The 2026 Federal Budget contains some of the most significant property tax reforms in decades, with major implications for residential property investors, developers, builders, private groups and the broader construction sector. The intent is to redirect capital from existing housing stock to new supply.
For business owners, developers, and high-net-worth families, these changes represent a major change in the Australian property landscape. Understanding the nuances of these reforms is critical to ensuring your portfolio remains tax-efficient and commercially viable.
Residential property investors face a materially worse tax position from 1 July 2027. The 50% CGT discount is scrapped and replaced with inflation indexation, with a 30% minimum tax floor on real gains. Pre-1985 assets, having been CGT-free for over 40 years, are brought into the tax net for gains accrued from July 2027. Negative gearing losses on established property acquired after budget night can no longer offset wages or other income. Properties held at budget night are grandfathered. This is likely to trigger reduced investor demand for existing stock, with capital shifting toward new residential property, off-the-plan apartments and build-to-rent projects.
Developers are relative beneficiaries, over the long term. Tax concessions are retained for new builds, making off-the-plan apartments and townhouse projects more attractive to investors. Build-to-rent developments retain full policy support. The near-term risk is investor uncertainty dampening pre-sales activity and tightening project finance during the adjustment period.
Builders and construction businesses should see a medium-term demand lift toward medium-density and apartment construction. The $2 billion Local Infrastructure Fund targets 65,000 new homes over a decade, and the $20,000 instant asset write-off is now permanent for eligible businesses. Critically, labour shortages, materials cost increases, financing costs pushed up by inflation, red tape and planning delays remain unresolved headwinds to unlock supply. Proposed changes to the taxation of trusts could also have an impact on building and construction businesses in the medium term.
First-home buyers are the stated beneficiaries. Treasury estimates 75,000 additional homeowners over the next decade through reduced investor competition, though the same reforms are projected to reduce housing supply by 35,000 dwellings.
High-net-worth families and private groups face the most immediate structural challenge and will eagerly await the proposed legislation. The 30% minimum tax on discretionary trust distributions from July 2028, combined with the 30% CGT floor and limited effectiveness of corporate beneficiaries, which may not receive an offset, will be a game changer. Expanded and more concessional rollover relief is available from July 2027 for a three-year period. While we must await the details post budget, these structuring conversations should begin now to ensure groups are optimised from a tax efficiency, asset protection and estate planning perspective.
What should you do now?
The Budget structurally favours new residential construction while penalising passive investment in existing stock. For developers and builders, the demand signal is mildly positive. For investors, trust structures and private family groups, the planning imperative is immediate.
Strategic conversations regarding your current structures should begin now to ensure your group is optimised for tax efficiency, asset protection and estate planning before the 2027 deadline.
Contact William Buck today to discuss how these Federal Budget reforms impact your property portfolio or construction business.
