Federal Budget 2026: New and Off-the-Plan Properties Are Now Australia's Most Tax-Advantaged Investment

Australia’s Current Supply Shortage Creates a Strategic Opportunity for Off-the-Plan Property Investment

Australia’s housing shortage is well documented. But when that shortage is viewed alongside the latest Federal Budget changes, the investment case for new and off-the-plan property becomes even more compelling. 

For investors looking over the next five to ten years, the opportunity is not simply about undersupply. It is about the intersection of constrained housing supply, changing tax settings and a policy environment that now clearly distinguishes between established property and eligible new builds. 

This is a structural shift, not a short-term market cycle. And for investors, it changes how new residential property should be assessed.

The Federal Budget Shift: New Builds Are Now in a Category of Their Own

The 2026–27 Federal Budget introduced the most consequential changes to property investment taxation in 25 years. The reforms are deliberate in their design: they are intended to redirect investor capital away from established residential stock and toward new housing supply. Following the announcement, investors purchasing properties off-the-plan need to clearly understand the changes and what didn’t.

1. Negative Gearing: The New Divide

From 1 July 2027, negative gearing on established residential properties will be restricted. Net rental losses will no longer be freely deductible against salary and other income. The losses will be separated, allowing them to be used solely to offset other property income or capital gains.

New residential builds are explicitly exempt from this change. Investors who purchase off-the-plan or new properties will retain unrestricted negative gearing against all income sources, exactly as all investors can today. This is not a minor technical distinction. For investors on higher marginal tax rates, the deductibility of holding costs against income is a core component of the after-tax return calculation.

Properties purchased before 7:30pm AEST on 12 May 2026 are grandfathered and retain existing negative gearing treatment for the life of the ownership. For those acquiring property going forward, the decision framework has shifted substantially in favour of new builds.

2. Capital Gains Tax: Optionality for New Build Investors

From 1 July 2027, the current 50% Capital Gains Tax (CGT) discount will be replaced. This discount is currently applicable to individuals, trusts, and partnerships for assets held longer than 12 months. It will be superseded by a new system incorporating a cost base indexation model and a minimum 30% tax on the real (inflation-adjusted) capital gains.

There is one significant carve-out: investors who purchase new builds from 1 July 2027 will be able to elect, at the point of sale, between the existing 50% discount or the new indexation arrangement — whichever produces the more favourable tax outcome.

Established property investors lose the discount entirely. New build investors retain it, plus gain the flexibility to choose. In practical terms, off-the-plan investors entering the market today are acquiring an embedded tax option that established property cannot replicate.

3. Discretionary Trusts: Time to Review Structure

For investors who hold or are considering holding property through a discretionary trust, a new 30% minimum tax on trust income will apply from 1 July 2028. A three-year rollover relief window opens from 1 July 2027, providing time to restructure if required. 

This is a conversation to have with your accountant now rather than later. Investors with primary production income, testamentary trusts pre-dating the announcement, or fixed trust structures are largely unaffected and should assess their position individually before making any changes.

SMSFs: A Doubly Advantaged Position

The post-budget outlook is particularly clear for investors who own or are considering property through a self-managed superannuation fund (SMSF). Current professional commentary, aligned with the announced reforms, suggests that SMSFs will be excluded from all three major changes. This is, however, subject to final legislative confirmation.

The CGT changes do not apply to super funds. SMSFs in accumulation phase retain the existing one-third CGT discount (producing an effective ~10% rate on gains from assets held over 12 months), and pension-phase funds continue to pay 0% CGT on assets supporting a retirement income stream. The negative gearing restrictions exclude super funds entirely, meaning an SMSF can continue deducting net rental losses against fund income regardless of whether the property is new or established. Complying super funds, along with bare trusts utilised in limited recourse borrowing arrangements, are expressly exempt from the 30% minimum tax proposed for discretionary trusts.

High-income investors with a long-term perspective should seriously consider the fundamental case for including property within their superannuation. This is especially true for new builds, which offer advantages like depreciation benefits, easier exit liquidity, and compatibility with Limited Recourse Borrowing Arrangements (LRBAs). However, this decision must be made in conjunction with qualified SMSF advice.

The Investment Case Beyond Tax

The data suggests it won't. The more productive question is how to position a portfolio to benefit from a market that is likely to remain undersupplied for the foreseeable future. The tax reforms reinforce an investment thesis that was already well-founded on supply and demand fundamentals. 

• Rental yield support: In markets where housing supply remains constrained relative to population growth, quality new stock in well-located areas tends to attract reliable tenants and support rental yields. New builds carry lower maintenance costs and comply with current building standards. 

• Depreciation: New residential properties generate significantly higher Division 43 capital works and Division 40 plant and equipment deductions than established stock. This depreciation profile amplifies the after-tax return in the early years of ownership, particularly for investors on marginal rates above 37%.

• Exit liquidity: Over time, the policy settings will increase investor attention toward eligible new-build stock, at the time of sale. The investor market shifts its focus to this segment, a trend explicitly anticipated by Treasury's modelling.

• Price positioning: Treasury modelling suggests the reforms may result in house prices growing by around 2% less over a couple of years relative to no policy change, as investor demand moderates. Off-the-plan contracts secured now represent considered positioning ahead of a structural market shift.

Positioning Your Portfolio: What to Consider Now

Investors reviewing their strategy in light of these changes should focus on a few key considerations.

If you hold established property purchased before 12 May 2026, your existing tax position is grandfathered. While reactive decisions aren't necessary, it's a good time to review your property portfolio to assess your long-term strategy, especially if you own assets with minimal remaining depreciation.

If you are planning to acquire property in the next 12 to 24 months, the after-tax arithmetic now clearly favours new and off-the-plan property. The combination of retained negative gearing, CGT optionality, and superior depreciation profiles produces a materially stronger net return position than equivalent established stock from 1 July 2027 onwards.

Owners of property held within a discretionary trust should consult their accountant to consider restructuring options. This should be done before the restructure window closes in June 2030, and the final decision must align with your unique investment horizon, income profile, and existing property structure.

Disclaimer

This article is general information only and does not constitute tax, financial, legal or personal investment advice. Investors should seek independent advice from a qualified accountant, financial adviser, mortgage broker or solicitor before making decisions.

Ready to Review Your Investment Position?

The tax landscape has changed. Your strategy should reflect it. iBuyNew specialises in helping investors to identify quality off-the-plan opportunities that align with individual investment objectives, risk profiles, and financial structures. Our role is property strategy and asset selection: helping you make informed decisions, supported by the right professional advisers, in a market that continues to evolve.

Schedule Your Personal Strategy Session or Book Free Call with an iBuyNew property specialist.