Before the 2026–27 Federal Budget, the choice between buying a brand-new investment property and an established one came down mostly to personal preference — depreciation benefits and lower maintenance on one side, character, location and price on the other. The Budget has added a significant new factor to that decision: tax treatment now differs sharply between the two.
The new dividing line
The key change is this. Under the proposed rules, eligible new builds remain exempt from the negative gearing and CGT changes — investors can still access both negative gearing and the 50% CGT discount. Established dwellings purchased after 7:30pm on 12 May 2026 lose both: negative gearing against salary is removed from 1 July 2027, and the 50% CGT discount is replaced by inflation indexation and a minimum 30% tax on gains.
In other words, the tax system will actively favour investment in new housing supply over established stock. For investors, that’s a material difference in after-tax returns between two otherwise similar properties.
What this means for after-tax returns
Consider two investors, each buying after Budget night. One buys an eligible new build; the other buys an established home down the road for a similar price and rent. Assuming both run at a rental loss in the early years:
- The new-build investor can offset those losses against their salary, improving cash flow now, and can later claim the 50% CGT discount on sale.
- The established-home investor can only carry losses forward against future rental income, and faces the new indexation-based CGT treatment on sale.
Over a typical hold period, that gap in tax treatment can meaningfully change the net return — even if the two properties perform identically in terms of rent and capital growth. It doesn’t automatically make new builds the better choice, but it does mean the comparison has to be done on an after-tax basis, not just on headline price and yield.
But tax isn’t the whole story
It would be a mistake to let tax treatment alone drive the decision. New builds and established properties differ in ways that matter just as much:
- Price and value: New builds often carry a developer premium, and off-the-plan purchases carry completion and valuation risk. Established homes in proven suburbs may offer better land value and negotiating room.
- Location and supply: New stock is often concentrated in growth corridors or higher-density developments, which can affect both rental demand and future capital growth. Established homes in established suburbs like much of the Hills District have a different supply dynamic.
- Holding costs and depreciation: New builds generally offer stronger depreciation benefits and lower near-term maintenance, while older properties can carry higher upkeep.
- Cash flow reality: If you can no longer offset losses against salary on an established property, your out-of-pocket holding cost may be higher than under the old rules — so your borrowing capacity and cash buffer matter more.
Making the decision with confidence
The Budget has turned what was a lifestyle-and-preference decision into one with real tax consequences — and the right answer genuinely differs from one investor to the next. As always, these measures are proposed and not yet law, so the detail of what qualifies as an eligible new build, and how the rules are finally drafted, is worth confirming before you commit.
This is a natural point to bring lending and financial advice together. At SMI Financial Solutions, we can help you compare new builds and established homes on a genuine after-tax, after-cash-flow basis, structure the right loan, and make sure the property fits your wider plan — not just your tax return.
Want to know what the 2026–27 Budget means for your situation?
Book a consult call with the SMI Financial Solutions team on 1300 222 484 or at smifinancialsolutions.com.au
Important information
This article is general in nature and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute financial, taxation or legal advice. The Budget measures referred to (including the proposed capital gains tax, negative gearing and discretionary trust changes) were announced in the 2026–27 Federal Budget and, at the time of writing, are proposed and not yet law; details may change before or if they are legislated. Before acting on any information, you should consider its appropriateness having regard to your own circumstances and seek advice from a qualified professional. SMI Financial Solutions Pty Ltd ABN 92 154 155 307 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049, AFSL 236523. Christopher Smith (478941) and SMI Financial Solutions Pty Ltd (418006) are authorised to provide credit services with Connective Broker Services ACN 161 731 111, ACL 384324. Infocus is not liable for any credit services provided by either entity. Your full financial situation will need to be reviewed prior to acceptance of any offer or product.