The 2026 Budget on property — four owner types, four different stories.
Where you sit in the new tax architecture, the lived impact on your home or your portfolio, and what to actually do in the next eighteen months. Written for buyers across Sydney’s Northern Suburbs.
By Sarah Kaye & Co · May 2026
On Tuesday night, Treasurer Jim Chalmers handed down the most substantial change to Australia’s property tax architecture since Paul Keating brought in capital gains tax in 1985. The headlines have been competing for the loudest version of the story for forty-eight hours. Most of them are wrong in one direction or the other.
We work exclusively for buyers across forty-two micro-markets in Sydney’s Northern Suburbs — from Manly out to Avalon, from Mosman up through Killara to St Ives. This is the version we are walking our clients through. It is direct. It is evidence-based. It is what we would tell a member of our own family. Skip to the section that fits you.
Five reforms matter. Negative gearing has been abolished for new purchases of established residential property. The 50 per cent CGT discount is being replaced by inflation indexation. A 30 per cent minimum tax rate now applies to capital gains. Pre-1985 assets have been brought into the CGT net. And discretionary trust distributions face a new 30 per cent minimum. The lived impact on each of our four client groups is more specific and less dramatic than the front pages suggest.
Current owner-occupiers
If you already own your home in our coverage areas and aren’t planning to move.
The direct tax impact on your home is approximately zero. None of the five reforms touches the principal-residence CGT exemption. Your home stays CGT-free.
What does change, indirectly, is the price trajectory. Treasury’s modelling says house prices will grow about two percentage points less than they otherwise would have, over the next two to three years. For a Lower North Shore family home around $3 million, that is roughly $130,000 to $150,000 off the trajectory you would otherwise have been on by 2031. For a $2.4 million Northern Beaches house, around $100,000 to $115,000. Less than a single year of typical growth in these markets, and well within the variation we already see between micro-markets.
On the other side, income tax cuts. The 16 per cent bracket drops to 15 per cent from July, then 14 per cent from July 2027. Add the $1,000 instant standard deduction and the $250 Working Australians Tax Offset, and a typical dual-income household picks up $400 to $700 a year — enough to lift your borrowing capacity by $15,000 to $35,000 by 2028.
Sydney’s Northern Suburbs market has a structural feature that matters here. Demand at the family-home level is supply-constrained. The slower price growth Treasury is forecasting will, in our judgement, materialise more visibly in the broader Sydney metropolitan picture than in our coverage areas, where the depth of off-market activity — more than three-quarters of what we transact for clients — cushions cycles like this one. The headline number is real. The lived effect on your house is likely smaller.
Our advice. If you weren’t planning to move, resume the renovation and stop checking the property pages. If you’re planning to upgrade in the next twenty-four months, the maths is mildly in your favour: the gap to the next house is softer than it was, and your borrowing room is better. If you’re planning to downsize from the Upper North Shore into a coastal lifestyle market, do it sooner rather than later — those markets aren’t materially affected by these changes and the gap will widen, not narrow.
Future owner-occupier buyers
If you’re trying to buy your first family home — or your next one.
This is the constituency the budget is built for. Every measure in the package is, in one way or another, designed to tilt the auction floor in your favour against an investor competitor. Treasury’s headline number is 75,000 additional first-home buyers over the next decade — modest in the aggregate, but meaningful for individual buyers in specific markets and time windows.
Three things move in your direction. First, materially less investor competition. Every prospective investor at every auction is now doing a different calculation than they were on Monday. The weekend before budget night recorded the second-lowest clearance rate of the year across Sydney. Second, slower price growth gives you time — roughly $50,000 to $100,000 off a $2.5 million Northern Beaches target by 2027-28 relative to the no-budget counterfactual. Third, the income tax cuts lift your borrowing capacity by $15,000 to $30,000.
Quieter but worth knowing about: the ban on temporary residents buying established property has been extended to mid-2029. In the upper end of the Lower North Shore — Mosman, Cremorne, parts of Neutral Bay — temporary residents have been a visible and consistent presence at the top of the market. Combined with the negative-gearing change, you have two structural demand shocks layered on the same stretch of properties.
Our advice. This is your window. Refresh your pre-approval after the July 2026 bracket change to capture the additional borrowing room. Buy quality stock in a strong location — we do not chase imagined ten-per-cent crashes, because they are not coming. Treasury’s modelling is approximately right: the budget does not change the supply-driven structure of the housing problem, only the demand side at the margin. Do not chase a marginal off-the-plan new build just because the tax architecture now favours new builds for investors — you do not get that benefit as an owner-occupier, and the construction-cost risk on anything you contract today for delivery in 2027-28 is real.
Current investors
Hold the existing property. Grandfathering is permanent.
If you owned, or had contracted to buy, a residential investment property at or before 7.30pm on Tuesday 12 May 2026, the negative-gearing rules for that asset do not change. You can continue to claim losses against your wages indefinitely, for as long as you own it. That single grandfathering provision is the most important piece of fine print in the entire budget.
But grandfathering attaches to the property, not to you. The moment you sell, the concession is gone forever — and the CGT on sale will be calculated under the new rules: inflation indexation, no 50 per cent discount, a 30 per cent minimum on the real gain. For a typical Lower North Shore example — bought $1.8 million in 2020, sold for $2.6 million in 2031 — the new system costs you roughly $18,000 to $22,000 more in CGT than the old. That is, almost exactly, one year of the negative-gearing benefit you would otherwise claim each year you hold. The architecture is asking you to keep what you’ve got, not to trade it.
Our advice. Hold. Do not sell to crystallise the old CGT regime. The transition uses 30 June 2027 valuations, so the historical gain accrued up to that date is effectively frozen on the old discount basis without you needing to dispose of anything. Selling early just brings forward tax you were not going to pay yet. Commission a formal valuation at 30 June 2027 for every investment property you intend to hold long-term — that piece of paper establishes the cost base for the new system and will be worth its weight in CGT later.
If you’re thinking of expanding the portfolio. This is where the calculus changes. Grandfathering is asset-specific. If you sell your existing investment property and buy a different established property after 1 July 2027, the new one cannot be negatively geared against wages. Losses are quarantined — deductible against rental income or eventual capital gain, but not your salary.
If you hold investment property in a discretionary trust, the 30 per cent minimum on trust distributions from 1 July 2028 changes the after-tax position for almost every income-splitting arrangement you currently rely on. Distributions to lower-MTR beneficiaries — non-working spouse, adult child at university, bucket company — are largely defeated by the new floor. A three-year rollover window from July 2027 lets you restructure trusts into companies without triggering CGT, but for property, specifically, the right answer for most of our clients is to keep the trust and accept the floor.
Our advice. If you want to expand your property portfolio, the new build is now objectively the more tax-efficient option — see the next section. If you hold investment property in a discretionary trust, model your post-2028 distribution position with your accountant now, before the rollover window opens. Do not act on impulse: company structures are not automatically better for property, and the wrong restructure can cost you more than the new floor.
Future investors
New build or established — a structural choice now, not a preference.
Every prospective investor who buys after 1 July 2027 now makes a structural choice that did not exist in any meaningful form before this budget: new build, or established. The tax architecture is genuinely different for each.
New builds keep everything you used to expect: full negative gearing against wages, the choice between the 50 per cent CGT discount or inflation indexation on sale (whichever gives you the lower bill), and higher depreciation. Established properties get the opposite: rental losses are quarantined against rental income and future CGT only, never against wages; CGT on sale uses inflation indexation only, with the 30 per cent floor.
On comparable Northern Suburbs scenarios — a $1.6 million new build apartment in an urban infill site versus a $2.0 million established house in a comparable suburb — the new build is roughly $80,000 to $100,000 better over five years in cumulative cash flow. The established property still nets ahead by around $15,000 to $25,000 in absolute wealth terms because the larger land share generates more capital growth. The tax architecture favours new builds. Investment fundamentals — land share, downside protection, inspectable quality — still favour established stock in many cases. And construction-cost risk is real: the Iran war is pushing steel reinforcement up as much as 25 per cent, so anything you contract today for delivery in 2027-28 carries genuine timing and cost-overrun risk.
Our advice. This is now a client-specific decision in a way it was not forty-eight hours ago. If you are cash-flow constrained or your horizon is under ten years, lean new build — the cash-flow advantage is meaningful and the after-tax CGT outcome is genuinely better. If you have strong cash flow and a long horizon, established stock still wins in absolute wealth terms despite the worse tax architecture, because the land share and capital growth do more work than the tax benefit. If you are funding the purchase with equity drawn from a primary residence that has appreciated strongly over the cycle, the new build captures more of the new architecture working in your favour. We can model your specific case.
The bottom line
This budget changes the architecture. It does not change the underlying logic. A well-located property in markets with structural undersupply, held through cycles, with carefully managed leverage, still works. The execution shifts — in some cases meaningfully, particularly for investors moving between assets and families using trust structures — but the discipline does not.
The bigger risk for the next eighteen months is not the tax architecture. It is the macro: inflation at 5 per cent, the RBA cash rate at 4.35 per cent and unlikely to fall quickly, an Iran war with no clear end-point, and construction costs continuing to push out new-build feasibility. Our working assumption for client recommendations is a cash rate at or above 4 per cent through to mid-2028, with the first cuts in late 2027 at the earliest.
If you want us to model your specific position — grandfathered investor, future first-home buyer, prospective investor choosing between new build and established, or owner-occupier weighing an upgrade — get in touch. Every active client of ours has had a personalised version of this conversation since Wednesday morning.
Director-led. Independent. Fixed-fee. 75 per cent off-market. Sarah Kaye & Co. Buyers Agents. Radically Honest. Fiercely on Your Side.
Drawn from our full research paper, “The 2026-27 Federal Budget: What it actually means for Australian property,” available on request.