The 2026 Federal Budget introduced the biggest changes the property investing landscape has seen in decades, including the end of negative gearing as we know it and updates to the capital gains tax discount.
The changes will directly impact investors' profits and holding costs, forcing many to reconsider their strategy. This will have an inevitable flow-on effect for the businesses which manage rental properties in Australia.
However, it’s not all doom and gloom. To cut through the headlines, take a look at a breakdown of the proposed changes plus their potential outcomes:
Federal Budget 2026: Proposed property investing changes
These are the recommendations from the Federal Budget:
From 1 July 2027, negative gearing on established residential property will be removed for new purchases made after Budget night, 12 May 2026 and investors will no longer be able to offset rental losses against wage income.
Those losses can still be carried forward and applied against future rental income or capital gains, meaning the benefit is deferred rather than eliminated entirely. Existing holdings are grandfathered (aka anyone who already owns an investment property will continue to benefit from negative gearing), and newly built properties remain exempt from both the negative gearing and capital gains tax changes.
On capital gains, the existing 50 per cent discount will be replaced with an inflation indexation model, alongside a new 30 per cent minimum tax on net real gains. Capital gains accrued before 1 July 2027 will retain the existing discount, and investors in new residential properties will be able to choose between the two systems.
Under these changes, some investors may decide to sell and build wealth using alternative strategies, while others will look to take advantage of loopholes, such as purchasing brand new properties to avoid negative gearing costs or buying investment homes through their SMSF.
What this means for rental supply and rents
Australia's national vacancy rate sits at 1.2 per cent as of April 2026, well below the level consistent with a balanced market, and rental affordability is reportedly at its worst level since at least 2008. Australia is also on track to see net migration average 230,000 people per year for the remainder of the decade, the vast majority of whom rent for at least their first five years.
If investors exit the market in response to the tax changes, demand for rental stock will only increase. From a rent roll perspective, this may mean less stock on the market but higher rental income, which should help even things out for property managers.
The IMPACt ON inner suburban PROPERTY
It will be interesting to watch the shift in where rental properties are located over the coming years. As noted in realestate.com.au, if investors change from purchasing established homes near the city to new builds in outer growth corridors or high-density apartments, reduced supply in existing locations could see rents on freestanding homes in the inner city reach even higher levels.
Property analyst Michael Yardney reinforces this, suggesting inner and middle-ring suburbs of major cities, where affluent owner-occupiers drive price growth and where genuine tenant demand exists, will hold up strongest in terms of price over the coming years.
For rent roll owners with portfolios concentrated in established metropolitan suburbs, this is a structural advantage. Every PUM lost will be difficult to replace organically, so a healthy inner-city rent roll is likely to have strong value.
The bottom line for rent roll owners
Broadly speaking, Australia’s rental property stock may drop over the next few years as a result of CGT and negative gearing changes, and it’s likely the cost of renting will increase.
As a property management agency, you have a few options to respond to a shrinking pool of rental homes:
Continue your current strategy and grow from referrals, advertising and word of mouth
Buy a rent roll to fast-track your growth
Sell your rent roll and focus on other parts of your business
If you want a (relatively) rapid win, a purchase or sale can make sense. Buying now will set you up for success as the market shrinks, while you should find a strong buyer market if you decide to sell.
FAQ
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No. Existing holdings are grandfathered, so if you already own an investment property, you'll continue to benefit from negative gearing as before. The changes only apply to established properties purchased after Budget night, 12 May 2026.
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With Australia's vacancy rate already low and investors potentially exiting the market, rental supply could tighten further. For rent roll owners, this likely means less stock but higher rental income overall.
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It depends on your goals. If you want to fast-track growth, buying now positions you well as the market shrinks. If you're looking to exit, current conditions suggest a strong buyer market for sellers.