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What the new negative gearing and CGT rules mean if you are building
For most of this year, investors building new homes were making a bet. The rules looked like they might move, new builds looked like they might be treated differently, and it seemed worth acting early. That bet has now been settled.
The Treasury Laws Amendment (Tax Reform No.1) Bill 2026 passed both houses of parliament on 25 June. From 1 July 2027, negative gearing on residential investment property is limited to new builds, and the 50 per cent capital gains tax discount is replaced by an inflation-based calculation with a minimum 30 per cent tax on real gains. New residential property is carved out of that change too.
Put plainly, tax settings that used to apply to any investment property will, from mid 2027, apply mainly to new ones.
What actually changed
Three things matter if you are weighing up building as an investment.
Negative gearing on established homes bought after 7.30pm on 12 May 2026 can no longer be offset against salary or other personal income from 1 July 2027. Those losses can still be carried forward and offset against rental income, or against a future capital gain on a rental property, but not against wages.
New builds keep both concessions. Newly constructed residences remain eligible for negative gearing and for the existing 50 per cent CGT discount. That covers homes built on previously vacant land, apartments bought off the plan, knock down rebuilds that add a dwelling, and newly built homes that have been lived in for less than 12 months before their first sale.
Anything already held is grandfathered. If you owned the property, or were under contract, at 7.30pm on 12 May 2026, the current treatment continues until you sell.
The enquiry pattern was there before the announcement
Matt Jackson, Managing Director of David Reid Homes, said the shift was visible across the group’s national network well before the Budget landed.
“We are seeing a clear lift in enquiry levels from investors who are trying to get ahead of potential changes,” Jackson said at the time.
“There is a growing awareness that current CGT concessions may not remain as they are, and people are acting now rather than waiting to see what happens.”
That read of the market turned out to be right, and the reasons investors gave for choosing a new build have not changed.
“New homes offer a combination of incentives, from depreciation benefits through to modern design and lower maintenance costs, which makes them highly appealing in the current environment,” Jackson said.
“Energy efficiency, tenant appeal, lower ongoing costs and strong depreciation profiles all play into the investment case as well.”
What it means for the building industry
A tax system that now points investment demand at new housing is, on paper, good news for a sector that has had a difficult few years.
“After a period of volatility, any increase in demand is positive,” Jackson said. “It helps drive pipeline, supports builders and creates more certainty across the supply chain.”
He said capacity and delivery timelines remain the key considerations.
“Builders need to be able to respond efficiently to increased demand without compromising on quality or timelines. This is where strong systems and processes become critical,” he said.
The right property, under the right conditions
Jackson said the trend reflects a wider shift in how investors approach property.
“It is no longer about simply buying property, it is about buying the right property under the right conditions,” Jackson said.
That was worth saying when the rules were uncertain. It carries more weight now that they are not, because from 1 July 2027 the difference between a new home and an established one is written into the tax treatment rather than left to judgement.
Worth noting alongside this: a lift in investor demand does not fix the underlying constraint. We have argued separately that tax settings will not fix housing supply while land release and approvals remain the bottleneck.
Thinking about building as an investment
Browse the house plans library for designs that suit an investment brief, or talk to your local David Reid Homes builder about build timelines and costs in your area.
This article is general information about market conditions and tax settings announced by government. It is not tax, financial or investment advice. Outcomes depend on your own circumstances and on the detail of how the measures are administered. Talk to your accountant or a licensed adviser before making a decision.
