Budget night: the NG change hits higher earners hardest, and the CGT change is being misread. Here's the actual breakdown by income bracket.
Most coverage tonight is treating property investors as one group. The impact of both reforms varies significantly by income bracket, and one of them is being widely misunderstood.
Who the NG change actually hits
Scope first: if you own investment property today, or signed contracts before 7:30pm tonight, nothing changes. Full NG preserved indefinitely. The restriction only applies to new buyers of established properties from tonight.
For those buyers, from 1 July 2027: rental losses can no longer be offset against wages. The property can still offset losses against its own rental income, but the tax benefit most investors are actually claiming disappears. Full policy detail at the Budget 2026-27 tax reform page.
The cost of losing that benefit varies with income because marginal rates vary with income. Modelled on a $650k established property, 80% LVR, 6.5% interest-only, 4.5% yield: Annual rental loss: $11,550
| Income | Marginal rate (inc. Medicare) | Annual NG benefit lost |
|---|---|---|
| $80,000 | 34.5% | $3,985/yr |
| $120,000 | 34.5% | $3,985/yr |
| $150,000 | 39% | $4,505/yr |
| $200,000 | 47% | $5,429/yr |
The highest earners were extracting the most from NG and lose the most from tonight. A $200k earner loses $5,429/year in tax benefit. An $80k earner loses $3,985.
New builds are fully exempt. If you want leveraged property exposure post-budget, a new build is the only path to keeping full NG.
The CGT change is being misread
Replacing the 50% discount with inflation indexation sounds like bad news. At current CPI it might not be.
Worked example: $650k property, sold after 10 years for $1,200,000.
Nominal gain: $550,000
Old method (50% discount): taxable gain = $275,000
New method (indexation at 4.6% CPI compounding 10 years): indexed cost base = ~$1,019,000. Taxable gain = ~$181,000.
Tax comparison at $120k income (34.5% marginal rate):
Old method: $275,000 × 34.5% = **$94,875**
New method: $181,000 × 34.5% = **$62,445**
New method saves $32,430 in this scenario.
For the new method to be worse you need either very low inflation (cost base barely moves) or property growing well above CPI (the nominal gain outpaces the indexation benefit). In an environment where property grows 5-7% annually against 4-5% CPI, indexation is roughly comparable or better. The era where property was growing 15% and inflation was 2% was when the 50% discount was genuinely superior.
The 30% minimum tax floor only stings investors earning under ~$45k (below that, their marginal rate is under 30%). For most investors it is irrelevant.
The one thing most investors are getting wrong regardless of tonight
Separate to the budget: most NG calculators apply a flat 30% or 32.5% rate. That is inaccurate for anyone earning over $135k. The table above shows the real numbers using actual ATO 2025-26 brackets.
For a $150k earner, a flat-rate calculator underestimates the annual NG saving by ~$520. At $200k the gap is nearly $2,000/year. If your model is wrong on that input, every suburb comparison you run is off.
Check your actual marginal rate here: [Individual income tax rates (ATO)](https://www.ato.gov.au/rates/individual-income-tax-rates/)
Full breakdown of what qualifies as deductible: [ATO negative gearing](https://www.ato.gov.au/individuals-and-families/investments-and-assets/rental-properties/negative-gearing)
Have been running suburb-level comparisons through [PropPulse](https://proppulse.dev) which calculates at actual marginal rates rather than a flat estimate. Happy to run the numbers on a specific scenario in the comments if useful.
Caveats
- Legislation has to pass Parliament. Announced tonight, not yet law.
- Contract vs settlement timing for the 7:30pm cutoff needs to be confirmed in the bill when it drops.
- CGT modelling assumes consistent CPI across the hold period. Real inflation is not linear.
- All figures are interest-only. P+I loans reduce the deductible interest portion over time as principal pays down.
- Not financial advice. Run your specific numbers with your accountant.
**TLDR:** NG restriction only applies to new established-property buyers from tonight existing owners untouched. Higher earners lose more because they were getting more. The CGT indexation change is probably better than the 50% discount at current inflation rates for most hold periods, not worse. Separate tip: if you are modelling NG on a property, check the calculator is using your actual marginal rate and not a flat 30% for anyone over $135k the gap is $500-2,000/year.