Budget Briefing · 12 May 2026
The Budget that
redrew the playbook.
On the evening of 12 May 2026, Treasurer Jim Chalmers delivered the most consequential property-tax Budget in three decades. Five measures sit at the centre of it. Each one rewards investors who move toward new builds, and penalises those who don't.
- 01
From 1 July 2027
Negative gearing restricted to new builds
Negative gearing for residential property will apply to new builds only. All existing investments made before 7:30pm AEST 12 May 2026 are grandfathered. Investments made between Budget night and 1 July 2027 retain pre-Budget treatment.
Investor implication
The investor cash-flow profile that has supported Australian property since 1985 only continues to exist for one asset class. Established-stock investors lose their primary tax lever overnight.
- 02
From 1 July 2027
CGT discount replaced with inflation indexation
The 50% capital gains tax discount is replaced with inflation-adjusted indexation and a minimum 30% tax rate on realised gains. New homes are exempt — investors keep optionality between the discount and the new indexation method.
Investor implication
Every other asset class loses optionality. For new homes, Hera models both paths at sale and applies whichever produces the lower tax outcome.
- 03
Until mid-2029
Foreign-investor ban on existing dwellings extended
Foreign investors remain banned from purchasing established Australian dwellings, with limited supply-positive exceptions. The ban was due to expire — its extension materially shifts the established-dwelling competitive landscape.
Investor implication
Established stock previously contested by offshore capital reverts to domestic buyers, including investors recycling out of soon-to-be-disadvantaged tax positions.
- 04
Rolling — $5.9B available to states
100,000 Homes for First Home Buyers — funded
A dedicated pipeline of 100,000 new homes reserved for first home buyers, backed by $5.9 billion of Commonwealth funding to the states. The pipeline is new-build only, layered onto the uncapped 5% Deposit Scheme.
Investor implication
Creates the largest concentrated demand event for new housing in Australian history. Investors with new-build pipeline sit on top of legislated demand.
- 05
Rolling
$2B Local Infrastructure Fund + faster approvals
A new $2 billion fund for housing-enabling infrastructure (roads, water, power, sewerage), $500M reserved for regional Australia. State access is linked to planning reform and faster approvals.
Investor implication
Directly accelerates the growth-corridor LGAs that Hera's house-and-land and dual-occupancy thesis sits inside.
The Hera response
Three things every investor should do before 1 July 2027.
Audit the existing portfolio against grandfathering rules. Some positions are worth holding; others should be recycled.
Build a transition runway of new-build settlements. Every new-build settled before 1 July 2027 locks in full tax treatment for the life of the asset.
Restructure capital toward the seven Budget-compliant asset classes. Hera's research index is the starting point.