2026-27 Federal Budget Overview

Posted By David Brown

4 Investor Budget Changes

Negative Gearing Reform
Negative gearing will be limited to newly constructed residential properties, with established properties purchased after Budget night no longer receiving the same concession from 1 July 2027. Existing investments will be grandfathered under current arrangements.

$2 Billion Housing Infrastructure Package
A $2 billion housing infrastructure package will fund enabling works such as roads, water, electricity and essential services to unlock residential development sites and support additional housing supply in priority areas.

Capital Gains Tax (CGT) Changes
The 50 per cent CGT discount will be replaced from 1 July 2027 with an inflation-adjusted model, alongside a minimum 30 per cent tax rate on capital gains. Transitional arrangements will apply, while investors in new residential properties will retain more favourable treatment.

Faster Planning and Housing Delivery Measures
Planning and housing delivery measures are aimed at streamlining approvals, reducing delays and improving coordination across government, with the objective of accelerating residential development and increasing housing supply over time.

Current Investors / Investment Property

Investors will be more likely to hold onto their properties to preserve their negative gearing benefits.
Rising interest rates add to the appeal of negative gearing and further support retention of the current asset to optimise tax benefits and cashflow.
The CGT changes will impact current investment property from July 2027 (gains from 1/7/27 onward will be subject to the new CGT rules) and puts the property into the inflation-based indexation and minimum 30% tax rate which is likely to incentivise the investor to retain the property for longer.

We believe that there will be a significant reduction in investment property coming to the market as investors seek to retain the tax advantages of negative gearing and transitional arrangements for CGT.

The Government aim is to reduce competition between investors and home buyers on homes. This is likely to be the outcome for established homes but the number of listings on the market is likely to fall so that there is an increase in buyer competition for less stock. If 30% of housing is investor stock, and 50% of investors move to a ‘hold’ position, then that will result in a 15% fall in overall listings which is significant.

Of course, there are many factors to consider and the actual market impact will depend on investor behaviour, interest rates, rental yields, supply conditions and broader economic factors.

Less stock on market and constant demand is NOT likely to see any price relief for home buyers in the established homes market.

New Homes

The announcement proposes that new homes and off-plan property will continue to benefit from negative gearing.
Investors will have the choice of indexation or the 50% CGT discount for newly constructed dwellings.
$2 billion infrastructure investment is aimed at accelerating the delivery of new homes.
Streamlining of planning and delivery processes is a good thing.

There will be a marked shift towards new homes and off plan developments with the lower tax structures offered via the continuance of negative gearing and CGT incentives. The infrastructure investment and streamlining of planning and delivery is not enough to deliver any significant increase in supply. Spooling up the supply of new land and/or medium and high-density residential projects takes time.

There may be some time saving to be achieved but it will not bring new supply to the market, just bring forward some projects that are in the pipeline already – maybe.

Our view is that the investment shift to new homes will add more pressure to an already under-supplied market. The supply solutions will not be sufficient to not add pressure to pricing in this segment.

SEQ land supply is already critically short, so increased investor focus on new house and land packages is just going to add to the pressure and push up prices.

A more balanced land supply market in Victoria will benefit investors with competitive pricing and the continuation of tax benefits.

Superannuation

Changes to policy on trusts (with a new minimum tax rate of 30%), negative gearing and CGT bring the advantages for SMSF property investment into more focus.

Continuing lower tax rate of 15% and 0% in pension phase.
Gearing (typically with 20% deposit) ability creates the opportunity to uplift the SMSF asset value.
Negative gearing continues to be available for SMSF property investment within the superannuation fund.
CGT continues at the 1/3 discount for SMSF investment which, when combined with the 15% accumulation phase tax rate, delivers a low tax environment for investors.
Under the pension phase, with a tax rate of 0% there is no CGT to be paid.⁽³⁾

The Meridien team is looking for more SMSF investment opportunities for our clients.

We are developing some new programs for current, medium-term, and longer-term project deliver to enable clients to optimise their superannuation funds to their advantage and realise the full benefits of the lower tax environment.

Immigration and Population Growth | Demand

Government forecasts indicate that Australia’s population will grow by 1.4 million people over the next 4 years.

Net overseas migration continues to exceed Government forecasts and is running at an annualised rate of over 300,000 people p.a. in the first quarter of 2026.

To put this into context, over 4 years we are adding the equivalent of:

1 x Adelaide
2 x Gold Coast-Tweed
3 x Canberra/ACT/Queanbeyan
10 x Darwins

Think about how many homes you see in a flyover of these places and you realise how many you need to meet the housing needs of this bigger population.

It is going to take more than $2 billion of ‘bring forward’ infrastructure spending to sort this out.

It is going to require a lot of rethinking of the types of homes that need to be developed, density planning, decentralisation and a lot more than is in the budget statement.

New Housing Construction | Supply

In August 2023, National Cabinet agreed to an ‘ambitious new target’ to build 1.2 million well-located homes over the 5 years from July 2024.
This means that by 2030, they will have achieved this goal. This equates to 240,000 new homes per year for each of the 5 years. We are now approaching July 2026, how is this looking?

Industry observers point to a current shortfall in the region of 400,000 new dwellings. With just 2 years into the Government’s National Housing Accord, the shortfall is almost 100,000 which means that over the final 3 years of the plan, there needs to be over 270,000 new homes delivered each year to meet the target.

That is a whopping 45% increase over the 2024/25 result and highly unlikely to be achieved.

The conclusion?

Supply is not going to meet demand.

Rental Demand & Yields

In March 2026, Australia’s rental vacancy rate hit a historical low of 1%. A vacancy rate of 2% or less is described as ‘an acute shortage’.

What does this look like? In a rental pool of 100 homes, there is only 1 available for rent (and it is probably unliveable).

In Brisbane, Perth and Adelaide, there is less than 1. In Darwin, there is only 1 available in 300 rental properties. This is an acute shortage.

The Numbers

Rental price increases are accelerating – 2.1% for the March 26 quarter from 1.2% in the December 25 quarter = 75% higher growth rate
Unit rents are increasing more
than houses
Advertised rental prices are higher than median prices which suggest that upward rental pricing will continue
Regional markets are showing the highest rental increases with the gap between city and regions narrowing

The conclusion?

Supply is not going to meet demand.

Overall Perspective

Economics 101 prevails.

Supply does not meet demand – prices rise.

The Government is clearly aiming to increase housing supply with a mix of investor tax benefits and delivery programs. The capacity of the housing and construction industry to ramp up supply with land constraints, skilled labour shortages and cost increases is likely to cap the supply increase well below what the Government expects.

On the other hand, investors are likely to lengthen their property cycles with longer retention times on existing dwellings and even (once complete) new homes, to optimise their tax positions. Holding homes for longer will reduce the number of listings on the market and with continued population growth, upward price pressure is likely to continue.

We work in the market every day. We see the impact of rising demand on an under-supplied market and the constant upward shift in prices. Good property sells fast. Slow movers miss out. It is a very competitive market and in the prime segments, it is likely to get more competitive with more buyers feeding on the limited supply of property.

Opportunities are emerging for astute investors. The Meridien Invest team is committed to understanding where changes create opportunity.

Our view, now is a better time to be investing than later. Why wait for everyone to realise where the opportunities are.

Get in touch and learn more.

1300 964 811
[email protected]

The CGT, negative gearing and trust measures are Budget announcements only and are not yet law. The final position may change once legislation and ATO/Treasury guidance are released.
These comments are based on Budget announcements only and are general in nature. They do not take into account any client’s personal circumstances. Clients should seek personal tax, financial and legal advice before making any property, SMSF or investment decisions.
While pension phase earnings may generally be tax-free within the fund, Division 296 may still apply to members with total super balances above $3 million from 1 July 2026.

Disclaimer: The information provided is for general informational purposes only and does not constitute financial advice, investment recommendations, or professional guidance. All financial examples, forecasts, and interpretations are illustrative in nature and should not be relied upon for making financial decisions. You should consider seeking independent financial, legal, or tax advice before acting on any information contained herein.