Insight · The 2027 tax reforms

New builds just became the tax winner. Here’s why I’m telling clients to be more careful, not less.

The negative-gearing reform has made new-build property the most tax-advantaged category in the market. That is the moment to slow down, because a tax benefit can prop up a good asset, but it will never rescue a weak one.

Mia Charles · MC Acquisitions · July 2026 · ~7 min read

What changed

From 1 July 2027, an investor who buys an established residential property can no longer offset their rental losses against their wage income. Those losses are quarantined, usable only against other property income or a future capital gain. For individuals, trusts and partnerships the 50% CGT discount gives way to cost-base indexation and a 30% minimum tax on real gains. This applies to gains accruing from 1 July 2027; gains accrued before that date keep the 50% discount under the transitional rules, with the method for splitting a gain either side of that date still in draft. New builds that meet the test are treated differently: the offset against wage income is kept, and the legislation provides an election between CGT methods at sale. Which builds meet that test is still being finalised, and it is your accountant's call on your own circumstances rather than something I can settle here.

There’s another change too, one brokers have started describing: lenders beginning to price the loss of negative gearing into borrowing capacity. The pattern they report is capacity approved a year ago coming back materially lower on the same income. Ask your own broker to re-run yours before you rely on last year’s number. Reduced capacity pushes people towards a lower price point (a lesser area, a smaller land holding, or a unit), which carries its own risk.

On paper, all of this makes new builds the obvious winner. On paper is where the trouble starts.

The tax tail should never wag the dog

When one category suddenly carries a tax advantage, the temptation is to buy the category. The reform changed the tax treatment laid over the top, without changing what makes a property a sound investment. Capital growth, rental growth and cashflow drive long-term wealth far more than which CGT regime happens to apply.

A tax benefit can support cash flow, but it can’t turn a weak asset into a strong one.Junge Ma, InvestorKit , via Mortgage Choice, July 2026

So the honest question was never “does it get the tax break?” It’s “would I still buy this if it didn’t?”

The case against new builds that most people selling them won’t put in writing

Most of my work is new-build dual occupancy. So it matters that I’m the one to say this plainly: new builds carry real disadvantages that established property doesn’t, and you deserve to hear them from the person you’re paying rather than discover them later.

• A developer premium. New stock is often priced above what the land and the build are independently worth. You can pay a retail margin for something whose value only catches up years later, if at all.
• Less land, and land is what grows. Capital growth comes disproportionately from land value. New builds frequently sit on smaller parcels, with a higher share of the price tied up in the building, which depreciates.
• Established property is often argued to win on growth. The argument runs through scarcity close to where people already want to live. It is worth testing that against the specific market rather than assuming it.
• Oversupply risk, which this reform actively worsens. If investors pile into new-build stock all at once, prices inflate in the short term while the fundamentals weaken: more competing rentals, softer rental growth and weaker resale, which are the outcomes buyers were trying to avoid.
• A definitional grey area. The rules on what qualifies as an eligible “new build” are neither simple nor settled. Configuration matters to the answer, including whether each dwelling could ever be separately titled. Not everything that looks new will make the cut, so put the question to your accountant, in writing, before you commit.

None of that is a reason to avoid new builds. It is a reason to buy them on their merits rather than their tax status, and to work with someone whose incentives don’t depend on you ignoring the list above.

The yield mirage: why the hottest market is the most dangerous

Every so often the strongest twelve-month growth in the country turns up somewhere inland rather than in a capital city, with yields to match. Queensland’s western corridor has had exactly that kind of run. It is tempting to read a chart like that as a yield-and-growth paradise.

Look closer at what those towns run on. Roma, Chinchilla and Dalby are gas-and-agriculture economies built on the Surat Basin’s oil, coal-seam gas and farming, a good deal of it serviced by a fly-in workforce. High yields in places like these are the market demanding compensation for concentration risk and for thinner, more volatile long-term growth.

We have watched this film before. Through the mining boom, towns like Moranbah and Gladstone delivered some of the most spectacular yield and growth in Australian history, then gave most of it back. Values fell by more than half, and for a period the majority of sales in some of those markets settled at a loss. The investors who read the boom as a fundamental, rather than as a commodity cycle, wore the difference.

The data itself deserves humility. Twelve-month growth figures are backward-looking, and regional medians are drawn from thin sales volumes. A hot year tells you about the past rather than the future.

What holds up

Strip away the noise and the durable version of this strategy is unglamorous: manageable cashflow, genuine capital-growth fundamentals, and diversification, so that no single policy change or industry downturn can sink you.

This is why not all regional markets are equal, even when their twelve-month charts look alike. Toowoomba is a diversified city, where health care is the largest employer and education the second. It is backed by freight infrastructure, an airport, major hospital investment and a long-run population projection well above where it sits today. That is a fundamentally different proposition to a single-commodity town two hours further west. Both can show a strong year. Only one has more than one engine.

High yield is not the same as a sound hold. Sometimes the yield is the reward. Just as often, it’s the risk, priced in.

Where I land

New-build dual occupancy can be an excellent cashflow-first strategy in this environment, and I wouldn’t do as much of it otherwise. The reform hasn’t made it a safe bet. It’s made it a crowded one, and those are very different things.

My job is to make the honest case against it apply to you as little as possible. I hold no developer stock and take no commission, so there is no premium I’m motivated to hide. I insist on real land content. I screen hard for oversupply, street-level over-clustering, and single-industry exposure. I model twenty years of fundamentals on numbers your own broker and accountant confirm, with the tax benefit stripped out, to see whether the asset stands on its own two feet.

The test was never whether it gets the tax break. It’s whether you’d still want it if it didn’t. If the answer is yes, you have a genuine investment. If the answer is only yes because of the tax break, you don’t, and I’ll be the one to tell you.

General information only. This is not financial product advice, taxation advice, credit assistance, legal advice or town-planning advice, and must not be relied on as such. Figures are drawn from the public sources cited above and are current as at September 2026. The 2026-27 tax reforms take effect from 1 July 2027, with the definition of a qualifying new build still in exposure draft. Obtain your own independent financial, taxation and legal advice before making any investment decision.