2027?

The Australian Government’s reforms change the taxation of residential property investments and capital gains. According to the Australian Taxation Office, the measures will limit negative gearing for residential property investments to new builds and replace the existing 50 per cent capital gains tax discount for individuals, trusts and partnerships with cost base indexation and a 30 per cent minimum tax rate on capital gains.

The main changes include:

Negative gearing for residential property investments will generally be limited to eligible new builds from 1 July 2027.
Properties held before 7.30 pm AEST on 12 May 2026 will be exempt from the new negative gearing restrictions.
Investors who acquire established residential property after the Budget announcement can continue deducting losses against residential property income, subject to the legislation.
The 50 per cent CGT discount for individuals, trusts and partnerships will be replaced by cost base indexation and a minimum 30 per cent tax rate on relevant capital gains.
The new CGT arrangements will generally apply to gains accruing from 1 July 2027 when those gains are realised.

These rules connect the type of property an investor purchases with the deductions that may be available. They also connect the timing of a capital gain with the method used to calculate the taxable amount. This makes accurate record keeping and forward tax planning especially important.

For further details, refer to the ATO’s explanation of the negative gearing and capital gains tax reforms.

How negative gearing currently works

Negative gearing generally occurs when the deductible costs of owning an investment are greater than the income the investment produces. For a rental property, these costs may include eligible loan interest, council rates, insurance, property management fees, repairs, maintenance and depreciation.

Under the existing rules, an eligible rental property loss can generally be offset against other assessable income, such as salary or business income. This can reduce the investor’s taxable income for that financial year.

Negative gearing does not automatically make a property a suitable investment. A tax deduction compensates an investor for only part of an eligible expense. The investor still incurs the underlying cost, so rental income, borrowing expenses, cash flow and long-term growth prospects should remain central to the investment decision.

How the negative gearing reforms may affect property investors

From 1 July 2027, the tax outcome may depend on whether a residential property is an established dwelling, an eligible new build or a property protected by the transitional arrangements.

Properties held before the Government’s announcement time on 12 May 2026 are exempt from the changes. This means an eligible existing investor may continue to apply the previous negative gearing treatment to that property.

New residential properties will remain eligible for negative gearing under the reformed system. The relationship is deliberate: investment in a new build supports additional housing supply, while the tax system continues to permit qualifying losses to be applied against other income.

Investors who purchased an established residential property after the announcement should obtain advice about how the loss limitation rules apply. The reforms may restrict the use of a property loss against salary, wages or unrelated business income, although the loss may still be available against residential property income under the legislation.

This distinction can affect annual cash flow. An investment that produces a tax benefit under the earlier rules may produce a different after-tax result once the new restrictions apply.

Tax planning in Geelong before the reforms commence

Tax planning in Geelong should help a property investor connect the new legislation with their own income, investment structure and financial objectives. It should not involve making a rushed purchase solely to obtain a tax outcome.

Before buying another investment property, consider:

whether the property is an established dwelling or an eligible new build
when the property was or will be acquired
the expected rental yield and ongoing ownership costs
whether the property is likely to produce taxable income or a rental loss
how a loss may be treated under the rules applying from 1 July 2027
the ownership structure and the taxpayers who will receive the income or capital gain
the potential CGT consequences when the property is eventually sold

These factors demonstrate the connection between property selection, ownership structure and tax treatment. Reviewing them before signing a contract can provide more options than seeking advice after the transaction has been completed.

What is changing for capital gains tax?

Capital gains tax may apply when an investor sells or otherwise disposes of a rental property. The taxable result generally depends on the capital proceeds, the property’s cost base, available capital losses, exemptions and any concession that applies.

Under the previous rules, eligible individuals and trusts could generally reduce a capital gain by 50 per cent after holding an asset for at least 12 months. The reforms replace this discount for affected taxpayers with cost base indexation and a minimum 30 per cent tax rate on relevant capital gains.

Cost base indexation adjusts an asset’s cost base to account for inflation. In broad terms, the adjustment is intended to separate the inflationary component of an increase in value from the investor’s real capital gain.

The eventual tax result will depend on factors including:

the original purchase price and eligible acquisition costs
capital improvements made during the ownership period
ownership expenses included in the cost base where permitted
the period for which the property was held
inflation during the relevant period
the investor’s taxable income and applicable tax rate
available capital losses and other relevant concessions

The ATO explains that the new CGT arrangements apply to gains accruing from 1 July 2027 when those gains are realised. Investors should therefore retain complete records covering the property’s purchase, ownership, improvement and sale.

Do the reforms affect the 2025–26 tax return?

No. The ATO has confirmed that the recent negative gearing changes do not apply to the 2025–26 tax return.

Rental property owners preparing their 2025–26 returns should continue to apply the rules relevant to that income year. They must still ensure that rental income is fully declared and that deductions are correctly classified, apportioned and supported by records.

The distinction between current compliance and future planning is important. The 2025–26 return concerns income and expenses for the year ended 30 June 2026, while the new negative gearing and CGT arrangements generally commence from 1 July 2027.

More information about claiming rental expenses is available from the Australian Taxation Office.

Should investors favour a new build?

The continuation of negative gearing for eligible new residential properties may make new builds more attractive to some investors. However, the availability of a tax deduction should not determine whether a property is financially suitable.

A sound investment assessment should also consider the purchase price, construction quality, local rental demand, vacancy risk, owners corporation costs, expected yield and prospects for long-term capital growth.

For investors in Geelong and surrounding areas, local property conditions can vary between suburbs and property types. A new build that qualifies for negative gearing may still be unsuitable if its purchase price, rental return or ongoing costs do not support the investor’s objectives.

The property creates the financial return, while the tax rules influence the after-tax result. Both elements should be considered together.

Why accurate property records matter

The CGT reforms increase the importance of maintaining accurate records throughout the full ownership period. Property owners should retain contracts, conveyancing documents, stamp duty records, loan information, invoices for capital improvements and evidence of incidental purchase and sale costs.

Records for repairs and maintenance should also be kept separately from records for capital works. These expenses may receive different tax treatment, and an incorrect classification can affect both the annual rental property deductions and the property’s CGT cost base.

Good records connect each transaction with the correct tax treatment. They also help an accountant calculate deductions, apply cost base indexation and support the taxpayer’s position if the ATO requests evidence.

Review your property tax strategy with CD&G Accountants

The negative gearing and capital gains tax reforms may affect property investors differently depending on what they own, when it was acquired and what they plan to do next. General information can explain the legislation, but it cannot determine the right approach for an individual investor.

CD&G Accountants provides tax planning and strategy services for individuals, property investors and business owners in Geelong. We can review how the rules relate to your existing portfolio, future purchases, rental property deductions and potential capital gains.

Planning before a transaction can help identify the tax implications while there is still time to consider the available options. To discuss your property investment plans and tax position, contact CD&G Accountants.