Federal Budget 2026-27: What It Means for Australian Property Developers

Treasurer Jim Chalmers handed down the 2026-27 Federal Budget at 7:30 pm AEST on Tuesday 12 May 2026, and for Australian property developers it is the most consequential federal fiscal event since the 50% capital gains tax discount was introduced in 1999. The Budget pairs a $2 billion housing-enabling Local Infrastructure Fund and an $8.6 billion transport pipeline with structural changes to negative gearing, the 50% CGT discount, and the taxation of discretionary trusts. By Treasury’s own modelling, the tax package is expected to reduce new housing supply by around 35,000 dwellings over the next decade while delivering an additional 75,000 owner-occupiers over the same period.

TL;DR: who is affected and how

This Budget reshapes the economics of Australian property development. Here is a quick map of where you may sit, and what may change for you.

Development types

• Off-the-plan apartments and townhouses. Investor demand may strengthen because new builds retain full negative gearing from 1 July 2027.
• Knock-down rebuilds adding dwellings. Treated as new builds, so the negative gearing and CGT discount carve-outs may apply.
• Vacant land subdivisions. Generally treated as producing new builds when developed.
• Build-to-rent (50+ dwellings, single ownership, 5-year leases). Existing managed investment trust settings unchanged. Continues to be exempt from the foreign buyer ban.
• Established dwelling value-add and character renovations. Investor demand may weaken because resale into the investor market loses negative gearing benefits for the buyer.
• Worker and student accommodation. Commercial-scale exemption from the foreign buyer ban continues.
• Aged care, retirement villages and assisted living. Commercial-scale exemption from the foreign buyer ban continues.

Investment and hold strategies

• Build-to-hold investor strategies on established stock. Negative gearing quarantined to residential property income from 1 July 2027 for property bought after Budget night.
• Holding completed stock past 12 months for CGT discount. Incentive weakened. The 50% discount is replaced with CPI indexation plus 30% minimum tax from 1 July 2027.
• Off-the-plan sales targeting investor buyers. New builds favoured. Established-stock plays disadvantaged.
• Secondary investor resale of recently completed stock. Loses new-build status on second investor sale, which may compress resale pricing into the investor market.

Entity and deal structures

• Discretionary family trusts. 30% minimum tax from 1 July 2028. Rollover relief window 1 July 2027 to 30 June 2030.
• Income streaming to lower-rate beneficiaries. Less efficient under the trust minimum tax.
• Bucket company strategies. Explicitly targeted. Corporate beneficiaries do not receive credits for trustee tax paid.
• Landowner-developer joint ventures using trust structures. Profit-share arrangements may need review before 1 July 2028.
• Individual and partnership structures. CGT discount replaced from 1 July 2027.
• Company structures. Relatively advantaged. Unaffected by CGT or trust changes.

Funding stack implications

• Foreign capital raises. FIRB thresholds lifted to A$347 million (non-FTA developed commercial). Processing faster under the new portal.
• Offshore institutional BTR acquisitions. Foreign buyer ban exemption continues. Ban extended to 30 June 2029.
• Projects blocked by missing trunk infrastructure. $2 billion Local Infrastructure Fund opportunity. $500 million regional carve-out.
• Small to mid developer cash flow. Permanent $20,000 instant asset write-off from 1 July 2026. Loss carry-back (2-year lookback, turnover up to $1 billion) from 2026-27.

Bottom line

Treasury’s own modelling indicates the tax package may reduce new housing supply by approximately 35,000 dwellings over the next decade while supporting 75,000 additional owner-occupiers. The Coalition has rejected the tax package. The deferred 1 July 2027 commencement date means the next federal election will determine whether the reforms commence as drafted. Model your pipeline against both scenarios.

This guide covers what property developers may need to know about every Budget measure that could materially affect feasibility, funding stacks, deal structures and pipeline strategy. It works through the tax reforms, supply-side spending, foreign investment settings, infrastructure pipeline, construction inputs and macroeconomic outlook, and finishes with a staged action plan and a frank assessment of legislative risk. Every figure cited is traceable to a primary source, and the analysis treats the announcements as proposals that may yet be amended in their passage through Parliament.

The 7:30 pm line: why budget night timing matters

The single most important moment in this Budget for property developers is 7:30 pm AEST on Tuesday 12 May 2026. That is the precise time the Treasurer began delivering the Budget speech, and it is also the cut-off used for grandfathering arrangements under the negative gearing reform. Properties held at that time, including those subject to signed contracts before that moment, may be fully grandfathered under the existing negative gearing rules. Properties contracted after that moment may be subject to the new regime that commences on 1 July 2027.

The Treasury fact sheet Negative Gearing and Capital Gains Tax Reform sets out the bucketing in detail, and the Budget 2026-27 tax reform theme page confirms the headline rules. The 7:30 pm line creates three distinct categories of investor for the purposes of off-the-plan and investor-targeted stock currently in market, and developer sales teams may want to audit every active contract against this cut-off before approaching buyers about the implications.

Negative gearing reform: new builds favoured from 1 July 2027

The Budget proposes to limit negative gearing on residential property to new builds from 1 July 2027. The stated intent, as set out on the Budget 2026-27 tax reform theme page, is to “focus tax support on new supply.” For property developers, the immediate consequence is that investor demand for new builds may strengthen relative to established stock, because only new builds may continue to attract full negative gearing benefits against other income.

How the rules typically work

The Budget proposes the following structure, which may be subject to amendment during legislative passage:

• Held at 7:30 pm AEST 12 May 2026. Properties already owned, or subject to signed contracts before that moment, are proposed to retain full negative gearing under existing rules indefinitely.
• Acquired 12 May 2026 to 30 June 2027. A transitional regime would allow negative gearing against any income until 30 June 2027, after which losses on established properties would be quarantined to residential property income and carried forward.
• Established property acquired from 1 July 2027. Losses would only be deductible against other residential property income. Any unused losses could be carried forward but not deducted against wages, business income or other investment income.
• New builds acquired from 1 July 2027. Full negative gearing against other income may continue to apply.

The proposed definition of a new build is reasonably broad and may include vacant-land construction, off-the-plan apartment purchases and knock-down rebuilds that add dwellings. A property is generally expected to be treated as a new build only on its first investor purchase. Subsequent investor purchasers of the same property are typically expected to lose new-build status and fall into the established-stock bucket.

The reforms appear to exempt widely-held trusts and self-managed superannuation funds, and the Treasury fact sheet referenced by SBS News indicates that investments supporting government housing programs and affordable housing programs may also be exempt.

What this could mean for feasibility

The reform creates an explicit tax-driven pricing differential between new and established stock that developers may want to model carefully. Some practical implications include:

• Off-the-plan demand may strengthen. Investor buyers seeking negative gearing benefits would need to buy new builds. This could support deeper presale absorption on apartment, townhouse and dual-occupancy projects.
• Knock-down rebuild plays could be advantaged. Adding dwellings on an existing site appears to produce new-build stock that retains full negative gearing, which may make small-lot intensification more attractive.
• Established-stock value-add strategies face headwinds. Heritage renovations, character-area refurbishments and minor extensions sold to investor buyers may need to be repriced or repositioned to owner-occupier markets.
• Resale of newly-completed stock could lose its premium. Because new-build status appears to attach to the first investor purchase, the secondary investor market for one or two-year-old completed stock could compress relative to brand-new product.

With Feasly’s feasibility software, you can model the pricing premium that new-build status may create across different stock types and run sensitivities on investor demand assumptions under both pre-reform and post-reform scenarios.

Capital gains tax: the 50% discount replaced from 1 July 2027

The Budget proposes to replace the 50% CGT discount with a discount based on inflation, combined with a minimum 30% tax on gains, from 1 July 2027. The Budget 2026-27 tax reform theme page describes the change as a shift from a flat percentage discount to a cost-base indexation method, restoring elements of the pre-1999 CGT framework.

How the new method may work

Drawing on the Treasury fact sheet referenced in the AusTax Tools Budget 2026 summary and confirmed by SBS News, the proposed mechanics are:

• The reform applies to individuals, partnerships and trusts. Companies are generally unaffected, because companies have never been entitled to the 50% CGT discount.
• For assets owned across 1 July 2027, the gain is proposed to be split: the pre-1 July 2027 portion uses the existing 50% discount, while the post-1 July 2027 portion uses cost-base indexation plus the 30% minimum tax.
• Investors may choose between an actual valuation as at 1 July 2027 or an ATO apportionment formula to determine the split.
• The 12-month holding period requirement is retained.
• Investors who acquire new builds may elect either the existing 50% discount or the new indexation rules at the time of disposal.
• The main residence exemption, the four small business CGT concessions (15-year exemption, 50% active asset reduction, retirement exemption and rollover), and the 60% affordable housing CGT discount are all retained.
• The 30% minimum tax may exempt Age Pension and JobSeeker recipients in years they realise a gain.

Implications for development entities

For developers structuring sales through individuals, trusts or partnerships, the reform changes the after-tax return calculation in several ways:

• Lower nominal after-tax gains on long-held appreciating assets. In a moderate inflation environment, indexation typically produces a smaller deductible reduction than the 50% discount. The 30% minimum tax floor may further compress after-tax returns on highly geared, high-growth holdings.
• Reduced tax planning value of holding stock past 12 months. The discount-driven incentive to hold completed stock for at least 12 months before sale is weakened, although the 12-month holding requirement itself remains.
• Election option may preserve the discount for new-build investors. Developers selling to investor buyers can credibly highlight that new-build purchasers may elect to retain the 50% discount at disposal, which could be a meaningful marketing point.
• Company structures become relatively more attractive. Because companies are unaffected, developers operating through companies may face a smaller relative disadvantage compared with trust and individual structures than previously.

The split treatment for assets owned across 1 July 2027 will require accurate cost-base records and may benefit from professional valuation of land-bank and completed-stock holdings before the commencement date.

Discretionary trusts: 30% minimum tax from 1 July 2028

The Budget proposes a 30% minimum tax on trust income for discretionary trusts from 1 July 2028. This is a structural change that may affect a large share of small and family-owned development businesses currently using discretionary trust structures.

How the trust tax may work

Drawing on the Treasury fact sheet Minimum Tax on Discretionary Trusts as catalogued in the AusTax Tools Budget 2026 summary, the proposed structure is:

• Trustees may pay a minimum 30% tax on taxable trust income.
• Non-corporate beneficiaries may receive non-refundable tax credits for the tax paid by the trustee.
• Corporate beneficiaries would not receive credits, which is explicitly designed to prevent income being streamed to bucket companies to access the corporate tax rate.
• Excluded entities include fixed trusts, widely-held trusts (including most managed investment trusts), complying superannuation funds, special disability trusts, deceased estates and charitable trusts.
• Excluded income types include primary production income, certain income distributed to vulnerable minors, non-resident withholding amounts and income from testamentary trusts existing at announcement.
• Rollover relief from income tax and CGT is proposed to be available for a three-year window from 1 July 2027 to 30 June 2030 for entities choosing to restructure out of discretionary trusts.

Why this matters for developers

Many small and mid-sized Australian property developers operate through family discretionary trusts for asset protection, succession planning and the ability to stream income to lower-tax beneficiaries. Roughly 40% of the estimated 350,000 small businesses using discretionary trusts may pay additional tax or face a restructuring decision under the proposed regime.

Practical implications may include:

• Family income streaming becomes less efficient. Distributing project profits to adult children, parents and other lower-rate beneficiaries may produce a smaller tax saving once the 30% minimum tax floor applies.
• Restructuring decisions in a tight window. The three-year rollover relief window runs from 1 July 2027 to 30 June 2030. Developers considering moving to company, fixed unit trust or hybrid structures may want professional advice well before the window closes.
• Bucket company strategies are explicitly targeted. The rule that corporate beneficiaries do not receive credits for trustee tax paid is designed to neutralise the most common income deferral strategy used by family development entities.
• Joint venture structures may need a review. Many landowner-developer joint ventures use trust structures to hold the project. The minimum trust tax may interact with profit-share arrangements and capital allocation decisions in ways that warrant pre-commencement modelling.

Cash flow measures: instant asset write-off and loss carry-back

The Budget delivers two cash-flow measures of direct relevance to small and mid-sized developer and builder entities.

Permanent $20,000 instant asset write-off from 1 July 2026

Small businesses with aggregated turnover under $10 million may immediately deduct the cost of eligible assets costing less than $20,000 from 1 July 2026. The threshold is proposed to be made permanent rather than continuing the previous annual extension cycle. The Budget 2026-27 tax reform theme page estimates this could improve cash flow for small businesses by around $890 million over five years and save around $32 million per year in compliance costs.

For developer and builder entities, eligible items may typically include tools, plant and equipment, vehicles within Luxury Car Tax limits, and office and site-office equipment. Each asset is assessed against the $20,000 threshold separately, which generally means multiple sub-threshold purchases can each be written off in the same year.

Loss carry-back from 2026-27

Companies with aggregated turnover up to $1 billion may carry losses back against tax paid in the prior two income years to claim a cash refund, from the 2026-27 income year. The Budget estimates this could benefit up to 85,000 companies, mostly small and mid-sized businesses. The measure is permanent rather than the previous time-limited iteration.

For developers that experience a loss year during a market downturn after several profitable years, this can be a meaningful source of liquidity. Practical considerations may include:

• Two-year lookback only. Tax paid more than two years before the loss year is not recoverable through carry-back.
• Company structures only. Trusts and individuals are not eligible for loss carry-back. This may be a factor in any restructuring decision triggered by the discretionary trust changes.
• Cash refund, not just deduction. Unlike loss carry-forward, carry-back produces an actual refund of tax previously paid, which can support working capital during downturns.

Foreign investment: ban extended, FIRB streamlined

Established dwelling ban extended to 30 June 2029

The temporary ban on foreign persons acquiring established Australian dwellings has been extended from the original 31 March 2027 end date through to 30 June 2029. This extends a measure originally introduced in 2025 and described on the Foreign Investment Review Board website as a response to housing affordability concerns.

The existing exemptions are generally expected to continue, including:

• Redevelopments that add at least 20 additional dwellings to the existing dwelling stock.
• Commercial-scale residential developments, including retirement villages, assisted living facilities, aged care and student accommodation.
• Pacific Australia Labour Mobility (PALM) scheme worker accommodation.
• Acquisitions of established build-to-rent developments (50 or more dwellings, single owner, minimum five-year lease offers) that continue to operate as build-to-rent.

Double vacancy fees for foreign-owned residential dwellings purchased since 9 May 2017, in effect for vacancy years starting on or after 9 April 2024, continue to apply.

FIRB threshold indexation and accelerated approvals

FIRB monetary thresholds were indexed on 1 January 2026 by approximately 2.3%, lifting the standard developed commercial land and business acquisition threshold for non-FTA investors to around A$347 million. The sensitive land threshold continues to scale separately. The new Foreign Investment Portal is fully operational and is referenced in the Budget productivity theme as supporting “accelerating environmental, low-risk foreign investment, resources and telecommunications approvals to make it easier to launch new projects.”

For developers raising foreign capital or selling to foreign institutional investors in eligible asset classes, the combined effect is mildly positive: thresholds have lifted, processing should be faster for low-risk applications, and the BTR carve-out from the established dwelling ban continues to operate.

Housing supply spending: the $2 billion infrastructure play

The Local Infrastructure Fund

The headline supply-side measure is a new $2 billion Local Infrastructure Fund, pre-announced on Sunday 10 May 2026 in a joint press conference with Treasurer Chalmers, Housing Minister Clare O’Neil and Assistant Minister for Productivity Andrew Leigh, and confirmed in the Budget overview’s cost-of-living theme on budget.gov.au.

Key parameters as currently announced:

• Quantum. $2 billion over four years from 2026-27.
• Distribution. Broadly per-capita, with minimum allocations to each state and territory.
• Regional carve-out. $500 million ring-fenced for regional Australia.
• Recipients. Local governments and state utility providers, for water, sewer, power and local road infrastructure that unlocks development sites.
• Stated outcome. Up to 65,000 new homes over a decade.
• Total housing-enabling spend. The Government states this brings total federal housing-enabling infrastructure investment to $6.3 billion across all programs.

The Australian Local Government Association (President Mayor Matt Burnett) described the fund as “a major step forward” and “a major win on housing infrastructure.” HIA Managing Director Jocelyn Martin stated that “timely provision of enabling infrastructure is critical to making projects shovel-ready. It is not traditionally an Australian government responsibility, so this is an important commitment that will help accelerate housing delivery.”

For developers, the practical opportunity is to identify projects in your pipeline where missing trunk infrastructure is the binding constraint on commencement, and engage early with the relevant council or utility on the form an application to the fund might take. Sites where the development application is approved but financial close has been delayed by an upgrade to water, sewer or road infrastructure are typically the strongest candidates.

Housing Australia Future Fund

The Budget releases a further $100 million from the Housing Australia Future Fund specifically to improve housing quality for First Nations Australians in remote communities. There is no top-up to the existing $10 billion HAFF corpus. Existing federal-state HAFF partnerships continue to flow. For example, the Western Australian 2026-27 State Budget references over $1 billion of new investment under the HAFF partnership delivering an additional 1,426 homes in Western Australia alone.

National Housing Accord status

The 1.2 million homes target over five years to 30 June 2029 remains the headline national supply ambition. Master Builders Australia industry forecasts released on 27 March 2026 project 995,894 new home starts over the five years of the Accord, a shortfall of more than 200,000 homes against the target. New home building approvals dropped 10.5% in March 2026, with higher-density approvals down 23.4%. The Treasurer has described the 1.2 million target as “ambitious” but achievable “if everyone does their bit.”

Commonwealth Rent Assistance and youth housing

The Budget allocates $59.4 million to community-housing providers to support social housing for over 4,000 young people aged 16 to 24 at risk of, or experiencing, homelessness. Commonwealth Rent Assistance increases legislated in 2023 and 2024, described as “the first back-to-back increases in more than 30 years,” continue to flow to over 1.4 million renters.

Help to Buy and demand-side support

The existing 5% deposit Home Guarantee and Help to Buy shared equity scheme settings continue. The Treasurer’s Budget speech framed the supply story as combining “5 per cent deposits and tax reform,” tying the deposit guarantee scheme to the negative gearing and CGT reforms as a coordinated package aimed at lifting owner-occupier participation. Treasury modelling cited in the fact sheet Negative Gearing and Capital Gains Tax Reform estimates the tax package may support an additional 75,000 owner-occupiers over the decade, with house price growth roughly 2% lower over a couple of years and a median rent impact under $2 per week.

Build-to-rent: no new measures

The Budget did not announce changes to the previously legislated build-to-rent managed investment trust withholding tax rate of 15%, the 4% capital works depreciation rate, or eligibility criteria (50 or more dwellings, single ownership, minimum five-year lease offers). The 2024 concessional FIRB fee treatment continues. BTR developers may treat the existing regime as the operating baseline, and the continued BTR carve-out from the foreign-buyer ban remains a meaningful structural advantage for institutional BTR.

Infrastructure pipeline: $8.6 billion new, $120 billion rolling

The Budget 2026-27 security and investment theme sets out $8.6 billion in new and ongoing nationally significant projects in this Budget, within a rolling pipeline of more than $120 billion over ten years. Named items of direct relevance to property developers include:

Each of these allocations may shape local development corridors in different ways. The additional $3.8 billion for Victoria’s Suburban Rail Loop East confirms federal commitment to corridors that have already driven significant up-zoning activity around proposed station precincts in Melbourne’s south-east. The Henderson Defence Precinct in Western Australia is expected to generate substantial ancillary worker accommodation and commercial development demand in the Fremantle and Cockburn local government areas over the medium term.

Construction inputs: labour, code reform and standards

National Construction Code modernisation

The Budget continues funding for modernisation of the National Construction Code and removing barriers to modern methods of housing construction, including modular and prefabricated construction. Two specific measures may have a direct cost impact on small and mid-sized builders:

• Deployment of AI tools to make the NCC easier to use and reduce compliance time.
• Free access to all standards referenced in Australian legislation, which is estimated by Master Builders Australia to save small construction businesses up to $1,600 per year on standards subscriptions.

The Australian Building Codes Board NCC Modernisation Interim Report has been released and the full reform package is expected to flow through subsequent NCC amendment cycles.

Skills and migration for construction trades

The Budget allocates $85.2 million to accelerate skills assessments for migrant trades workers and to accelerate occupational licensing recognition between states. Budget Paper No. 2 forecasts an additional 4,000 skilled trades workers per year, as quoted in the Master Builders Australia Budget night response. The permanent migration points test is being reformed to favour “better educated, higher-skilled and younger migrants.”

Net Overseas Migration is now forecast at 295,000 for 2025-26 (revised up from 260,000), 245,000 for 2026-27 (up from 225,000), then around 225,000 per year through 2028-29 and 2029-30. Australia’s population is projected to reach 29.4 million by 2029-30. For developers, the upward revision of near-term migration is directly relevant to medium-term off-the-plan sales absorption assumptions, particularly in apartment markets and university precincts.

Fuel excise relief

Fuel excise is cut by approximately 60.9% (around 32 cents per litre) for three months from 1 April 2026, with the heavy vehicle road user charge reduced to zero over the same window. The measure is intended to address Middle East conflict-related fuel price pressures. For civil contractors and earthworks subcontractors, this is a direct input cost reduction during the relief period. Master Builders has called for the relief to be passed through the supply chain, which developers may want to verify in subcontractor pricing renewals.

Regulatory burden reduction

The Budget 2026-27 productivity theme sets out a $10.2 billion per year reduction in regulatory burden, advancing 13 of 17 reform areas identified by the Productivity Commission. Items most relevant to developers include:

• Abolition of 497 nuisance tariffs from 1 July 2026 (estimated to save businesses $157 million per year, with downstream effects on imported construction materials).
• Single national market reforms covering payroll tax administration and national occupational licensing.
• Expansion of Digital ID with $654.3 million in funding.
• More than $500 million to implement environmental approval reforms, including AI deployment, reduced duplication with state processes, and additional bioregional plans and strategic assessments.

The bioregional plan rollout is particularly important for developers operating in growth-corridor LGAs where environmental approvals under the EPBC Act have historically extended timeframes by 18 months to five years. UDIA had specifically called for accelerated bioregional planning in its pre-Budget submission.

Sustainability and energy

Electric vehicle FBT

The fringe benefits tax exemption for electric vehicles transitions to a permanent 25% discount under a staged approach:

• EVs at or under $75,000 retain 100% FBT exemption if the salary packaging arrangement commences before 1 April 2029.
• EVs over $75,000 but below the LCT fuel-efficient threshold provided between 1 April 2027 and 1 April 2029 receive a 25% discount.
• From 1 April 2029, a permanent 25% discount applies to all eligible EVs.

For developers operating fleet vehicles for site management, sales staff and project management, the change is generally neutral in the near term but may affect medium-term vehicle replacement decisions.

Domestic gas reservation from 1 July 2027

LNG producers may be required to reserve 20% of export volumes for Australian users from 1 July 2027. The forward signal for developers is improved certainty around long-run input cost for materials manufacturing, particularly cement, steel and brick, all of which are heavily gas-dependent in their production processes.

Embodied carbon and energy efficiency

The Budget does not introduce new federal mandatory embodied carbon requirements. The NCC modernisation work remains the live federal channel for energy-efficiency and embodied-carbon settings, and developers should monitor the next NCC amendment cycle for any tightening of operational energy or embodied carbon provisions.

Macroeconomic outlook: feasibility assumptions to review

The Budget contains updated Treasury forecasts that may directly affect feasibility model assumptions for projects with a commencement window of the next 12 to 24 months.

Inflation

Treasury forecasts inflation peaking at around 5% (up from the current 4.6%), driven by Middle East conflict-related fuel costs, before returning to the RBA target band “in the middle of 2027” on the assumption that oil prices begin to decline from mid-2026. Developers may want to test feasibility against scenarios where construction cost escalation runs above CPI through 2026-27, particularly for projects entering construction during the inflation peak.

Growth and unemployment

Real GDP growth slows to 1.75% in 2025-26 from 2.25% in 2024-25, before recovering. Treasury’s downside scenario, modelling a closure of the Strait of Hormuz combined with protracted Middle Eastern energy infrastructure damage, sees oil at up to $200 per barrel, inflation peaking at 7%, and unemployment spiking to “pre-pandemic levels,” though Treasury maintains that even this scenario “won’t lead Australia into a recession.”

Fiscal position

The Treasurer has flagged $63.8 billion in savings and reprioritisations across the forward estimates, with gross debt $173 billion lower than the 2022 Pre-Election Economic and Fiscal Outlook baseline. The underlying cash balance is expected to improve by $26 billion over the next four years, supported by an additional $19 billion in company tax revenue driven by higher gas export prices.

Practical feasibility implications

Developers may want to review feasibility models for the following assumptions:

• Construction cost escalation. The Treasury 5% inflation peak suggests construction cost escalation assumptions of 4 to 6% per annum may be appropriate for projects with construction commencing in 2026-27, falling toward 3% from 2027-28 if the central case holds.
• Interest rate paths. Higher near-term inflation may delay the RBA’s cash rate easing cycle. Off-the-plan apartment projects with settlements scheduled in 2026 and 2027 face elevated settlement risk if mortgage stress in the buyer pool deepens.
• Sales absorption. The upward revision of NOM forecasts is positive for medium-term demand. However, the higher density approvals decline of 23.4% in March 2026 suggests near-term apartment supply may already be constrained, and projects that proceed may face limited like-for-like competition through 2027.

With Feasly’s feasibility software, you can model multiple inflation, interest rate and absorption scenarios in parallel and stress test the funding stack against Treasury’s central case, the downside scenario and your own house view.

Industry response

The Master Builders Australia Budget night response (CEO Denita Wawn, 12 May 2026) described the package as a “mixed budget for the nation’s home builders and tradies.” Master Builders welcomed the permanent $20,000 instant asset write-off, free access to Australian Standards, faster skills assessments for migrant trades workers, reforms to the migration points test and the $2 billion housing-enabling infrastructure fund, but criticised the negative gearing and CGT changes, stating that “by Treasury’s own estimate, the new restrictions on Negative Gearing and Capital Gains Tax (CGT) will deprive us of 35,000 new homes over the next decade.”

HIA Managing Director Jocelyn Martin endorsed the infrastructure fund as a “shovel-ready” enabler. The Australian Local Government Association called the $2 billion fund “a major win on housing infrastructure.”

UDIA had stated in its pre-Budget submission that “increasing taxes on housing reduces supply, that is a fundamental economic reality and if this Government is serious about the National Housing Accord it would be reducing housing taxes.” UDIA’s Budget night assessment is expected to focus on the same point, while welcoming the bioregional planning funding and the NCC modernisation continuation.

The Coalition, through Shadow Treasurer Tim Wilson, rejected the tax package on Budget night, describing the Budget as “broken promises, higher taxes, lower living standards and fewer homes.” The Coalition’s rejection means the negative gearing, CGT and discretionary trust measures may require government numbers plus crossbench negotiation in the Senate to pass.

State-by-state implications

While the Budget is a federal document, several measures interact with state-administered taxes, infrastructure programs and planning systems in ways that may affect developers differently across jurisdictions.

New South Wales

NSW developers may see the largest absolute impact from the negative gearing reform given Sydney’s high investor share of off-the-plan apartment demand. The $45 million M1 safety upgrade and $50 million Sydney to Canberra rail corridor allocation are modest relative to the project pipeline. NSW continues to administer stamp duty under the Duties Act 1997 (NSW) and the property tax option for first home buyers under the First Home Buyer Choice scheme.

Victoria

The $3.8 billion additional federal commitment to the Suburban Rail Loop East, taking total federal SRL East funding to $6.0 billion, is the standout state-specific item. Developers in Cheltenham, Clayton, Monash, Glen Waverley, Burwood and Box Hill station precincts may want to factor confirmed federal funding into corridor-pricing assumptions. Victoria continues to administer the Windfall Gains Tax and the Commercial and Industrial Property Tax Reform, neither of which is affected by federal measures.

Queensland

The $812.5 million Bruce Highway allocation supports the southeast growth corridor extending from Brisbane to the Sunshine Coast. Queensland’s stamp duty regime continues unchanged. The federal foreign-buyer ban extension may interact with Queensland’s existing Additional Foreign Acquirer Duty surcharges to further restrict foreign demand for established stock.

Western Australia

The $12 billion initial Henderson Defence Precinct allocation may drive substantial commercial and worker accommodation demand in the Cockburn, Fremantle and Kwinana LGAs over the medium term. Western Australia’s $1.3 billion state land development package, in combination with the federal HAFF partnership delivering 1,426 homes, makes WA one of the most actively funded supply jurisdictions in the current cycle.

South Australia, Tasmania, ACT and Northern Territory

Smaller absolute allocations are expected to flow through the per-capita Local Infrastructure Fund distribution and minimum state allocations. The $500 million regional carve-out within the Local Infrastructure Fund is particularly relevant for regional Tasmania, regional SA and the NT. ACT developers may benefit from the $50 million Sydney to Canberra rail corridor funding through improved connectivity to NSW markets.

What to do now: a staged action plan

The Budget creates time-sensitive decisions for developers across three horizons. The following framework may help prioritise actions, although every developer’s circumstances differ and professional tax, legal and financial advice should be obtained before acting on any of these prompts.

Immediate (May to June 2026)

1. Audit active contracts against the 7:30 pm AEST 12 May 2026 grandfathering line. Identify any investor-targeted contracts that could realistically be signed before that moment is too late, and confirm the grandfathering position for contracts already in place. Sales teams may want to brief buyers proactively on what the new regime could mean.

2. Stress-test feasibility under two legislative scenarios. Scenario A assumes the negative gearing and CGT reforms commence on 1 July 2027 as legislated. Scenario B assumes the reforms are amended, deferred or repealed before commencement following the next federal election. Investor demand assumptions for established stock should typically be reduced in Scenario A and modestly increased for new builds.

3. Begin family-group restructure planning where discretionary trusts are involved. The three-year rollover relief window runs from 1 July 2027 to 30 June 2030. Engaging tax advisers now allows time for considered restructure options, including company conversion, fixed unit trust restructure or hybrid arrangements.

4. Plan instant asset write-off and loss carry-back utilisation. The $20,000 IAWO threshold becomes permanent from 1 July 2026 for sub-$10m turnover entities. Loss carry-back commences for 2026-27 and may be valuable for any small or mid-sized developer with prior tax paid in 2024-25 or 2025-26.

Next 6 to 12 months

5. Re-rank development sites against the new policy geometry. Sites that produce new builds, including vacant-land subdivisions, knock-down rebuilds adding dwellings and off-the-plan apartments, may command an investor demand premium relative to established-stock plays. Established-stock value-add projects targeting investor buyers may need to be repositioned to owner-occupier markets.

6. Engage with councils and utilities on Local Infrastructure Fund eligibility. Identify pipeline projects where missing trunk infrastructure is the binding constraint on commencement. Brief council planning and utilities departments early so any fund application from the council or utility includes your project in the pipeline.

7. Re-examine BTR feasibility under unchanged 2024 settings. The Budget delivered no negative BTR signals and the foreign-buyer ban explicitly continues to exempt established BTR acquisitions. Developers with eligible sites (50+ dwellings, single ownership, capable of 5-year leases) may want to re-test BTR feasibility relative to build-to-sell.

8. Update absorption modelling with revised migration forecasts. The upgraded NOM forecasts of 295,000 for 2025-26 and 245,000 for 2026-27 may justify revised demand assumptions for off-the-plan apartment projects in major-city catchments.

12 to 24 months

9. Monitor legislative passage closely. Senate negotiations on the negative gearing, CGT and trust tax measures will be central to whether the announced reforms commence as drafted. The next federal election, due by early 2028, falls between the 1 July 2027 commencement of the NG and CGT reforms and the 1 July 2028 commencement of the trust tax, which makes the package an inevitable election issue.

10. Watch the NCC modernisation outputs and bioregional plan rollouts. These are the federal levers most likely to materially reduce approval timeframes and per-dwelling regulatory cost over the medium term. Developers operating in growth corridor LGAs may benefit from being early adopters of any new modular construction pathways the NCC enables.

Triggers that should change strategy

• If negative gearing reform is amended to preserve negative gearing for all dwellings, or the start date is deferred beyond 1 July 2028, the differential pricing premium between new and established stock may collapse. Reverting to pre-Budget feasibility settings may be appropriate.
• If the RBA cash rate moves up further in response to the Treasury 5% inflation peak, off-the-plan settlement risk on apartment projects rises sharply. The Master Builders observation that higher-density approvals fell 23.4% in March 2026 suggests this sensitivity is already evident.
• If NOM forecasts are revised below 200,000 in MYEFO or the 2027-28 Budget, medium-term absorption assumptions may need to be reduced for apartment-heavy pipelines.

Legislative risk and caveats

This guide should be read with several important qualifications, because the Budget contains announcements that are not yet law.

Measures requiring legislation

The most material developer-facing measures require legislation to commence. These include:

• Negative gearing reform (commencement 1 July 2027).
• 50% CGT discount replacement (commencement 1 July 2027).
• 30% minimum tax on discretionary trusts (commencement 1 July 2028).
• Permanent $20,000 instant asset write-off (commencement 1 July 2026).
• Permanent loss carry-back regime (commencement 2026-27).

The Coalition has rejected the negative gearing and CGT changes. Passage through the Senate may rely on government numbers plus crossbench negotiation. The deferred 1 July 2027 commencement dates for the largest tax reforms create a meaningful window in which the next federal election, due by early 2028, will likely become a referendum on the property tax package.

Treasury modelling caveats

The “additional 75,000 owner-occupiers over the decade” figure is a Treasury modelling estimate. Master Builders Australia cites a competing Treasury number suggesting the same NG and CGT changes may reduce new housing supply by 35,000 over the next decade. These two figures are not contradictory: the first relates to owner-occupier composition of the buyer pool, the second relates to total dwelling supply. Both should be treated as scenario estimates that depend on assumptions about investor responsiveness, owner-occupier substitution and price elasticity.

Pre-announced versus Budget night

The $1,000 Instant Tax Deduction, the $2 billion Local Infrastructure Fund and several skills and migration items were pre-announced in the days before the Budget. The principal new Budget night measures are the negative gearing reform, the CGT reform, the 30% minimum tax on discretionary trusts, the permanent IAWO, the loss carry-back regime and the fuel excise relief package.

Build-to-rent absence

The Budget did not directly address BTR. Existing managed investment trust withholding and capital works depreciation settings continue. If the Government plans further BTR refinements, these may surface through subsequent regulation or consultation processes rather than the 2026-27 Budget.

State and federal interaction

Stamp duty remains state-administered and is not affected by the federal Budget. Federal funding for housing-enabling infrastructure is contingent on state cooperation on planning approvals and land readiness. WA’s $1.3 billion land-development package and Victoria’s Suburban Rail Loop are examples of conditional federal-state pairings already operating.

Macroeconomic conditionality

Treasury’s central case assumes oil prices decline from mid-2026. The downside scenario (Strait of Hormuz closure, Middle Eastern infrastructure damage) would push inflation to 7% and unemployment materially higher. Feasibility models may benefit from being run against both Treasury’s central case and the downside scenario.

Primary source verification

Several detailed figures referenced in this guide (the exact bucketing of negative gearing transitions, the ATO apportionment formula for the CGT split treatment, the $890 million IAWO cash-flow estimate over five years, the exact mechanics of trust tax rollover relief) trace back to Treasury Budget Paper No. 1 Statement 4, Budget Paper No. 2 and the Treasury fact sheets Negative Gearing and Capital Gains Tax Reform, New Tax Cuts for Australian Workers, Minimum Tax on Discretionary Trusts and Backing Small Businesses to Grow, Compete and Build Resilience. Every figure quoted in this guide should be cross-checked against those primary documents before being relied on for live financial modelling, and developers should obtain professional tax, legal and financial advice on their specific circumstances.

Where this leaves developers

The 2026-27 Federal Budget is a mixed package for property developers, and the net effect is likely to vary substantially by business model.

Developers focused on off-the-plan apartments, townhouses, knock-down rebuilds and other new-build product may see a structural improvement in the investor demand proposition relative to established stock, supported by the new-build election to retain the 50% CGT discount. Small and mid-sized developers operating through companies may benefit from the permanent IAWO and the loss carry-back regime. BTR developers may welcome the unchanged BTR settings and the continued exemption from the foreign-buyer ban.

Developers operating through discretionary trusts, particularly family development entities relying on income streaming and bucket company strategies, face a more challenging adjustment and may want to engage tax advisers well before the 30 June 2030 expiry of rollover relief. Developers focused on established-stock value-add, character renovation and minor heritage extensions sold to investor buyers may need to reposition their offering toward owner-occupier markets.

Above all, the Budget should be read as a set of proposals rather than settled law. The 14 to 24-month window between Budget night and the commencement of the largest tax reforms is precisely the period in which the next federal election will be fought, and the developer community has historically been an effective participant in tax policy debate. Modelling the Budget as a single scenario, rather than as one of several plausible futures, may understate the value of optionality in feasibility planning right now.

The most important thing developers can do in the next 30 days is run their pipeline against both Scenario A (reforms commence as legislated) and Scenario B (reforms are amended or repealed), and identify which decisions in the pipeline are robust to either outcome and which require a clear view on the legislative endpoint. With Feasly’s multi-scenario feasibility modelling, you can stress test both scenarios in parallel against the same project parameters, which may help separate the decisions you can take now from those that benefit from waiting on legislative clarity.