The 50% capital gains tax (CGT) discount has been part of how investors are taxed since 1999. From 1 July 2027, it’s being replaced, and negative gearing is changing alongside it. There’s been plenty of noise since the Budget, but not many clear answers. So we had to ask: will investors actually be better or worse off?
New research from the e61 Institute offers the most detailed answer so far. Economists Elyse Dwyer and Nicholas Garvin found that about 53% of property investments would have paid more tax under the new rules. That’s a majority, but a much slimmer one than the headlines suggest.
The Reforms
For those unaware, here’s what’s changing:
- Negative gearing is being limited to new builds. Buy an established property after Budget night (12 May 2026) and rental losses can no longer reduce the tax on your wage. They’re banked instead, and used against future rent or the gain when you sell.
- The 50% CGT discount is going. From 1 July 2027, your purchase price is adjusted for inflation instead, so you’re only taxed on the real gain.
- There’s a new tax floor: capital gains will be taxed at no less than 30%.
If you owned your investment property before Budget night, your negative gearing stays as it is, and any gains made before 1 July 2027 still get the 50% discount.
Methodology
The researchers took 920,000 real property purchases and sales from mid-2007 to mid-2025, using PropTrack sales and rental data, and worked out how each would have been taxed if the new rules had applied the whole time. It’s a what-if exercise. It makes assumptions about each investor’s loan size and income, and it doesn’t account for how the market might react to the changes.
Results
Surprisingly, 47% of investments would have paid the same or less tax: 43% less and 4% the same.
And it wasn’t negative gearing doing the heavy lifting. The negative gearing changes raised rental income tax for 49% of investments, but the increases were mostly small. That’s because losses haven’t disappeared, just delayed. Most negatively geared investors end up claiming the same dollar amount, only later.
What is very interesting is the CGT side. The switch to inflation indexing would have cut CGT for 54% of investments and raised it for 42%.
Why?
To make something complex dangerously simple: the bigger the gain, the bigger the tax.
Of course, that doesn’t give you the whole picture. Here’s a simplified example.
Say you buy an investment property for $600,000 and sell it 10 years later, and inflation totals 30% over that time. Under the new rules, the first $180,000 of your gain (30% of $600,000) is treated as inflation and isn’t taxed.
- Sell for $800,000: your $200,000 gain leaves just $20,000 taxable. Under the 50% discount, $100,000 would be taxable. You pay less.
- Sell for $1,200,000: your $600,000 gain leaves $420,000 taxable, compared with $300,000 under the discount. You pay more.
The tipping point in this example is a $360,000 gain, or 60%, which is double the rate of inflation. Below that, indexation comes out ahead. Above it, the 50% discount would have been better. (This keeps things simple by assuming the whole gain falls under the new rules and leaving out selling costs.)
Most investments over the past 18 years sat below that line, which is why CGT falls for most. But the ones above it more than make up the difference: almost all of the extra tax the reforms raise comes from the top 20% of performers.
To make a long story short, the reforms trim the best outcomes and soften the worst ones. That means less risk for investors overall.
Who’s Paying the Most?
Retirees are the first group to watch. Under the current rules, some investors time a sale for after they retire, when their income drops and so does their tax rate. The 30% minimum is designed to close that door. There is an exemption for age pensioners, but retirees holding investment property often won’t qualify. For investors with no other income, e61 estimates there’s roughly a one in three chance the minimum rate lifts their tax. If you earn more than $45,000 a year in other income, you’re already paying at least 30% on your gains, so the floor won’t change anything.
Highly leveraged investors are the other group. Bigger loans mean bigger interest bills, which makes a property more likely to run at a loss. For these investors, the real issue is cash flow. The tax benefit that used to arrive each year at tax time now waits until the property is sold. And because some lenders count that tax benefit when working out how much you can borrow, anyone borrowing close to their limit could find their borrowing capacity takes a hit too.
Based on this modelling, most investors would pay more tax, but not as many as you might think. The catch is that you won’t know which side you’re on until you sell, because nobody can predict what your property will be worth in 10 or 20 years.
So What Does This Mean for You?
It depends where you sit:
- Already own an investment property? If you bought before Budget night, the transitional rules protect most of what you have.
- Buying an established property? Plan for the cash flow gap, and it’s worth checking how lenders will assess your rental losses before you settle on a price.
- Looking at a new build? New builds can still be negatively geared, and you’ll be able to choose between the 50% discount and the new indexation method.
Our team can run the numbers on your borrowing power under the new rules, so you know where you stand before you make your next move. Get in touch today! No pressure, no jargon, just simple guidance. For advice on how the tax changes apply to your situation, speak with your accountant or tax adviser.
Source: e61 Institute, “How many housing investors pay more tax under the reforms?”, Research Note, 23 September 2026. https://e61.in/how-many-housing-investors-pay-more-tax-under-the-reforms/
This information is general in nature and does not take into account your objectives, financial situation or needs.