Should I buy a new build to keep negative gearing benefits?
This article contains general information only and does not constitute personal financial or investment advice. Please consider your own circumstances or speak with a qualified adviser before making any decisions.
Since the 2026 Federal Budget reforms were announced, one question has come up time and time again:
Should I buy a new build just to keep the negative gearing benefits?
It’s an understandable question. The new rules have made brand new properties significantly more attractive from a tax perspective, and for many investors, the difference to their after-tax cash flow is substantial.
But tax alone has never been a good reason to buy a property.
A great investment can become a poor one if it’s bought in the wrong location, at the wrong price, or for the wrong reasons. While the new tax rules have shifted the numbers in favour of new builds, the fundamentals that drive long term property performance haven’t changed.
In this article, we’ll explain what the new legislation means, why new builds have become more attractive under the new rules, and the key risks investors should consider before making a decision.
What actually changed, and why new builds are now more attractive
From 1 July 2027, negative gearing on established residential properties will no longer be available for properties purchased after 7:30pm (AEST) on 12 May 2026. Investors who buy an existing property after that date will only be able to offset rental losses against rental income or future capital gains from residential property, not against their salary or other income. Properties already owned before the Budget (including those under contract awaiting settlement) are grandfathered and continue under the current rules until sold.
New build residential properties are exempt from these changes. Investors purchasing an eligible new build retain full access to negative gearing against any income, as well as the existing 50% CGT discount.
Widely held trusts, superannuation funds, build-to-rent developments and properties supporting government housing programs also carry their own exemptions, although a new ban on SMSF borrowing for residential property was added to the legislation during the Senate process and is worth checking with your adviser if that’s part of your structure.
Beyond the tax changes, new builds often come with practical advantages that can improve cash flow. Lower maintenance costs, depreciation benefits and, in many markets, stronger rental demand for brand new homes can all contribute to a better financial outcome in the early years of ownership.
Combined with the new tax rules, the cash flow difference between an eligible new build and an established property has become considerably more pronounced. Depending on factors such as income, borrowing costs and depreciation, the after-tax difference on a $1 million purchase can exceed $30,000 per year.
For some investors, that can be the difference between being able to purchase and afford an investment property, versus no longer being able to afford the cash flow payments and therefore being priced out of investing in property.
The pitfalls investors need to get right
The new legislation has undoubtedly made new builds more attractive, but that doesn’t mean every new build is a good investment.
One of the biggest misconceptions we see investors make is assuming that the tax benefit alone is enough to justify the purchase. In reality, tax concessions can improve the numbers, but they can’t compensate for buying the wrong property in the wrong market.
Like any property purchase, new builds come with their own due diligence considerations. If you’re buying off the plan, you can’t inspect the finished product before committing. Independent valuations generally aren’t available until construction is complete, and it’s easy to find yourself buying in a location you’ve never properly researched simply because that’s where the available new property stock happens to be.
The bigger risk in today’s environment, however, is more strategic than practical.
As the tax advantages encourage more investors towards new builds, some areas may become increasingly dominated by brand new investor-owned stock with limited owner-occupier appeal. While you’ll benefit from the negative gearing concessions while you own the property, the next buyer won’t receive those same incentives once the property is resold . If buyers can purchase a brand new property nearby with better tax concessions, your resale proposition becomes far less attractive.
This is particularly relevant in markets with large apartment pipelines or significant greenfield land releases, where thousands of similar properties compete for the same pool of buyers. In these circumstances, capital growth can fall well short of expectations, even if the tax benefits during ownership have been substantial.
“The tax breaks will obviously be great for those investors who buy quality brand new properties in locations that have high owner occupier demand and limited supply. But for those investors who buy the wrong property types and in the wrong locations, purely on the basis of the negative gearing, they are likely to be disappointed with their lack of long term capital growth.” – David Hancock, Binnari Property
Common misconception: Does this mean established properties are no longer worth buying?
One of the biggest misconceptions following the Budget changes is that established properties have suddenly become poor investments.
That’s not the case.
While the tax settings now favour eligible new builds, tax has always been just one part of the investment equation. An established property in a tightly held suburb with limited supply, strong owner-occupier demand and excellent long term growth prospects may still outperform a new build in an oversupplied investor market, even without the same negative gearing treatment.
Established properties can also offer advantages that some new builds don’t, i.e the construction period has already been completed and they could be located in areas where future housing supply is naturally constrained.
The right choice ultimately depends on your objectives, borrowing capacity, investment timeframe and the specific property you’re considering. The legislation has changed the numbers, but it hasn’t changed the fundamentals that drive long term property performance.
Getting the fundamentals right
The tax settings now clearly favour new builds, but that only translates into a good outcome when the property itself is sound. That means buying in an area dominated by owner-occupiers rather than investors, where supply is genuinely limited and demand from local buyers, not just other investors chasing the same deduction, is strong. It also means buying the right property within that area: a house, townhouse or apartment that would be in demand on its own merits, tax benefits aside.
This is consistent with what we look for in any Binnari recommended property, new build or established: strong owner-occupier appeal, limited competing supply, and fundamentals that hold up regardless of what the tax rules happen to apply in a given year. A new build bought purely for the negative gearing benefit, in an oversupplied, investor-dominated market, is a considerably weaker asset than one bought for genuine long-term demand that also happens to carry a tax advantage.
What should investors take away?
New build property is now the clearer path for investors wanting to retain full negative gearing and CGT benefits, and for many the after-tax cash flow difference will make a real impact on their personal cash flows. But the tax advantage should support the investment case, not replace it.
The investors who are likely to benefit most from the new legislation won’t necessarily be those chasing the biggest tax deduction. They’ll be the ones who combine the tax advantages with the same fundamentals that have always driven successful property investing.
The right property should make sense beyond the tax benefits. If you’re looking for an independent, research-backed assessment of a property or location you’re considering, our team is here to help.
