Budget signals major shift for property investors

(AI video summary)

This video was created on 11 May 2026 for IG audiences by ausbiz.

Budget set to reshape property tax settings

The Federal budget due on Tuesday, 12 May at 7.30pm AEST is expected to be one of the most important in years. Treasurer Jim Chalmers is calling it a responsible budget focused on resilience and reform, with markets watching closely for major tax changes.

Two key changes

1. A restriction of negative gearing to new‑build homes only for purchases after budget night. Existing investment properties would be fully grandfathered. This would make leveraged investment in established housing far less attractive going forward.
2. An overhaul of the capital gains tax discount: the current 50% discount is expected to be replaced with an inflation‑indexation system. Assets purchased after budget night would reportedly keep access to the 50% discount for a one‑year grace period, before switching to the new rules from 1 July 2027. Existing assets are expected to be largely grandfathered.

Together, the changes make long‑term investment in both property and shares less tax‑advantaged when profits are realised.

Implications for housing, banks and the ASX

Some argue the biggest winner could be the tax‑free, owner‑occupied home, with investors redirecting money away from shares, businesses, commercial property and rental housing. That could push owner‑occupier prices higher and lift rents.

Others see risks for established housing prices and sentiment. With Australian banks heavily exposed to residential mortgages, any sustained price decline could increase mortgage stress, pressure bank profits and weigh on the ASX 200.