Guide
The 2026 Budget changes, decoded for anyone thinking of building
What the settings are, when they apply, and what they do to the numbers on a feasibility for a block in Sydney's south. Not tax advice.
The short version
Five months on from the 12 May 2026 Federal Budget, we still get asked what actually changed for property. This is the neutral version. It is not tax advice. We do the planning and cost numbers; your accountant decides how any of this applies to you.
Put briefly: the settings now favour creating a new dwelling over buying an established one. For an owner in Sydney's south with room on the block, that changes three comparisons, covered below.
The two big changes
Negative gearing: new builds only
For residential property bought after 12 May 2026, negative gearing is limited to new builds. Property you already owned on Budget night is grandfathered — the existing rules keep applying to it. New construction remains eligible regardless of when the land was bought, which is the part that matters for owners: a new dwelling, or a new secondary dwelling, on land you already hold is a new build.
Treasury's own modelling projects around 65,000 additional new builds and roughly 75,000 homes shifting to first-home buyers as a result. Whether that modelling is right is a debate for other people; the direction it points is clear enough.
The CGT discount: replaced from 1 July 2027
The 50% capital gains tax discount is being replaced by cost-base indexation plus a 30% minimum rate. Gains accrued on existing property up to 1 July 2027 stay under the old rules; gains after that fall under the new regime. What that means for your particular holding is an accountant's question.
The settings, with dates
| Change | Status | From |
|---|---|---|
| Negative gearing limited to new builds (purchases after 12 May 2026) | Legislated | 12 May 2026 |
| 50% CGT discount replaced by indexation plus a 30% minimum rate | Legislated | Gains after 1 July 2027 |
| Division 296 (super balances over $3m) | In force | 1 July 2026 |
| Help to Buy — 10,000 more places; income caps $103k single, $165k joint | In force | 1 July 2026 |
| Foreign buyer ban on established homes | Extended | To 30 June 2029 |
| 30% minimum tax on discretionary trusts | Proposed — exposure draft | 1 July 2028 |
| NSW council DA target | Set | 105 days now, 95 from 1 July 2027 |
The trust measure is the one developers using a family or discretionary trust are watching. It is not law yet. A temporary restructure rollover is proposed from 1 July 2027 for three years. Talk to your adviser before you change anything.
The money side
| Measure | Now | Context |
|---|---|---|
| Cash rate | 4.35% | Three hikes in early 2026, held since August. Majors expect 4.60% by November; first cuts forecast for 2027. |
| APRA serviceability buffer | 3.0 points | Unchanged, reconfirmed May 2026. |
| Sydney dwelling values | −4.6% y/y | −1.4% in August; 7.1% below the February 2026 peak (Cotality). |
| Construction input prices | +4–5% y/y | About +2% in the June 2026 quarter alone, the largest since 2022 (ABS). |
| Trade prices | +5.1% | First half of 2026; trades index still in shortage (HIA). |
The remaining RBA meetings for 2026 are 28–29 September, 2–3 November and 7–8 December. Whatever they decide, none of it changes what your block is allowed to hold, the five-year life of an approval, or the direction of build costs.
What it does to a feasibility
Buy a second established house vs build a duplex on your block. An attached duplex is $1.0–1.4m all-in before land — two dwellings, demolition, site works, contributions, approvals, itemised in the dual occupancy guide. A second established house in the same suburb costs about the same, adds stamp duty, and after 12 May no longer comes with negative gearing. Both dwellings in the duplex are new builds.
Buy an investment unit vs add a granny flat. A two-bed 60 m² secondary dwelling is $180–280k all-in, usually a CDC on an R2 block of 450 m² or more, and a new dwelling for the purposes of the new rules. No stamp duty on land you already own. The granny flat guide has the planning rules.
Renovate vs knock-down rebuild. Values are 7% off their peak, so the end-value number on a rebuild feasibility did the wrong thing this year while the cost number kept rising. That thins the margin. But the same is true of every alternative, and building new on land you own is the option that kept its tax treatment. The real question is whether your block supports the end value — a $990 desktop feasibility answers it before you spend on drawings.
What hasn't changed
- What you're allowed to build on your lot. Zoning, the LEP, the DCP and the SEPPs don't reference the cash rate.
- The five-year life of a development consent or complying development certificate.
- The direction of build costs: up, 4–5% a year, whatever the RBA does.
Where to go next
- What your budget actually buys — six rungs, all-in, before land
- Why a slow market is the time to lodge — the approval as a five-year option
- Granny flat design and approval and dual occupancy — the two projects the settings favour
- Desktop feasibility — $990 + GST for the controls and pathway on your lot
Common questions
Does negative gearing still apply to a property I already own?
Property owned before 12 May 2026 is grandfathered, so the existing rules keep applying to it. The new-builds-only limit applies to residential property bought after that date. How it applies to your holding is a question for your accountant.
Is a granny flat on my own block a "new build"?
A newly constructed secondary dwelling is new construction, and new construction remains eligible regardless of when the land was bought. Whether the income and deductions on it fall inside the rules for your circumstances is for your accountant to confirm before you rely on it.
When does the CGT change take effect?
Gains accrued on existing property up to 1 July 2027 stay under the old 50% discount rules; gains after that date fall under cost-base indexation plus a 30% minimum rate. What that means for a particular asset depends on when it was bought and when it will be sold.
Is the trust change law yet?
No. The 30% minimum tax on discretionary trusts was announced in the 2026 Budget and released as exposure draft legislation in September 2026, with a proposed start date of 1 July 2028 and a temporary restructure rollover from 1 July 2027. Talk to your adviser before changing any structure.
Will rates be cut this year?
None of the four major banks forecasts a cut in 2026. The RBA hiked three times in early 2026 to 4.35% and has held since August; the majors expect a further hike to 4.60% by November, with first cuts pencilled for 2027. The remaining 2026 meetings are 28–29 September, 2–3 November and 7–8 December.
Is any of this tax advice?
No. This guide states the settings as legislated or proposed, with dates and sources, and describes what they do to the numbers on a planning feasibility. PlanLand does the planning and cost side. Your accountant decides how any of it applies to you.
General information about NSW planning, current at September 2026. Not advice on a particular site — the instruments are amended often and councils vary them locally.
Run the numbers properly
A $990 desktop feasibility for the controls and pathway, then a concept feasibility with a yield test if it's worth going further. Bring your accountant in early.