Top 5 Myths About the 2026 Federal Budget and Property Investing

The 2026 Federal Budget has created plenty of noise and uncertainty in the property market. The announcement plus the hundreds of speculations prior to the announcement hasn't helped either.

The 2026 Budget has announced significant changes to:

• Negative gearing.

• Capital gains tax.

• Family trusts.

• Bucket companies.

• New builds.

• Established homes.

If you are not sure what they are, read our guide to the Budget 2026 changes here.

There is a lot to digest. And as usual, when tax, politics and property get thrown into the same pot, the result is not always a clean soup. It is more like a hot pot of half-truths, sensationalised headlines and confident opinions from people who probably should have read and understood the Budget papers first.

For property investors, especially in the often talked about Melbourne market, the key question is not just what is changing. It is also what is being misunderstood. What are the truth, and what are just outdated rumours or sensationalised news from property spruikers?

Because misunderstanding these changes could lead to poor decisions. Selling too early, buying the wrong asset, overpaying for a new build, or assuming an old investment strategy still works exactly the same way.

Our buyers advocates had spent quite a bit of time understanding the budget, and will now cut through the noise, and explain what is happening. Bookmark and share this to your social page so you have a instant reference page, whenever you need.

We'll clarify the...

Top 5 myths about the 2026 Federal Budget and property investing.

Myth 1: Negative Gearing Is Being Abolished

This is probably the biggest and most misunderstood change.

The myth says:

“Negative gearing is gone.”

The truth is:

Negative Gearing is still very much alive, with some tweaks.

Tweaks to Negative Gearing is being proposed in this Budget. The Budget says the Government will limit negative gearing for residential property investments to new builds from 1 July 2027. Existing Negative Gearing arrangements remain unchanged for:

• Investment properties held before Budget night (12 May 2026); and

• Investors who buy eligible new builds.

Investors of established properties after Budget night, can still negative gear, but the process is different. That is very different from the myth suggesting negative gearing is dead.

What is really happening is that negative gearing is being redirected.

The Government is trying to push tax support toward new housing supply, rather than encouraging investors to compete with first-home buyers for established homes.

For established residential properties bought after Budget night, losses are still be deductible. Not against your unrelated income, but against residential property income. Unused losses can be carried forward to future years, but they cannot be offset against unrelated income such as wages.

Example

Let’s say James earns $180,000 a year and buys an established investment property in Melbourne after Budget night. The property brings in $35,000 in rent, but after interest, rates, insurance and other expenses, it costs him $50,000 a year to hold. That creates a $15,000 loss.

Under the old rules, James may have been able to offset that $15,000 loss against his salary.

Under the proposed new rules, the established property is affected by the changes. He generally cannot use that loss to reduce his salary tax bill. Instead, the loss may be carried forward or used against residential property income or residential property capital gains.

So negative gearing is not gone. But for many future established-property investors, the immediate tax benefit is reduced.

That is the real story.

Myth 2: Existing Property Investors Are Affected and Will Sell Immediately

The myth says:

“If I already own an investment property, I’m in trouble.”

The Truth is:

The Budget says existing arrangements will remain unchanged for properties held before Budget night. That means existing investors are generally not affected by the new rules overnight, and any suggestions of investors immediately selling their properties because of the change is just fake news. Existing investment properties are not affected at all, and if they sell, it will, more likely than not, be due to the asset itself, rather than the negative gearing changes.

This is important. A retrospective change would have created serious investor panic and voter backlash. Instead, the Government has drawn a line between existing holdings and future purchases.

That does not mean existing investors should ignore the changes. It means they should not make rushed decisions based on headlines.

What existing investors should ask

If you already own an investment property, the smarter question is not:

“Should I sell because the Budget changed?”

The better questions are:

• Is this still a quality asset?

• Is the holding cost manageable?

• Is the rental demand strong?

• Does the property have good resale appeal?

• Would I buy the same property again today?

• Does this property still make sense under future tax settings?

That last question is brutal, but useful. If the answer is no, the issue may not be the Budget. The asset is the issue.

Myth 3: The 50% CGT Discount Is Simply Gone for Everyone

The myth says:

“The 50% CGT discount is being removed completely, and everyone loses.”

The Truth is:

The Budget says that from 1 July 2027, the Government will replace the 50% CGT discount for individuals, trusts and partnerships with cost base indexation and a 30% minimum tax rate on capital gains.

The official Budget site explains that investors will only pay tax on their real capital gain, with the reform applying to gains arising after 1 July 2027. That means the change is not simply “50% discount gone, everyone worse off, game over”. The way CGT is calculated is changing, and in some cases, it is better, while worse in other cases.

The old system gave a simple 50% discount if the asset was held for more than 12 months. The proposed new system adjusts the cost base for inflation, then applies a minimum tax framework.

Example

Let’s say Mei bought an investment property for $900,000 and sells it years later for $1.4 million. Ignoring buying and selling costs, the raw gain is $500,000. Under the old 50% CGT discount, only $250,000 may be taxable.

Under the proposed indexation system, the cost base may be adjusted for inflation. If the indexed cost base becomes $1.1 million, the real gain may be closer to $300,000.

Depending on the numbers, inflation and the investor’s personal tax position, the result may be better or worse than the old method.

The key point is this:

The CGT system is changing, but the outcome will depend on the asset, the ownership period, inflation and the investor’s tax profile. This has some impact on the property market over the next 12 months, and we will cover this in our next article on how these changes will affect the property market.

Myth 4: New Builds Are Treated the Same as Established Properties

The myth says:

“All investment properties are being treated the same.”

The Truth is:

Wrong. New builds are being treated more favourably. The Budget clearly favours eligible new residential properties. The Government says negative gearing will be limited to new builds from 1 July 2027, and investors who buy new builds can still deduct losses from other income.

The CGT advantage.

Investors in new builds will be able to choose either the 50% CGT discount or the new arrangements when they sell, and obviously investor will pick the one which taxes less.

The Government is effectively saying:

“If you want better tax treatment, invest in new housing supply.”

That makes policy sense. But it does not automatically make every new build a good investment, and this is where investors need to be careful. A new build can still be a bad asset, and it usually is in an inferior, compromised location.

A poor-quality new build can still suffer from:

• inflated developer pricing;

• weak land component;

• high body corporate fees;

• oversupply risk;

• poor resale demand;

• generic design;

• weak owner-occupier appeal;

• limited long-term capital growth.

A tax benefit does not turn a weak asset into a strong one. The tax benefit probably recognised these compromises, and is designed to make the weak asset look slightly prettier in a spreadsheet.

And let’s be honest. There are reasons why experienced investors avoid new builds. Favourable tax position simply removes one of the reasons.

Example

Anna is considering two properties.

• Property A is a new apartment in a high-supply investor-heavy precinct.

• Property B is an established townhouse in a tightly held Melbourne suburb with strong owner-occupier demand, good schools, scarce supply and strong resale appeal.

Depending on your investment timeline and goals, while Property A may receive better tax treatment, Property B may still be the better long-term asset.

Investors should not let tax rules override property fundamentals. While tax incentives can be a sweetener, fundamental asset quality should is usually the deciding factor. Tax incentive can change overnight, but asset fundamentals don't. Always ask why are incentives needed to encourage buyers.

Myth 5: Family Trusts Are Now Useless

The myth says:

“Family trusts are dead.”

The truth is:

No. Discretionary trusts are not being abolished. But tax minimisation loopholes are being tightened. Family trusts serves many purposes and they are still valid, even without the tax "benefit". Your accountant or solicitor should be the best person to advice if family trusts are still valid for your situation.

In the Budget, the Government will introduce a 30% minimum tax on discretionary trusts from 1 July 2028, with some exceptions. The trustee will pay the tax, and beneficiaries other than corporate beneficiaries will receive non-refundable credits for the tax payable by the trustee.

The Government says this is designed to better align the tax paid on trust income with the tax rates paid by wage and salary earners. This means the benefit of distributing income to low-tax beneficiaries may be reduced. It may also affect some bucket company strategies.

Example

The Chen Family Trust earns $100,000 in taxable income from investments and business activities. Previously, the trustee may have distributed income across adult family members on lower tax rates, reducing the overall tax paid by the family group.

However, under the proposed minimum tax rules, the trust income is intended to face at least 30% tax. So if you had used trusts for the sole purpose of income splitting, the benefit may be reduced. But it might be too late to change the structure. Changes in ownership structures would usually trigger stamp duties, CGT, and potentially move you to the new CGT and negative gearing structure.

But that does not mean the Family Trust is useless. Trusts are still useful for:

• asset protection;

• estate planning;

• family wealth planning;

• business succession;

• risk separation;

• holding long-term family assets.

A trust is a legal structure, and it should have a proper reason for existing. It is unfortunate that investment spruikers have suggested abusing the family trusts structure to push income to low-tax beneficiaries. And that loophole has been tightened.

If your trusts had been established for broader legal, commercial or family reasons, its role is still unchanged. But if you are one of those who had used Family Trust to minimise taxes, it might be too late to change now. Changes can trigger stamp duties, CGT, and put you onto the new CGT and negative gearing rules.

The Real Lesson for Property Investors

The biggest lesson from the 2026 Budget is simple:

The tax system is becoming less forgiving of lazy property investing.

For years, property spruikers have convinced lazy investors into buying average assets because the tax benefits softened the pain.

• The property lost money each year? Negative gearing helped.

• The property was held for long-term growth? The 50% CGT discount helped.

• The family trust distributed income? That may have helped too.

With those advantages are being reduced, redirected or tightened, investors need to focus more heavily on the fundamentals.

A strong investment property should have:

• quality location;

• land value;

• scarcity;

• owner-occupier appeal;

• strong rental demand;

• sensible cash flow;

• long-term resale strength;

• infrastructure access;

• good school and lifestyle drivers;

• disciplined purchase price.

In Melbourne, this matters enormously. Not all suburbs are equal. Not all streets are equal. Not all properties in the same suburb are equal.

A property in good suburbs such as Glen Waverley, Mount Waverley, Doncaster, Box Hill, Oakleigh, Bentleigh, Camberwell, Brunswick or another strong Melbourne market still needs to be individually assessed properly.

The Budget, in fact, emphasised importance of property fundamentals. It increases their importance.

What Melbourne Property Investors Should Do Now

Investors should not make rushed decisions. But they should review their portfolio and strategy.

1. Review existing properties

Ask whether each property still deserves a place in your portfolio. Investigate the property, not the tax outcome.

2. Model future purchases under the new rules

Do not assume old calculations still apply. For future established residential property purchases, the after-tax cash flow may look very different.

3. Be cautious with new builds

Do not rush into buying new builds. While they may receive better tax treatment, these incentives probably exist for a reason. And there are also many reason why experienced investors are NOT buying them. Asset quality is key, when it comes to investing avoid buying a poor asset just because of tax incentives. Tax incentives can change overnight, but the property fundamentals don't. Ask the thousands who bought EVs because of preferential taxes, despite the inconvenience and concerns raised by experienced motorists.

4. Review trust structures

If you use a family trust, discretionary trust or bucket company, speak to your accountant or tax adviser. This is not something you should DIY. Trust tax mistakes can cost you hundreds of thousands in taxes and stamp duties.

5. Buy better

The margin for error is getting smaller. Lazy investing is gone. Investors need to be more selective, more disciplined and more evidence-based. That means understanding value, not just price.

Final Thoughts

The 2026 Federal Budget does not kill property investing. It kills lazy tax-led investing.

• Negative gearing still exists, but the rules have changed and new builds enjoy a slightly better advantage.

• The 50% CGT discount is not simply disappearing overnight, but the capital gains tax framework is changing.

• Family trusts are not dead, but income-splitting benefits are being tightened.

• New builds may receive better tax treatment, but they still need to be good assets.

• Established properties are not suddenly bad investments, but investors will need to be more disciplined when buying them.

At Concierge Buyers Advocates, our view is simple:

The tax rules can and do change overnight, but the fundamentals of good property selection do not.

The investors who do well from here will be the ones who buy carefully, avoid overpaying, and choose assets that stand on their own merits. Because in the end, the market can be brutal to bad investing solely for tax benefits. It rewards quality assets bought well.

FAQs

Is negative gearing being abolished in Australia?

No. Negative gearing is not being completely abolished. Under the 2026 Federal Budget proposal, negative gearing for residential property will be limited to new builds from 1 July 2027. Existing arrangements remain unchanged for properties held before Budget night.

What happens to negative gearing for established investment properties?

For established residential properties bought after Budget night, losses will generally be deductible against residential property income and can be carried forward. However, investors will not be able to deduct those losses against unrelated income such as wages.

Are new builds still negatively geared?

Yes. The Budget says investors who buy eligible new builds will still be able to deduct losses from other income.

What is changing with CGT?

From 1 July 2027, the Government proposes to replace the 50% CGT discount for individuals, trusts and partnerships with cost base indexation and a 30% minimum tax rate on capital gains.

Can new-build investors choose their CGT method?

Yes. The Budget says investors in new builds will be able to choose the 50% CGT discount or the new arrangements when they sell.

Are family trusts being abolished?

No. Discretionary trusts are not being abolished. However, from 1 July 2028, the Government proposes a 30% minimum tax on discretionary trusts, with some exceptions.

Should property investors still buy in Melbourne?

Yes, but with more discipline. Melbourne property investors should focus on quality locations, scarcity, land value, rental demand, owner-occupier appeal and long-term resale strength. Tax benefits should never be the main reason for buying a property.

Disclaimer

This article is general information only and should not be relied upon as tax, legal or financial advice. Property investors should seek advice from a qualified accountant, tax adviser, solicitor, financial adviser or licensed property adviser before making decisions based on the 2026 Federal Budget announcements.