Here’s the clear winner, and I’ll tell you straight: if your investment strategy depends on negative gearing, the safest position under the proposed reforms is to focus on newly built dwellings, but only once the draft law actually confirms they qualify. Treasury’s budget modelling says the package could add about 75,000 first home buyers over a decade, while also projecting 35,000 fewer homes built and a small rise in rents for the median renter. The government plans to restrict future negative gearing claims to newly built residential properties and to change how capital gains tax is calculated, while grandfathering current landlords. The bill is expected in the coming sitting fortnight, so read the draft and get written advice before you commit.

Here’s the clear winner, and I’ll tell you straight: if your investment strategy depends on negative gearing, the safest position after the proposed reforms is to focus on newly built dwellings, but only when the draft law actually confirms they qualify. The government’s package changes two things at once: who can claim negative gearing going forward, and how capital gains tax for investment properties is calculated. For you that means one simple question splits the crowd: are you buying something the new law will allow, or are you not?

1. Establish the property classification

The central legal distinction in the proposal is whether a dwelling is a Newly built property or an existing dwelling. The government says future negative gearing claims will be restricted to newly built homes, while properties already negatively geared will be Grandfathered. That matters because grandfathering protects current landlords from sudden tax loss, but it doesn't protect new purchases of existing homes.

Right now, worked example: if you are under contract for an established inner-city apartment and settlement happens after the law starts, that purchase may be outside the new negative gearing rules. If you are buying a developer’s new release and the draft law treats that as a new build, it may remain eligible. You must confirm the legal definition the bill adopts before you sign.

2. Wait for the draft bill and read the Explanatory Memorandum

The government will convert the policy statements and budget material into precise legal text in the draft bill and the Explanatory Memorandum. Those documents set the details that decide outcomes: the statutory definition of newly built, the commencement date, whether off-the-plan contracts and developers’ pre-sales are included, and the exact CGT formula changes.

For you, the action is simple. When the bill is tabled, read the draft and the Explanatory Memorandum or get a tax adviser to do it. That will tell you whether a specific transaction is captured or grandfathered. The government has signalled it will introduce the bill in the coming sitting fortnight and seek passage soon after with Greens support. Timing matters here.

3. Document holdings and prove grandfathering

The government has said existing negatively geared properties will keep that tax treatment, but that protection depends entirely on the transitional rules the bill sets.

When the bill appears, gather evidence: purchase contracts, settlement statements, and tax returns that show the property was claimed as negatively geared before the law’s commencement.

Worked example: if you purchased in 2016 and have claimed losses against that property in recent years, keep those tax records and your settlement paperwork. If the bill’s transitional clause links grandfathering to acquisition date or prior claims, those documents are what prove eligibility.

4. If you plan to buy so you can negative gear, restrict candidates to law-eligible new builds

If your strategy depends on negative gearing, you will likely need to limit purchases to the categories the law allows. The bill may treat off-the-plan sales, large redevelopments and strata new builds differently. Don’t assume a developer’s marketing claim of “brand new” equals eligibility under the tax code.

Worked example: an off-the-plan apartment purchased from a developer might be eligible if the draft law defines completion date or construction certification in a way that covers it. Or it might be excluded if the bill focuses on dwellings that have never been occupied. Confirm before you sign any contract.

The policy package alters both negative gearing and the capital gains tax base. Treasury’s budget modelling tells a complicated story of market effects. On one hand it estimates the reforms would create 75,000 additional first home buyers over 10 years and that complementary regulatory changes could support about 30,000 more new homes in that period. On the other hand it forecasts 35,000 fewer homes built over the next decade as some investors shift capital away from residential property, and it projects an average $2 a week increase for the median renter.

Mastheads

Update your cashflow and return assumptions to cover multiple scenarios. First, model the Treasury baseline where rent impacts are small and first home buyer numbers rise. Second, model the opposition-cited scenario using SQM Research figures that suggest much larger city rent rises, for example $160 a week in Sydney and $130 a week in Melbourne as referenced by Shadow Treasurer Tim Wilson. Use those as stress tests. The CGT changes add another layer of uncertainty. Adjust expected after-tax return and holding-period plans accordingly.

The government intends to introduce the bill quickly and to seek passage with Greens support. That raises immediate timing questions for transactions that might straddle the commencement date. If a sale or purchase will settle around the anticipated start, get specific advice on whether that settlement will be grandfathered or captured.

Worked example: if a contract is signed before the bill but settlement is after commencement, the bill may have rules tying grandfathering to contract date, settlement date, or prior tax treatment. Conveyancers and tax advisers can model those outcomes. Be explicit about the date assumptions they use and insist on written advice that you can rely on when you make your decision.

The final legal effect depends on the enacted bill and on Australian Taxation Office practice. Because the proposal changes the tax base and the CGT calculation, the application to an individual case can be complex. Obtain written advice from a tax professional and, if needed, a property lawyer or conveyancer who will apply the bill’s definitions and transitional provisions to your holdings.

Make sure the advice covers the exact contract you are contemplating, the settlement timing, and any developer warranties or certifications that bear on whether a dwelling is “newly built” under the law.

Stakeholders are sharply divided. Peak community groups including Everybody’s Home and the Australian Council of Social Service have urged fast passage, arguing the reforms improve fairness and push investment toward new supply. Maiy Azize of Everybody’s Home said, “There is no excuse for landlords to hike rents because of these changes,” and called on politicians to reject what she described as fearmongering. Housing Minister Clare O’Neil has argued limiting negative gearing to new builds would help control rents by redirecting investor demand.

But the Opposition and some industry voices dispute the government’s impact estimates. Shadow Treasurer Tim Wilson has cited modelling from SQM Research claiming much larger rent increases in major cities, and accused the government figures of understating the effects. Treasury’s own modelling and the SQM Research figures are alternative scenarios, not settled outcomes. Keep tracking updated Treasury releases, any independent modelling you trust, and industry commentary so your planning uses a transparent range of assumptions.

1. The legal definition of “newly built” that the bill adopts, including whether off-the-plan or pre-sale contracts count.

2. The statutory commencement date and the mechanics of grandfathering for properties already negatively geared.

3. How off-the-plan contracts, substantial renovations and development projects are treated.

4. The precise capital gains tax calculation changes and whether any concessional indexing or discount rules remain.

5. Any Australian Taxation Office administrative guidance that will follow enactment, and how it will be applied to borderline cases.

Note the numbers and who's saying them. Treasury material published with the budget is the government’s basis for forecasting both supply and affordability effects. That modelling estimates 35,000 fewer homes built across the next decade and an average $2 per week increase in median rents, while also forecasting 75,000 more first home buyers and the possibility that regulatory changes could support 30,000 additional new homes.

By contrast, opposition figures referencing SQM Research put much larger city rent increases on the table, for example $160 a week in Sydney and $130 a week in Melbourne. These differences come from different modelling assumptions and different scopes. Treat them as alternative scenarios to test against, not as settled facts.

For you: the practical decision. If negative gearing is essential to your cashflow plan, don't assume the rules will stay the same. Constrain acquisitions to the categories the draft law accepts, insist on written tax advice tied to specific contract and settlement dates, and model both Treasury and opposition scenarios for rental and capital outcomes. That will keep choices deliberate rather than reactive.

In short, the debate is now in law, not in political spin. The next step for owners and buyers is to read the draft bill when it appears and to get tailored, written advice before you buy or sell.

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The next concrete event is the bill being tabled in the coming sitting fortnight. Read the draft Explanatory Memorandum and get written tax and conveyancing advice that applies the bill’s definitions and transitional rules to your transaction. If you rely on negative gearing, treat new-build eligibility as the decisive variable and stress-test your finances using the Treasury scenarios.

This article was created with AI assistance.