The reforms contain transitional and grandfathering arrangements. Do not assume every investment property automatically loses negative gearing from July 2027 — acquisition date, property type and your circumstances matter.
What is changing, and when
The Federal Government's 2026–27 tax reform package includes significant changes to both negative gearing and Capital Gains Tax (CGT) from 1 July 2027.
Importantly, the rules contain transitional arrangements, so the outcome may depend on when an investment was acquired and the type of property involved.
What's Changing With Negative Gearing?
Under the announced reforms, negative gearing for residential property will generally be directed toward new builds from 1 July 2027.
Treasury states that residential properties held before the announcement time of 7:30 pm AEST on 12 May 2026 are exempt from the new restrictions. New builds can continue to qualify under the new arrangements.
For established residential property acquired after the announcement, the treatment of rental losses will change. Treasury says affected investors will generally be able to:
- use losses against income from residential property
- use them against relevant capital gains
- carry excess losses forward
but will not generally be able to offset those losses against unrelated income such as salary and wages.
For a police officer earning a salary and holding an investment property, that distinction could become very important.
What Is Changing With Capital Gains Tax?
There are also major CGT changes planned from 1 July 2027.
The Government intends to replace the existing 50% CGT discount for affected future gains with an inflation-based system. Under the new approach, the cost base will be adjusted for inflation so tax focuses on the investor's real gain. A minimum tax rate of 30% on real capital gains is also part of the reforms.
The changes are designed to apply prospectively. That means timing matters.
Treasury says gains accrued before 1 July 2027 retain access to the existing treatment, while the new system applies to affected gains accruing after that date.
Does This Mean Existing Investment Properties Lose Negative Gearing?
Not necessarily. This is one of the most important points.
The reforms contain grandfathering and transitional arrangements. A property you already own may therefore be treated differently from an established property purchased after the Government's announcement.
Do not assume that every investment property will automatically lose negative gearing from July 2027. The acquisition date, property type and your individual circumstances matter.
What About Buying a New Property?
The distinction between a new build and an established property will become increasingly important.
Treasury has indicated that qualifying new builds will continue to receive access to negative gearing under the new regime, and special CGT treatment may also be available.
If you are considering purchasing another investment property, the tax treatment should therefore form part of your broader financial analysis. Tax should not be the only reason you buy a property, but it can significantly affect the after-tax outcome.
Why Police Officers Should Review Their Property Records Now
Even though the major changes begin from 1 July 2027, keeping accurate records now can make future calculations much easier.
Property investors should retain information relating to:
- property purchase price
- stamp duty and acquisition costs
- legal expenses
- improvements and renovations
- depreciation and capital works
- rental income
- interest
- property management expenses
- repairs and maintenance
- dates of ownership
- periods where the property was your main residence
- sale costs.
CGT calculations performed years later can become difficult if original documentation has disappeared.
Property Values Are Also Moving
The tax changes are occurring against a changing housing market.
Recent Australian economic data has shown softer conditions in parts of the residential property market. That makes it even more important to evaluate property investment based on the full picture rather than tax benefits alone.
Should You Sell Before 1 July 2027?
There is no universal answer.
Selling purely because a tax rule is changing could produce a worse financial result depending on:
- your original cost
- current market value
- outstanding mortgage
- rental yield
- expected future growth
- transaction costs
- existing capital gain
- other income
- future investment plans.
The right decision for one investor could be completely wrong for another.
If you are considering a major transaction, personalised tax and financial advice should be obtained before acting.
Police Officer With an Investment Property?
Investment property tax can involve considerably more than entering your rental income into a tax return.
PoliceTax can help you review rental income, eligible expenses and your overall tax position, particularly as Australia's property tax rules change.
Own an investment property or considering purchasing one? Speak with PoliceTax about how the tax rules may apply to your situation.