If you were planning to buy an investment property this year, the 2026 Federal Budget just changed the maths. Maybe permanently. Our phones have been ringing with one question: “Is property investment still worth it?” Here’s our honest answer.
Yes, property can still be a strong long-term investment, but the strategy may need to change. The answer is not to panic, and it is certainly not to abandon property as an asset class. The answer is to understand what has changed, what has not, and how your lending strategy needs to adapt.
At a Glance: What Investors Need to Know
The Budget announced two reforms that matter for residential property investors.
From 1 July 2027, negative gearing on residential property is expected to be limited to new builds. Established residential properties purchased after 7:30pm AEST on 12 May 2026 may no longer allow rental losses to be offset against salary or other personal income beyond that date.
The current 50% capital gains tax discount is also expected to be replaced with a new system based on inflation indexation, with a minimum 30% tax on net capital gains.
Existing investment properties held before Budget night are expected to be protected for negative gearing purposes. For CGT, gains accrued before 1 July 2027 are expected to retain the current treatment, while gains after that date may fall under the new system.
This is a meaningful shift, but it does not mean property investment is over. It does mean investors need to be more deliberate.
What Actually Changed
Negative Gearing Will Be Restricted to New Builds
For any established residential property purchased after 7:30pm AEST on 12 May 2026, investors may no longer be able to offset rental losses against salary, wages or other personal income after 1 July 2027. Those losses are expected to be quarantined, meaning they could only be used against future rental income or future capital gains from residential property.
In practical terms, established investment properties will need to stand on their own cash flow and long-term capital growth potential. The tax shield that made cash flow negative properties palatable has gone.
The 50% CGT Discount Is Changing
From 1 July 2027, the existing 50% CGT discount is expected to be replaced with inflation indexation and a minimum 30% tax on net capital gains. Investors may pay tax on the real gain rather than the nominal one, but with a tax floor applied.
For existing investors, the transition matters. Gains accrued before 1 July 2027 are expected to be treated under the current rules, while gains after that date may fall under the new system. This is exactly why a conversation with your accountant is important before making any decisions around selling, holding or restructuring.
What Has Not Changed
Not everything has changed, and the fundamentals still matter.
Melbourne still has long-term population growth, housing demand and supply pressure. Lending still depends on income, deposit size, equity position, borrowing capacity and the strength of the application. The biggest shift is that investors can no longer rely as heavily on tax treatment to make a weak property strategy look acceptable, which is arguably a healthier way to assess an investment in the first place.
A good property should still make sense based on location, rental demand, land value, future growth prospects, holding costs and your personal goals. Tax treatment matters, but it should not be the only reason to buy.
So Should You Still Buy?
This depends entirely on where you sit, and three scenarios cover most prospective buyers.
If You Already Own Investment Property
The short answer is that you are largely protected, as your existing properties are expected to remain under the current negative gearing rules and the 50% CGT discount should still apply to gains accrued up to 1 July 2027.
The strategic questions for you now sit around timing and structure. If you hold properties with significant unrealised gains, there is a legitimate conversation to be had with your accountant about whether to crystallise gains under the existing CGT discount before 1 July 2027. There is also a refinancing conversation worth having, because releasing equity from grandfathered properties to fund new acquisitions, particularly into new builds, may be the most efficient capital strategy available right now.
This is where a coordinated conversation between your accountant and broker becomes important. Your accountant can assess the tax position. Your broker can structure the lending, refinance options and borrowing capacity to match.
If You Were Planning to Buy an Established Investment Property
The strategy you were probably planning no longer works the same way. Without negative gearing, established properties must stack up on rental yield and capital growth alone, which is the most significant shift for high income professionals on the top marginal rate.
This does not mean established properties are no longer worth buying. A strong established property in a high-demand location can still be a good investment. But a low-yield property relying heavily on tax deductions may no longer be as attractive, so the type of property and the structure of the purchase need a serious rethink. For most buyers in this position, the conversation now turns to new builds.
If You Are New to Property Investment
In some ways your starting point is cleaner than it was twelve months ago, because there is no legacy strategy to unwind. New builds are expected to retain both negative gearing and the existing CGT discount, which may make them the most tax efficient way to enter the market. SMSF property has also become relatively more attractive, and commercial property remains entirely outside the changes.
The first step is matching your goals, income, deposit and risk profile to the right structure, and this is exactly where strategic broking adds value.
The New Build Opportunity
New builds are now likely to become a much bigger part of the investment conversation, as eligible new residential properties are expected to retain access to both negative gearing and the 50% CGT discount.
What counts as a new build is broader than many people assume. Off the plan apartments purchased before or shortly after completion may qualify, depending on the final rules. House and land packages are likely to qualify and may become more attractive for investors wanting clearer rental demand and a meaningful land component. New construction on vacant land may qualify as new residential supply, though it introduces complexity around construction timelines, progress payments, valuations and builder risk. Knock down rebuilds can qualify where they create a net increase in dwellings, such as replacing one house with two townhouses.
The lending mechanics for new builds are different from established property purchases, as construction loans involve progress payments, valuation milestones, builder contracts, longer timelines and higher scrutiny from lenders. Not every bank handles construction lending well, and the wrong choice can cost you months and meaningful borrowing capacity.
A Word of Caution on New Builds
The tax advantage of a new build does not compensate for buying a poorly located off the plan apartment at developer margin pricing. Before buying, consider whether the property is in a location with genuine rental demand, whether the price is fair compared to similar stock, whether the builder is reputable, and whether the expected rent is realistic.
A bad investment with a tax benefit is still a bad investment.
The SMSF Angle
Self managed super funds have become relatively more attractive in the new environment, as property held in super retains the existing one third CGT discount and is expected to be exempt from the negative gearing changes. For investors with established super balances and a long investment horizon, SMSF property is worth a serious second look.
The constraints are real, however. SMSF property has rules around what you can buy, restrictions on renovations using borrowed funds, typically lower loan to value ratios at higher rates, and additional accounting and compliance costs. It is not the right fit for every investor, but for the right one, the relative case has just strengthened. From a broking perspective, the question is whether the lending structure is realistic and supports your broader retirement strategy.
Why Lending Structure Matters More Now
When tax rules change, cash flow changes, and when cash flow changes, borrowing capacity and loan structure become more important than ever. The lending side of property investment is no longer a back-end consideration, it is central to whether your strategy actually works.
This is particularly true for new builds, where the right lender choice can determine whether your project completes smoothly or stalls. It is also true for refinancing existing properties, where the structure of the new loan can either preserve or compromise your future borrowing capacity. A good broker compares lender policy, structures the application properly, and makes sure the finance strategy matches the investment strategy.
What We Are Telling Our Clients
A few clear positions for the current environment.
If you are a high income professional, get serious about new builds, because the reforms hit your strategy harder than most. Our investment loans for high income professionals service exists precisely for this kind of strategic recalibration.
Do not panic buy before 30 June 2027 just to secure grandfathering. The key cutoff date for established residential property was Budget night, 7:30pm AEST on 12 May 2026. A bad established property purchase under the old rules is still a bad purchase, and the fundamentals matter more than the tax structure.
If you have a healthy super balance, revisit the SMSF option, because it may not have suited you twelve months ago and the maths today is different.
Get your accountant and broker in the same conversation, since the tax decisions and lending decisions are now more interconnected than ever. Coordinated advice produces better outcomes than fragmented advice.
Move thoughtfully, not slowly. Property fundamentals in Melbourne have not changed, and the investment case remains strong for buyers who get the structure right.
Frequently Asked Questions
Yes, depending on when the property was purchased and whether it is an established property or a new build. Existing investment properties held before 7:30pm AEST on 12 May 2026 are expected to retain the current negative gearing treatment. New builds are expected to remain eligible. Established properties purchased after Budget night may no longer allow rental losses to be offset against salary or personal income after 1 July 2027.
Potentially, yes. An established property can still be a good investment if the location, rental demand, yield and long-term growth prospects are strong. However, investors can no longer rely as heavily on negative gearing to soften the cash flow impact, so the numbers need to work harder.
New builds may become more attractive from a tax perspective, but that does not mean every new build is a good investment. The property still needs to be assessed on location, price, rental demand, build quality, holding costs and future resale appeal.
Existing investment properties held before 7:30pm AEST on 12 May 2026 are expected to remain protected for negative gearing purposes. For CGT, gains accrued before 1 July 2027 are expected to retain the current treatment, while gains after that date may be treated under the new system. Speak with your accountant before making any decision to sell, hold or restructure.
Not purely for tax reasons. The key grandfathering date for established residential property was Budget night, not 30 June 2027. If you are buying now, the focus should be on whether the property still makes sense under the new rules.
Ideally, both. Your accountant can explain the tax impact. Your broker can explain your lending options, borrowing capacity and loan structure. When tax and lending decisions are made together, investors are usually in a better position.
The Bigger Picture
Australian property investment has been shaped by tax policy for 25 years, and that is now changing in a meaningful way. The reforms force investors to focus on what should always have been the priority, which is whether the property is a genuinely good investment on its own merits, with tax treatment as a secondary consideration.
For sophisticated investors, this is arguably a healthier framing, and the next few years will reward those who are more selective, more strategic and more disciplined. Melbourne property still has its long-term drivers, but the strategy needs to be sharper. The right property, with the right loan structure, can still make sense. The wrong property, bought for the wrong reason, is now harder to justify.
Take the Next Step with YMB Finance
The 2026 reforms have created a more complex environment, but complexity creates opportunity for buyers who think strategically. Every investor’s position is different, and the right move depends on your income, existing portfolio, equity position, borrowing capacity, goals and timeline.
At YMB Finance, we help Melbourne investors understand their lending options and structure their finance with a long-term view. Whether you are considering an investment property, refinancing an existing loan, or exploring a new build, we can help you understand what is possible.
Contact the expert team at YMB Finance today for a confidential strategic assessment. We will give you a direct answer based on your situation, not a generic recommendation.