Negative gearing for residential property will be limited to new builds from 1 July 2027.
Broadly, where net losses arise as a result of deductible expenses associated with income-producing property exceeding the income earned from that property, negative gearing allows for this resulting net loss to be offset against other assessable income of the taxpayer.
Under the new measures, negative gearing will be limited to eligible new builds only. This means that investors in new builds will still be able to deduct rental losses against other assessable income, such as their salary. New builds include dwellings constructed on vacant land, or where existing properties are demolished and replaced with a greater number of dwellings.
Knock-down rebuilds or substantial renovations are not considered new builds and therefore will not be eligible for negative gearing.
A new build cannot have been previously sold, unless first owned by the builder and not occupied for more than 12 months.
The measure will apply to individuals, partnerships and most trusts. Widely-held trusts (eg most managed investment trusts) and superannuation funds (including self-managed superannuation funds) will be excluded.
Losses incurred from established residential properties will only be deductible against rental income or capital gains arising from residential properties. Any excess losses will be able to be carried forward and offset against income from residential property in future years.
These changes will apply to any established residential properties acquired from 7:30pm (AEST) on 12 May 2026. Any residential properties acquired prior to this time (including any contracts entered into but not settled) will be grandfathered, and will therefore be exempt from the changes until disposed of. Residential properties acquired between 7:30pm (AEST) on 12 May 2026 and 30 June 2027 may be negatively geared during this period, but not from 1 July 2027.
Properties held in widely-held trusts and superannuation funds will be excluded from these measures, with exemptions for build-to-rent developments and private investors supporting government housing programs.
Changes to negative gearing only apply to residential properties. Commercial property and other asset classes, such as shares, will remain eligible for negative gearing. Exemptions to negative gearing will also be available for private investors who support government housing programs (through the provision of affordable housing).
Source: Budget Paper No 2, p 21; Prime Minister, Treasurer and Minister for Finance, Tax reform for workers, businesses and future generations [joint press release], Tax Explainer – Negative gearing and capital gains tax reform, 12 May 2026.
Each working Australian taxpayer will receive a $250 Working Australians Tax Offset from the 2027–28 income tax year.
From 1 July 2027, the Working Australians Tax Offset (WATO) will provide a permanent annual tax offset for Australians for their income derived from work, such as wages and salaries and the business income of sole traders. It will increase the effective tax-free threshold for income derived from work by nearly $1,800 to $19,985 (or up to $24,985 for workers eligible for the low income tax offset (LITO)). It will be paid automatically via workers’ tax returns at the end of the year.
The offset is in addition to the proposed $1,000 instant tax deduction for resident individuals who earn income for work from 1 July 2026 and the legislated 2025–26 Budget measure to reduce the personal income tax rates for individuals from 1 July 2026 and 1 July 2027.
Source: Budget Paper No 2, pp 16–17; Prime Minister, Treasurer and Minister of Finance [joint press release] “Tax reform for workers, businesses and future generations”, 12 May 2026; Tax explainer – New tax cuts for Australian workers.
The Medicare levy low‑income thresholds for singles, families, and seniors and pensioners will be increased by 2.9% from 1 July 2025.
The threshold for singles will be increased from $27,222 to $28,011. The family threshold will be increased from $45,907 to $47,238. For single seniors and pensioners, the threshold will be increased from $43,020 to $44,268. The family threshold for seniors and pensioners will be increased from $59,886 to $61,623. The family income thresholds will increase by $4,338 for each dependent child or student, up from $4,216.
Source: Budget Paper No 2, p 13.
The temporary ban on foreign purchases of established residential dwellings will be extended by 2 years and 3 months until 30 June 2029. The ban, which was announced as a measure in the 2025–26 Budget, was originally implemented for 2 years from 1 April 2025.
Current limited exceptions to the ban for purchases of established dwellings that support housing supply will continue. General exemptions from foreign investment screening will also continue to apply for purchases of established dwellings, including for permanent residents and New Zealand citizens.
Additionally, funding of $47.5 million over 4 years from 2026–27 (and $3.9 million per year ongoing) will be provided for the Treasury and the ATO to strengthen and streamline Australia’s foreign investment framework, including a new performance target to decide all low‑risk applications within 30 days from 1 January 2027, removal of ineffective conditions on existing approvals and reforms to foreign investment laws and the Register of Foreign Ownership of Australian Assets.
Legislation will also be introduced to amend the Foreign Acquisitions and Takeovers Act 1975, the Foreign Acquisitions and Takeovers Regulation 2015 and the Foreign Acquisitions and Takeovers Fees Imposition Regulations 2020 to implement the foreign investment framework reforms.
Source: Budget Paper No 2, pp 12, 58–59.
The age-based uplift of private health insurance rebate (the PHI rebate) will be removed from 1 April 2027.
This measure will enable a simplified and more equitable distribution of the PHI rebate. Funding of $3.2 million will be provided over 2 years from 2025–26 for implementation and to undertake consultation on further reforms.
Source: Budget Paper No 2, p 101.
Eligibility for the pension supplement will be amended, including:
extending payment of the full rate of pension supplement from 6 weeks to 12 weeks for recipients who are temporarily absent from Australia
ceasing the pension supplement for those recipients who are residing permanently overseas or who are temporarily absent from Australia for longer than 12 weeks.
Source: Budget Paper No 2, p 137.