New CGT Rules For Geared Property Investors: Practical 2027 Playbook

Updated capital gains tax (CGT) rules for geared property investors fundamentally change how much of your eventual gain you keep and how much risk you carry along the way.

From 1 July 2027, most individual investors will move from a simple 50% CGT discount to a more complex system: CPI indexation of cost base, a minimum 30% tax on real gains, and tighter links to negative gearing rules. Existing properties and new builds get softer treatment; newer established properties wear the brunt.

This guide explains what actually changes, how it interacts with gearing, and the specific steps you can take this week to protect your after‑tax outcomes.

Australia’s CGT reforms change both the discount method and minimum tax rate on many property gains.

1. The new CGT world in one page

1.1 What’s actually changing for property investors?

Treasury’s 2026–27 reform package reshapes both negative gearing and CGT for residential property. In plain language:

1. 50% CGT discount mostly goes for individuals and many trusts from 1 July 2027.
2. It’s replaced by CPI indexation plus a minimum 30% tax on real gains for most individuals (per the 2026–27 Budget papers and draft CGT reform bill).
3. Residential rental losses are quarantined for many investors, particularly on established properties bought after 12 May 2026.
4. New builds are favoured – they keep full negative gearing and can choose between the old 50% discount and the new indexed method.
5. Existing properties are grandfathered – 50% discount and current negative gearing rules stay until you sell.

These rules are deliberately complex and still evolving. Treat everything in this article as high‑level guidance, not legal drafting.

1.2 Who is most affected?

Most exposed:

• High‑income investors with heavily geared, high‑growth established properties bought after 12 May 2026.
• Long‑term investors planning to sell after 2027 with large unrealised gains outside the main residence exemption.
• Multi‑property owners using trusts as their main structure.

Less affected:

• Investors holding properties acquired before 7:30pm, 12 May 2026 (grandfathered).
• Investors focused on new builds, which keep better negative gearing and CGT options.
• Owner‑occupiers who stay largely within the main residence exemption.

If you’re starting out, read this together with “Starting Property Gearing Safely: A First‑Time Investor’s Playbook” so you don’t let tax alone drive risky gearing.

2. Old vs new CGT rules – what’s really different?

2.1 How CGT works now (pre‑2027, simplified)

For individuals and most family trusts today:

• Hold a CGT asset >12 months and you generally get a 50% CGT discount on the gain.
• The gain is sale price – cost base, with adjustments for buying/selling costs and some holding costs.
• The discounted gain is added to your other taxable income and taxed at marginal rates.

This combines very powerfully with negative gearing:

• Losses now (fully deductible against wages) + half‑taxed gain later has historically encouraged high‑leverage property strategies.[³]

2.2 What CGT looks like post‑2027

Under the reform bill and Budget papers, for most individuals from 1 July 2027:

• The automatic 50% discount is removed for new gains.
• Instead, you get CPI indexation on cost base to strip out inflation.
• You then pay at least 30% tax on the remaining real gain, regardless of your marginal rate in many cases.[²][⁸]

Investors in eligible new builds can still choose between:

• The existing 50% discount, or
• The new indexation + 30% minimum tax method.[⁴]

Existing (grandfathered) assets retain the current 50% discount.

2.3 Old vs new: numerical comparison

Assume:

• Purchase price: $700,000
• Selling price (10+ years later): $1,100,000
• Nominal gain: $400,000
• CPI indexation removes $120,000 as inflation (illustrative).
• Taxpayer is on a 39% marginal rate (including Medicare).

Indicative only – the interaction of the 30% minimum and marginal rates is still being refined. What matters: the tax bill typically rises, especially for high‑growth, long‑held investments.

3. How CGT and gearing now interact

3.1 Negative gearing and CGT are now a package deal

By 2027, three things line up:

1. Residential negative gearing is severely restricted to new builds and grandfathered assets.[¹⁵]
2. Rental losses on many established properties are quarantined to future rental income or property capital gains.[⁶][¹⁰][¹¹][¹⁴]
3. CGT concessions are reduced, with a 30% minimum tax on most real gains.[²][⁸]

So the old playbook – “maximise deductible losses now, enjoy half‑taxed gains later” – is weakened at both ends.

For long‑term wealth, asset quality and sensible leverage matter more than squeezing tax benefits.[⁵] Think pre‑tax returns and risk first, tax second.[¹⁷]

3.2 Different treatment by asset type

High level (residential only):

• Grandfathered properties (held at 7:30pm, 12 May 2026)

  • Keep existing negative gearing – losses can offset salary until sale.[¹³]
  • Keep 50% discount on gains when sold.
  • Still subject to the usual main residence rules.

• New builds (post‑12 May 2026)

  • Keep full negative gearing and 50% discount access.[¹]
  • Post‑2027, can choose between 50% discount and indexation + 30% minimum.[⁴]

• Established properties bought after 12 May 2026

  • Rental losses quarantined – can only offset other residential rental income or residential property gains.[⁶][⁹][¹⁰][¹¹][¹⁴]
  • No offset of losses against wages.
  • New CGT regime applies to post‑2027 gains.

Commercial property remains largely outside these residential‑specific changes (but still subject to general CGT reform).

3.3 Worked example: geared unit bought in 2027

Assume you buy an established unit on 1 July 2027 for $800,000:

• 80% LVR interest‑only loan at 6.5%: interest ≈ $41,600 p.a.
• Rent: $750 per week = $39,000 p.a.
• Other costs (rates, strata, insurance, repairs): $8,000 p.a.

Cashflow:
Net rental loss ≈ $41,600 + $8,000 − $39,000 = $10,600 loss.

Pre‑reforms, you might have deducted that $10,600 against your salary. Post‑reforms, for an established property like this:

• That $10,600 is quarantined each year and accumulates in a “rental loss bucket”.
• You can only use it against future rental income or capital gains on residential property.

On sale 10 years later, say you make a $300,000 real gain and have $80,000 unused rental losses:

• Net gain after losses = $300,000 − $80,000 = $220,000.
• Under the new rules, at 30% minimum, CGT ≈ $66,000.

Strategy takeaway: this property is no longer a “tax reducer”. It’s a deferred‑tax play with quarantined losses. You must judge it mainly on pre‑tax returns, risk and diversification, not its immediate tax benefits.

For more detailed before‑and‑after numbers, see “Real Numbers: After‑Tax Cashflow on Investment Loans Before and After Reforms”.

4. Main residence, six‑year rule and CGT on geared homes

4.1 Main residence exemption is now more valuable

One key constant: the main residence exemption survives the 2026–27 reforms.[²⁰]

That makes the way you use your home and temporary absences more strategic than ever, particularly if you’re geared.

Under the reformed rules:

• Partly taxable gains on former homes can be more expensive, because the 50% discount is replaced with indexation and minimum 30% tax on real gains for most individuals.[²]
• For geared homes that turn into rentals (or vice versa), loan splits and precise record‑keeping become critical.

4.2 Six‑year rule still matters – but the maths changes

The six‑year rule lets you:

• Move out of your home.
• Rent it out for up to six years.
• Still claim it as your main residence (subject to conditions), often making that period CGT‑free.

Post‑reforms, the choice of which property is your main residence and for which years becomes a higher‑stakes game, because:

• CGT on the non‑exempt portion is likely higher than under the old 50% discount regime.[²]

This article focuses on the rules themselves. For strategy and examples (especially for people with multiple geared properties), see “Using the Six‑Year Rule and Main Residence Exemption with Geared Properties” and “Should You Intentionally Keep Debt on Properties with the Highest CGT Exposure?” in this cluster.

4.3 Geared homes: don’t forget the loan side

CGT decisions and loan decisions must talk to each other:

• If a property will be fully exempt under the main residence rules, over‑gearing it just for tax reasons often makes no sense.
• If a property will be largely taxable, you may prefer to keep more deductible debt attached to that property and pay down loans on CGT‑free assets instead.

But this is never just about tax – you still need to follow basic safety rules on leverage and buffers, like those in “Five Safety Rules To Follow Before Gearing Into Property”.