What the bill limiting rental losses to new homes says, line by line

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Kooky

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The federal Budget's changes to negative gearing and capital gains tax now exist as a bill. Treasurer Jim Chalmers introduced the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 to the House of Representatives on 28 May, Accountants Daily reported the next day, and it has been referred to the Senate Economics Legislation Committee, which is due to report by 22 June.

For Queensland's property investors the bill replaces three weeks of headlines with something that can be read line by line. It confirms the two dates that matter: the moment on Budget night that separates the homes that keep today's treatment from the ones that do not, and 1 July 2027, when the new rules begin. It also leaves several important definitions to be written later.

This article sets out what the bill says, drawing on the federal Budget papers, Accountants Daily's report of the introduction and the summary of the bill published by the law firm Corrs Chambers Westgarth. It then looks at how investors in south-east Queensland were already behaving before the text arrived.

Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 as summarised by Corrs Chambers Westgarth; committee date as reported by Accountants Daily, 29 May 2026.

What the bill does to rental losses

Negative gearing is the name given to a simple outcome: a rental property costs more to hold in a year than it earns in rent, and the owner sets the shortfall against other income, such as a salary, when working out tax. The bill does not abolish that. It narrows where it is allowed.

According to the Budget papers, the Government will limit negative gearing to new builds from 1 July 2027, with the stated aim of focusing tax support on new supply. The Corrs summary of the bill gives the mechanism. For a residential dwelling acquired on or after Budget night, a net rental loss can no longer be set against income from other sources. The loss is not wiped out. It is carried forward and can be used against future residential rental income and against capital gains on residential property.

In practice that turns an annual tax deduction against wages into a credit that waits. An investor in an established house whose rent does not cover the interest and other costs would still record the loss each year, but would only get the benefit of it when the property, or another residential investment, moves into profit or is sold at a gain.

The restriction applies from 1 July 2027. Until then, the present rules continue for every investor, including those who bought after Budget night. What changes for those buyers is what happens to their losses from the 2027-28 income year onward.

The homes that sit outside the new rule

The bill draws its line at a precise moment. Corrs reports that residential dwellings owned before 7.30pm on 12 May 2026, the time the Budget was delivered, are exempt. The Budget papers put it in plainer terms: existing properties held before Budget night remain unchanged.

That is the provision most Queensland landlords will look for first, because it covers nearly everyone who already owns a rental. A unit in Chermside or a house in Townsville that was held on Budget night keeps its existing treatment for as long as the same owner holds it.

New homes are the second exemption. The Budget papers say investors in new builds keep the full ability to deduct losses. Corrs lists two further carve-outs in the bill: widely held unit trusts and complying superannuation funds.

One point stands out for anyone weighing a purchase off the plan or in a new estate. The bill uses the term "new residential dwelling" without defining it. Corrs notes that the definition is to be published later in a legislative instrument, and that the test described so far is that a property must genuinely add to supply. Until that instrument exists, the boundary between a new and an established home for tax purposes is not settled.

The capital gains side of the bill

The second half of the bill changes how a profit on sale is taxed. At present, an individual who has held an asset for more than twelve months generally counts only half of the capital gain, the arrangement known as the 50 per cent discount.

From 1 July 2027 the bill replaces that discount with two things, according to the Budget papers: an adjustment of the purchase cost for inflation, and a minimum tax of 30 per cent on the gain. Corrs describes the first as cost base indexation using the Consumer Price Index, available to resident individuals, trusts and partnerships, and the second as a minimum rate that applies to resident individuals.

The change is not retrospective in the way many owners feared. The Budget papers say it applies only to gains made after 1 July 2027. Corrs sets out how the bill achieves that: assets are treated as if they were sold and bought back at market value at the changeover, any gain built up before that date keeps the 50 per cent discount, and the tax on it is deferred until the asset is actually sold. In effect an investment property will carry two gains, one from before the changeover and one from after, each taxed under its own rules.

New homes are again treated differently. The Budget papers say investors in new builds may choose between the 50 per cent discount and the new arrangements.

All of this has a cost in paperwork. Corrs quotes Treasury's own estimate that the added compliance burden will cost taxpayers $88.4 million a year for at least ten years, and it lists the method of valuing assets at the changeover among the details still to come.

How Queensland investors were already reacting

The bill arrives in a market that had started to move before the Budget. Mortgage Professional Australia reported on 12 May that investors made 22 per cent of all offers on listings handled by the south-east Queensland agency Image Property between January and April 2026, down from 28 per cent in the second half of 2025. The agency's analysis covered more than 5,000 offers. Its managing director, Joel Davis, attributed the fall to uncertainty over possible federal tax changes.

After the Budget the reaction took a different form. Broker News reported on 25 May that Ray White AKG, a Brisbane agency group, recorded a 150 per cent rise in requests for investor appraisals in a single week, as owners reassessed their rents and their numbers. The same report cited a Herron Todd White survey in which 83.9 per cent of property specialists doubted the changes would ease pressure on renters or buyers. Those are the views of people who work in the market, not measurements of it, and the survey also found that 85 per cent saw a long-running shortage of housing as the main driver of prices over the next five years.

Cotality, whose May home value index was published on 1 June, expects the changes to bring a material pullback in investor demand from levels it describes as near record highs. ABC News has reported Treasury's own estimate that the measures would slow home price growth by 2 per cent over two years.

Why rental losses are common in Queensland

The reason the bill matters so much in this state is arithmetic. Cotality's May tables put the gross rental yield in Greater Brisbane at 3.3 per cent across all dwellings, made up of 3.1 per cent for houses and 3.9 per cent for units, and at 4.1 per cent in regional Queensland. A gross yield is a year's rent as a share of the property's value, before any costs.

The Reserve Bank's cash rate has been 4.35 per cent since its rise of 5 May, and mortgage rates sit above the cash rate. An investor who borrows most of the price of a Brisbane house at a rate above 4.35 per cent, against rent equal to 3.1 per cent of its value, is paying more in interest than the property earns before rates, insurance, maintenance or management are counted. That gap is the loss that negative gearing has allowed owners to set against their other income.

Units and regional homes, with higher yields, sit closer to breaking even. That is one reason commentary since the Budget has focused on whether investors will turn toward higher-yielding property, toward new homes that keep the existing treatment, or away from property altogether. None of those outcomes can be read from the bill itself.

What happens between now and 2027

The bill is not law. It must pass both houses, and the Government does not control the Senate. Accountants Daily reported that Greens senator Nick McKim, the party's economic justice spokesperson, plans to scrutinise the scope of the bill. The Treasurer, introducing it, addressed one concern directly, telling Parliament: "We are not introducing a tax on inheritances or inherited assets."

The bill also carries measures that have nothing to do with property, including a $1,000 standard deduction for work-related expenses from the 2027-28 income year and a tax offset for working Australians, which the Treasurer said would benefit about 6.2 million workers.

For an investor who already owns a Queensland rental, the draft says the tax treatment of that property does not change. For someone considering a purchase, the two open questions are whether the Senate alters the bill and how a new residential dwelling will finally be defined. How either applies to a particular person depends on their own income, loans and ownership structure, which is a matter for a registered tax adviser.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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