Published
The negative gearing and CGT changes, and who they actually affect
Most of the coverage has been about the announcement. The part that decides whether it affects you is the date you bought.
Do the negative gearing and capital gains tax changes affect a short-term rental property?
From 1 July 2027, negative gearing on residential property is limited to new builds and the 50% capital gains tax discount is replaced by cost base indexation with a 30% minimum tax rate. The published material does not distinguish short-term or holiday letting from a long lease, so the reasonable reading is that an Airbnb or short-stay property is treated as a residential property investment — confirm that with your accountant. A property held at 7:30pm AEST on 12 May 2026 is exempt from the negative gearing change. Where a later purchase is not a new build, losses carry forward against residential property income instead of reducing tax on a salary.
Two changes, one start date
The 2026-27 Federal Budget changed two things about how residential property investment is taxed. Both are legislated, and both start on 1 July 2027.
The first limits negative gearing on residential property investment to new builds. The second replaces the 50% capital gains tax discount with cost base indexation and a minimum tax rate of 30% on capital gains.
Neither is retrospective, which is the part most of the coverage moved past quickly.
If you already owned it, negative gearing does not change
Properties held at 7:30pm AEST on 12 May 2026 — the moment of the announcement — are exempt from the negative gearing restriction. If you owned the property before that, the way a loss is deducted against your other income is unchanged.
For most owners who ask us about this, that is the whole answer. The change is about what happens when you buy next, not about what you are holding now.
What counts as a new build
The restriction keeps negative gearing available where the property genuinely adds to housing supply: a dwelling built on vacant land, or existing structures demolished and replaced with more dwellings than stood there before.
It does not extend to a knock-down rebuild that adds no dwelling, to substantial renovation, or to a property that has been sold before — with a narrow exception where the builder occupied it for less than twelve months.
So new means new supply, not new to you.
Buy an established property after the announcement and the loss has to find its own income
Where a purchase made after the announcement is not a new build, a loss is not lost. It is carried forward. What changes is what it can be set against: residential property income in later years, including a capital gain on residential property, rather than salary or other income in the year the loss arises.
That is the change with the most practical weight. Under the old arrangement, a shortfall between rent and costs reduced tax on a salary in the same year. Under the new one, the property has to produce income for the loss to be worth anything, and the benefit arrives later rather than now.
The effect is to make the income a property actually produces matter more than it did, relative to a deduction that used to soften the shortfall.
The CGT change is about how the gain is measured
The 50% discount is replaced by two mechanisms working together. The cost base is indexed to CPI, so the part of a gain that is only inflation is not taxed. A minimum rate of 30% then applies to the capital gain, unless the investor's marginal rate already taxes it at 30% or more.
It applies to individuals, partnerships and trusts on assets held twelve months or longer, and only to gains accruing after 1 July 2027 — gains built up before then are not caught. A main residence is unaffected, and income-support recipients are exempt.
Whether a particular person ends up better or worse off depends on how long the asset is held, what inflation does over that period, and their marginal rate. That is arithmetic about one taxpayer, which is why there is no worked example here.
Where short-stay sits in this
The restriction is written as applying to residential property investments. The published material does not distinguish between a long lease and short-term or holiday letting, so the reasonable reading is that it covers both — but it does not say so in terms, and confirming it for your situation is a question for your accountant rather than for us.
The arithmetic underneath is not in doubt. If a loss can no longer reduce tax on a salary in the year it happens, the income the property produces carries more of the weight. Short-stay and mid-term letting generally produce a higher gross income than a long lease on the same property. They also carry higher costs — cleaning, linen, platform commission, furnishing, a higher management fee — and more variability month to month. Whether the net is better is a property-by-property question, and in Greater Sydney it is also shaped by the 180-day cap on non-hosted letting.
The honest summary is that the change raises the value of yield relative to the deduction. It does not make one letting strategy correct.
What we are, and what we are not
MetaWise is a licensed real-estate business. We are not tax agents and not financial advisers. Everything above describes published rules, with the sources listed below, and is not advice about your circumstances — which is also why we have deliberately not modelled what any of it would be worth to you.
Take it to your accountant before it changes a decision. If the decision you are weighing is how to let the property rather than how it is taxed, that part we can help with.