Negative Gearing & CGT After the 2026–27 Budget: A Worked Example

Two investors buy the identical house — same street, same $750,000 price, same $580-a-week rent, same 80% loan at 6.5% interest. One settles in April 2026. The other settles in August 2026. Nothing about the property is different. But the after-tax weekly cost of holding it is $210 for the first investor and $407 for the second — a gap of $197 a week, or $10,244 a year, for exactly the same asset. The only variable is the date on the contract.

This isn't a rule of thumb. It's the output of Plintha's own deterministic financial engine — the same code that powers every property analysis on this site — run on the same inputs twice, with one changed assumption: purchase timing relative to the 2026–27 Federal Budget's cut-off of 12 May 2026.

What actually changed on 12 May 2026

The Budget didn't abolish negative gearing. It split residential property into three tax classes, and which one a given property falls into depends on when it was purchased or contracted, not just what it is:

• Grandfathered — owned or contracted before 12 May 2026. The old rules keep applying, in full, indefinitely.
• New build — first sale from builder, or under 12 months old, purchased or contracted from 12 May 2026 onward. Keeps the full negative-gearing salary offset and concessional CGT treatment.
• Established, post-budget — an established (not new) property bought after 12 May 2026. From 1 July 2027, its rental losses are quarantined: carried forward against future rental profit or the eventual capital gain, rather than deducted against salary.

We cover the mechanics in full in Negative gearing after the 2026–27 Budget and CGT changes from 1 July 2027. This piece does something those guides don't: it puts one real property through all three classes and shows what the difference is actually worth, in dollars, this year.

The worked example

An established house, Victoria, standard Plintha assumptions:

• Purchase price: $750,000
• Weekly rent: $580 ($30,160 a year)
• Loan: 80% LVR, interest-only at 6.5%
• Marginal tax rate: 37%
• Dwelling: established house (not a renovation, not new stock)

Run through computeFinancials() three times — once per property class, everything else held constant — the results are:

Worst case: cash rate +3%, rent −10%, and four extra weeks vacant, all at once.

Two things happen to the established post-budget purchase that don't happen to the other two. First, the after-tax figure equals the pre-tax figure — there's no refund left to soften it, because the loss is no longer deductible against salary. Second, because that $407 is already above Plintha's $350/week red-flag threshold for an interest-only loan, the deal is classified RED before any stress is applied at all. The grandfathered and new-build versions of the same property start from AMBER and only turn RED under an actual rate shock.

Depreciation is worth a note too: the established post-budget property still generates a $6,563 deduction. It just doesn't get paid out against salary any more — it sits on a ledger, waiting for the property to turn a rental profit or for the eventual sale, rather than landing in this year's tax return.

Why the gap is $197 a week, specifically

The mechanism is loss quarantining, not a rate change or a bigger tax bill. Both the grandfathered and established-post-budget versions of this property run an identical pre-tax shortfall: $407 a week of interest and costs, against $30,160 of rent. Under the old rules, that shortfall is a deductible loss — Plintha's engine returns a weekly refund of $197, and the investor's real out-of-pocket cost drops to $210. Under quarantining, the deductibility doesn't disappear, but the timing does: the $197 a week refund arrives only once the ledger of carried-forward losses is finally used, against future rental profit or the capital gain on sale — not this financial year, against this year's salary.

Same loss. Same eventual deduction, in most cases. A different year for the cash to actually show up. For a hold with a real weekly top-up, that timing gap is most of what changes.

One nuance worth stating precisely, because it's easy to get wrong: the quarantining above describes the rule from 1 July 2027. In the 2026–27 transition year itself, an established property bought after 12 May 2026 still gets the full salary offset — the loss of it arrives at the start of the following financial year, not on settlement day. Because most of a multi-year hold happens after that date, the table above — like every Plintha analysis — models the steady-state, post-1-July-2027 treatment. That's the number that should actually drive a buy decision, not the one-year grace period in front of it.

The one cost the Budget didn't touch

Stamp duty on this purchase is $40,070 in Victoria — identical across all three classes. The Budget changed income-tax and capital-gains treatment; it left transfer duty exactly where it was. Whichever class a property falls into, the duty bill at settlement doesn't move (see stamp duty on an investment property in Victoria for the full table by price).

Capital growth doesn't move by class either, at least not on paper: Plintha's base-case 6% p.a. assumption projects the same $593,136 of gross 10-year equity on this $750,000 purchase regardless of which class it's in. What differs is what it costs to hold the asset while that growth accrues — the table above — and, from 1 July 2027, what's kept when it's eventually sold.

The other half: CGT from 1 July 2027

From 1 July 2027, the flat 50% CGT discount is replaced by indexation-based treatment with an effective minimum of 30% — for established, post-budget properties. Grandfathered holdings keep the old flat 50% discount entirely; new builds retain concessional treatment under the new regime.

This matters more than it looks like at a glance, because of where the cost base sits. Capital gains tax is charged on the gain — sale price minus cost base — and stamp duty is added to that cost base rather than deducted annually. The $40,070 above isn't just a one-off cost of buying; it's also $40,070 that reduces the assessable gain whenever the property is eventually sold. A bigger cost base plus a smaller discount is a genuinely different calculation from a bigger cost base plus a flat 50% discount, and which one applies depends on the same purchase-date test as the negative gearing treatment above. We work through the mechanics — and where land tax fits, since it's deductible annually rather than added to the cost base — in CGT changes from 1 July 2027.

We haven't put a single dollar figure on the CGT side here on purpose: unlike the weekly top-up, the eventual capital gain depends on a sale price and a sale date that don't exist yet. Anyone modelling an exit should treat that as a separate, later calculation — not a number to borrow from a hold-cost worked example like this one.

What this actually means for a buying decision

Established, post-budget isn't a bad asset class — it's a different cashflow commitment, and $10,244 a year is the number to size against your own buffer, not a rule of thumb from a forum thread. A few things worth taking from the numbers above rather than the headlines:

• The gap scales with the size of the loss. A property that's only mildly negatively geared loses less to quarantining than the $10,244 example above; a property that's cashflow-neutral or positive loses nothing, because there's no loss left to quarantine.
• A new build isn't a free lunch either — it keeps both concessions, but it's a different asset with its own risks (settlement risk on off-the-plan stock, an unproven suburb, strata on a brand-new building), not simply "the established house without the tax problem."
• The stress test result matters as much as the base case. The established-post-budget version of this exact property was already RED before a single assumption was stressed — that's a serviceability question for a lender and a buffer question for the buyer, not just a tax-return line.

None of this is a reason to avoid established property after 12 May 2026. It's a reason to run the actual number before signing, because — as this example shows — "the same house" can mean two genuinely different financial commitments depending only on the date on the contract.

This article is general information, not financial, tax, credit or legal advice — it doesn't take into account your objectives, financial situation or needs. Figures use Plintha's default assumptions (80% LVR, 6.5% interest-only rate, 37% marginal tax rate, Victorian stamp duty, standard operating-cost model) as of 14 July 2026 and will move if any of those change. Confirm your own position with a licensed tax agent or financial adviser before acting on it.