The latest Federal Budget has introduced changes to how property investments are taxed which will shape how Defence members approach buying, holding or selling property over time.
From 1 July 2027, new rules will apply to negative gearing and Capital Gains Tax (CGT). While these don’t affect Defence housing entitlements, they may influence the financial outcomes of common housing strategies, especially given the mobility that comes with service life.
What’s changing
From 1 July 2027, new rules will apply to future investment properties, particularly established homes.
Negative gearing
Restricted for established properties purchased after 12 May 2026
Losses can no longer offset salary income
Losses can only be used against future rental income or capital gains
Existing properties are grandfathered
New builds are exempt and retain current treatment
Capital Gains Tax (CGT)
The 50% CGT discount for assets held longer than 12 months will be replaced
A new model based on indexation will apply, with a minimum effective tax rate of 30%
New residential investors may be able to choose between the current and new methods
Why this matters in a Defence context
Property decisions in Defence are rarely straightforward. A home purchased to live in can become an investment property at the next posting, often without much planning around that shift.
These changes don’t alter entitlements such as DHOAS, Rental Assistance or HPAS, but they may affect:
The cash flow associated with holding a property
The long-term returns when buying or selling
How viable certain strategies feel over multiple postings
Over a career, these factors can compound, making it more important to step back and reassess how property fits into your broader financial picture.
Key considerations moving forward
Grandfathering matters
If you already own a property purchased before 12 May 2026, the current tax settings still apply. This may influence the decision to hold or sell.
While selling a grandfathered property could result in a more favourable tax outcome today, any future purchases (unless they are new builds) would fall under the new rules.
Cash flow becomes more important
With losses on established properties no longer reducing taxable income, holding costs take on greater significance.
Investment decisions are likely to rely more on:
Rental yield
Interest rate exposure
Ongoing affordability rather than tax offsets
Property type plays a bigger role
The tax changes introduce a clearer distinction between property types.
Established properties may become less attractive to hold as investments under the new rules, while new builds are structurally advantaged from a tax perspective. As always, this needs to be weighed against purchase price, quality and long-term suitability.
Defence entitlements still play a role
Defence-specific benefits continue to support housing decisions.
For example, entitlements like the Home Purchase or Sale Expenses Allowance (HPSEA) can reduce the cost of selling and re-entering the market, which may influence whether to hold or sell between postings.
How common strategies may shift
For many members, the impact of these changes will come down to how they shape familiar approaches to property.
Buying a home to live in and converting it into an investment at the next posting has long been common. Under the new rules, this may become less attractive if the property becomes negatively geared and those losses can’t be offset against income. In some cases, there may be a stronger case to sell and re-enter the market at the next location.
Choosing between a new build and an established property may also carry more weight. New builds retain tax advantages, particularly if there’s a chance the property will become an investment. However, that needs to be balanced against potentially higher upfront costs.
Strategies like renting at a posting while investing elsewhere may still work, especially where rent is subsidised through DHA or Rental Assistance. However, the change to negative gearing means cash flow should be considered more carefully when assessing these options.
A steady, considered approach
For Defence members, property has always been about more than just investment, it’s about flexibility, stability and planning for life beyond service.
These changes don’t take options off the table, but they do shift the balance. Taking the time to review your approach, understand how these rules apply to your situation, and consider both short-term cash flow and long-term goals can make a meaningful difference.
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Important: This article is general information only and does not consider your personal circumstances. It is not financial or tax advice. You may wish to seek professional advice before making any decisions.
