New Build vs Established: The 2026 Comparison Investors Should Actually Be Making

The Rules Changed. The Comparison Has to Change Too.

For most of the past decade, the new-build-versus-established debate came down to taste and strategy: depreciation versus location, convenience versus charm. That is no longer the full picture. The 2026 Federal Budget and a separate legislative change to SMSF borrowing rules have altered the tax treatment of each option in ways that matter to every investor who has not yet exchanged contracts.

This post sets out the mechanics as they currently stand. None of it is personal advice. A licensed tax adviser, mortgage broker, and SMSF specialist accountant are the right people to apply these rules to your numbers.

What the 2026 Legislation Actually Changed

Negative gearing for established residential property

Negative gearing for established residential properties will be abolished from 1 July 2027 for properties purchased after 7:30pm on 12 May 2026. Investors affected by the changes will no longer be able to offset rental losses against salary or other personal income. Instead, losses can only be offset against residential rental income or future capital gains from rental properties.

Eligible new builds will remain exempt, with investors still able to access both negative gearing and the 50% CGT discount. The ATO has published detail on these changes at ato.gov.au.

Capital gains tax

The 2026-27 Budget removes the current 50% CGT discount, which will be replaced with cost base indexation and a 30% minimum tax on net capital gains from 1 July 2027. Cost base indexation will apply to CGT assets held for more than 12 months. New residential dwellings will be exempt from the minimum CGT reform if the 50% CGT discount is retained.

Properties held at announcement (7:30pm AEST 12 May 2026) will be exempt from the negative gearing changes, while the CGT reforms will only apply to gains that accrue after 1 July 2027.

SMSF borrowing for residential property

From 10 August 2026, SMSF trustees can no longer enter into an LRBA to acquire property unless it is business real property. This means residential property can no longer be acquired this way unless it meets that test. Existing LRBAs and LRBAs entered into before 10 August 2026 remain unaffected by these changes so long as they comply with the existing superannuation laws. Per SuperGuide, commercial property LRBAs are not affected.

Building depreciation

Building depreciation (Division 43) allows investors to claim 2.5% of the original construction cost each year for buildings constructed after 16 September 1987. Plant and equipment depreciation (Division 40) covers fixtures and fittings, appliances, carpets, blinds, and is claimed at ATO-set effective life rates. New builds attract the full benefit of both divisions. For established properties purchased after 9 May 2017, Division 40 deductions on second-hand plant and equipment are no longer available to individual investors.

The Trade-Offs Worth Weighing

New builds favour tax-focused investors on higher incomes. For existing investors, depreciation schedules will continue to support annual deductions. For new build investors, they will remain especially valuable because new builds receive more favourable negative gearing treatment. However, tax benefits should support a good investment decision; they should not replace one.

Established properties carry different timing risk. Stamp duty is the single largest transaction cost most property investors will ever pay, often more than five years of loan interest, and in some states more than 5% of the entire purchase price. Yet it is routinely overlooked, with investors focusing on yield and capital growth projections while underestimating the upfront hit to their deposit and returns.

One stamp duty point worth knowing: if you purchase vacant land, you pay stamp duty on the land purchase price; when you build a home on that land, no additional stamp duty is charged on the construction cost. This means buying land and building separately can result in lower total stamp duty compared to buying an established home of equivalent value. Rates vary by state, so check your state revenue office.

SMSF investors face a structural shift. With new residential LRBAs closed from 10 August 2026, SMSFs that want residential property with borrowing now need to consider a unit trust structure: the property is held in a unit trust the fund invests in, and the borrowing sits at the trust level rather than inside the fund. This structure can fund construction (unlike the old LRBA for residential) and typically requires a 20 to 30% contribution from the fund. An SMSF cash purchase remains available regardless of property type. Commercial LRBAs continue under the existing rules. These structures require specialist legal and accounting advice before any contracts are signed.

Properties in widely held trusts and superannuation funds are exempt from the negative gearing changes, in addition to targeted exemptions for build-to-rent developments and private investors supporting government housing programs. That means the tax environment inside super remains distinct from personal-name ownership.

A Worked Scenario: Two Properties, Same Budget

Consider two investors, each with $750,000 to spend. Numbers below are illustrative only, not projections.

Investor A buys an established house (contract after 12 May 2026, personal name)

• Pays full investor stamp duty: in Victoria, this is approximately $40,000+ at that price point (confirm with the State Revenue Office of Victoria at sro.vic.gov.au)
• Rental income: assume a gross yield of 3.5%, or roughly $26,000 per year
• If the property runs at a loss, that loss cannot be offset against salary from 1 July 2027; it carries forward against future rental income or gains
• Division 43 depreciation: limited or nil if the building predates 1987, or partially available depending on build year; no Division 40 on second-hand plant
• CGT when sold: gains accrued after 1 July 2027 subject to cost base indexation and a 30% minimum tax rather than the 50% discount

Investor B buys a new build (contract signed from a builder/developer)

• Stamp duty calculated only on the land component in most states, often lower than an equivalent established purchase
• Rental income: similar yield range, though vacancy during construction is a real factor; get an independent rental appraisal from a local property manager before committing
• If the property runs at a loss, that loss offsets salary income under current rules
• Division 43: 2.5% of the construction cost annually for 40 years. If the construction cost is $250,000 and the depreciation rate is 2.5%, the investor can claim $6,250 per year for 40 years from the date construction is completed.
• Division 40: full benefit on brand-new plant and equipment
• CGT when sold: retains the 50% discount under current legislation

The tax difference is material at higher marginal rates. A tax adviser can model the after-tax cash position for your specific income and structure.

What to Do Next

1. Talk to a licensed tax adviser or specialist property accountant before exchanging any contracts. The negative gearing and CGT cut-off dates are tied to contract date, not settlement. Getting the sequencing wrong is not correctable after the fact.

2. If you are considering SMSF property, speak with an SMSF specialist accountant and a solicitor familiar with the SIS Act. The unit trust pathway is not a simple document swap from the old LRBA structure, and the compliance requirements are specific. Contact us at /contact or book a call if you want to understand how the SMSF and unit trust structures EWC works with operate in practice.

3. Get your finance position assessed by a licensed broker early. Lender appetite, deposit requirements, and loan structuring differ between personal-name investment lending, SMSF unit trust lending, and construction loans. A broker can map which products apply to your situation before you get to contract stage. See our services page for an overview of the finance coordination EWC provides, or read more at /insights.

General information only, not personal financial advice. Speak with a licensed adviser before acting.