Breaking · May 2026 Federal Budget
The 2026 Budget just changed
the rules for first home buyers
Negative gearing limited. Capital gains tax overhauled. Income tax cut. Here's what the 2026 Federal Budget actually means if you're saving for your first home — in plain English, no jargon, no investor spin.
Published 24 May 2026 · DeltaMap Research · Sources: Treasury, CBA, Domain, Fraunces Property
The verdict
Is the 2026 Budget good or bad for first home buyers?
✓ Bottom line
On balance — good for first home buyers. The budget is a deliberate attempt to tilt the housing market away from tax-assisted investment in established homes and toward owner-occupation and new supply. Less investor competition, more take-home pay, and existing FHB schemes untouched. The risk is potential upward rental pressure — but if you're trying to buy rather than rent, this budget is on your side.
✅
Less investor competition
Negative gearing limited on established homes means fewer investors competing with you for the same properties — especially in the sub-$800k bracket.
✅
More take-home pay
Income tax cuts of $268/year from July 2026 and $536/year from July 2027 increase your monthly savings capacity automatically.
✅
FHB schemes intact
5% Deposit Scheme (no income cap), Help to Buy, FHSS and all state FHOG grants are unchanged and fully available.
⚠️
Slower price growth
CBA forecasts prices 3% lower than they otherwise would have been — not falling, but growing more slowly. Good if you're still saving; neutral if you're about to buy.
❌
Rental pressure risk
Some investors may exit the market, reducing rental supply and pushing rents up. If you're renting while saving this is the main downside risk.
⚠️
New builds favoured
Investors in new builds retain full negative gearing. This may increase new build supply — good for FHBs targeting new homes and FHOG eligibility.
Change 1
Negative gearing — what changed and what it means for you
What is negative gearing?
Negative gearing is when the costs of owning an investment property (mortgage interest, rates, maintenance) exceed the rental income it earns — creating a net loss. Under the old rules, investors could deduct that loss against their salary and other income, reducing their tax bill. This made it financially attractive to hold investment properties even at a loss.
What changed on 12 May 2026?
From 1 July 2027, negative gearing will be limited to new residential builds for properties purchased after 7:30pm AEST on 12 May 2026. Investors who buy existing established homes after that date will no longer be able to deduct rental losses against their wages — losses can only be used to offset other residential property income, and can be carried forward to future years.
Investors who already own properties before that date are fully grandfathered — no change to their existing arrangements for as long as they own the property.
✓ What this means for YOU as a first home buyer
You are not affected at all by negative gearing changes. These rules only apply to investors. The benefit to you is indirect — fewer investors competing for the same established homes you're targeting. In March 2026, the average investor loan was $132,012 more than the average first home buyer loan. Investors with that kind of firepower often outbid FHBs on the same properties. Reduced investor demand in the established home market means less competition for you.
⚠ The nuance
Negative gearing still fully applies to new builds — meaning investors may redirect toward new construction. This could increase supply of new homes and actually benefit FHBs who are also targeting new builds for FHOG eligibility. The policy is still subject to Senate passage — the final detail may shift.
Change 2
Capital gains tax overhaul — explained simply
What is the CGT discount?
When an investor sells a property held for more than 12 months, they currently pay CGT on only 50% of their capital gain — the other 50% is tax-free. This 50% CGT discount has been a significant incentive for property investment since 1999.
What changed?
From 1 July 2027, the 50% CGT discount is replaced with a cost-base indexation method and a 30% minimum tax on net capital gains for established residential investment properties purchased after 12 May 2026. Investors must pay at least 30% tax on their capital gains — potentially significantly more than the old arrangement.
New builds are exempt — investors in new residential construction can choose between the existing 50% discount or the new indexation method, whichever is better for them.
Your main residence is completely unaffected. The main residence CGT exemption — which means you pay zero CGT when you sell the home you live in — is unchanged.
✓ What this means for YOU as a first home buyer
Your future home sale will still be 100% CGT-free — the main residence exemption is unchanged. When you eventually sell the home you bought as your first home, you pay no CGT regardless of how much it has grown in value. The CGT changes only affect investors selling investment properties. The indirect benefit: reduced tax advantage makes established investment properties less attractive, which may moderate prices in the segments where first home buyers compete with investors.
Change 3 — The good news
Income tax cuts — more money in your pocket every fortnight
This is the most direct and tangible benefit for first home buyers in the 2026 Budget. The lowest income tax rate drops in two stages:
$268
Extra take-home pay per year from 1 July 2026
Rate drops from 16% to 15% on income $18,201–$45,000
$536
Extra take-home pay per year from 1 July 2027
Rate drops again from 15% to 14%
$44/mo
Additional monthly savings capacity from July 2027
Applied automatically through your employer's PAYG
2.1 mo
Months sooner you reach your deposit goal
At $536/year extra savings on a $90k deposit target
These cuts are applied automatically through your employer's PAYG withholding from 1 July 2026 — no application required. You will simply notice slightly higher take-home pay in your first pay packet after 1 July 2026.
✓ The DeltaMap angle
An extra $536/year in take-home pay invested into your First Home Super Saver Scheme (FHSS) account compounds at the super tax rate of 15% rather than your marginal rate. Over 3 years of saving, this additional annual income — redirected into FHSS — could be worth $1,700+ in additional deposit savings with the tax advantage included. DeltaMap calculates this exact impact on your personal timeline →
The big question
Will house prices fall because of the 2026 Budget?
Short answer: No — but growth will slow. The most credible forecasts suggest the budget will moderate price growth, not reverse it.
3%
CBA forecast for established dwelling price growth to Dec 2026
Down from 5% pre-budget forecast
−0.6pp
Annual price growth reduction from policy change by end 2026
Source: CBA Economics, May 2026
3%
CBA forecast for 2027 — unchanged despite the budget
Underlying demand remains structurally strong
CBA's analysis is that the dominant effect is the removal of negative gearing on established properties, reinforced by the CGT changes. The combined effect is expected to lower established dwelling prices relative to what they otherwise would have been — modestly reducing growth rather than causing price falls.
New builds are largely exempted from the investor changes and may actually see increased demand as investors redirect toward construction. For first home buyers targeting new builds — particularly in Queensland (FHOG $30,000) and Victoria (FHOG $10,000) — this could create additional competition in new build segments.
⚠ The cost of waiting — still applies
Even at a moderated 3% growth rate, a $700,000 property becomes $721,000 in 12 months. That additional $21,000 requires approximately 8.4 extra months of saving at $2,500/month to catch up. Slower growth is good news for FHBs still saving — but waiting is still costly. Use DeltaMap to see your exact personal timeline.
What's unchanged
First home buyer schemes still fully available in 2026
Every major first home buyer scheme remains fully available and unchanged by the 2026 Budget. Here's the complete picture:
🏠
5% Deposit Scheme — No income cap, unlimited places
Buy with 5% deposit, no LMI. Expanded October 2025 — no income caps, no annual place limits. Fully available in 2026.
🤝
Help to Buy — Govt contributes up to 40% of price
Launched December 2025. 2% minimum deposit. Income caps $100k single/$160k couple. Available VIC, NSW, QLD, SA, ACT and NT.
🎁
State FHOGs — $10k (VIC/NSW), $30k (QLD until 30 Jun 2026), $15k (SA)
All state First Home Owner Grants fully operational and unchanged by the Budget.
💰
First Home Super Saver Scheme — Up to $50,000 from super
Unchanged. Contribute now — you cannot backfill. Every month of delay costs you the tax advantage on that month's contribution.
⚡
QLD FHOG $30,000 deadline — 30 June 2026
This is unrelated to the Budget but critical — the $30k QLD grant reverts to $15k after 30 June 2026. Sign your contract before that date to lock in the higher amount.
How does the Budget change your personal timeline?
The tax cuts, the slower price growth, the FHB schemes — how do they affect your specific gap? DeltaMap calculates it in 60 seconds using your actual numbers.
Calculate my updated gap — free →
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Key dates
What happens when — the 2026 Budget property timeline
NOW
12 May 2026 — Budget night
The cut-off date for grandfathered properties
Investors who contracted to buy established properties before 7:30pm AEST on 12 May 2026 are grandfathered — old negative gearing rules apply for as long as they own the property. Properties contracted after this date face the new rules from 1 July 2027.
30 JUN
30 June 2026
QLD $30,000 FHOG deadline
Unrelated to the Budget but urgent — Queensland's First Home Owner Grant reverts from $30,000 to $15,000 after this date. Sign your contract on an eligible new build before 30 June 2026 to lock in the higher amount.
1 JUL
1 July 2026
Income tax cut #1 — $268/year more in your pocket
The lowest income tax rate drops from 16% to 15%. Applied automatically through PAYG from your first pay packet in July 2026. No action required.
2027
1 July 2027
Three major changes take effect simultaneously
1. Income tax rate drops again to 14% — $536/year total extra take-home pay. 2. Negative gearing limited on established residential investment properties bought after 12 May 2026. 3. CGT discount replaced with indexation and 30% minimum tax for the same properties. All three changes are subject to Senate passage.
Common questions
First home buyers are asking...
Does the 2026 Budget help or hurt first home buyers?
On balance it helps. Limiting negative gearing on established homes reduces investor competition in that market segment. Income tax cuts add $268/year from July 2026 and $536/year from July 2027 to take-home pay. All FHB schemes remain intact. The main risk is potential upward pressure on rents as some investors exit the market — but if you're trying to buy rather than rent, this budget is on your side.
Will house prices fall after the 2026 Budget?
No — but growth will slow. CBA forecasts established dwelling price growth at 3% to December 2026, down from 5% pre-budget. That's not falling prices, it's slower growth. For FHBs still saving, this is good news — the gap widens more slowly. For FHBs about to buy, prices are still rising — just at a more moderate pace. New builds may actually see increased demand as investors redirect there.
Does negative gearing affect first home buyers?
No — negative gearing only applies to investors. First home buyers are not affected at all. The benefit is indirect: fewer investors competing for established homes in the sub-$800k bracket means less competition for you. Investors previously had a significant financial advantage because negative gearing tax benefits allowed them to outbid owner-occupiers. That advantage is being reduced for established properties.
Is my future home sale still CGT-free?
Yes. The main residence CGT exemption is completely unchanged. When you sell the home you live in as your principal place of residence, you pay zero CGT regardless of how much it has grown in value. This has always been the case and the 2026 Budget does not change it.
What is the income tax cut and when does it apply?
The lowest income tax rate (on income between $18,201 and $45,000) drops from 16% to 15% from 1 July 2026, saving an average taxpayer $268/year. It drops again to 14% from 1 July 2027, saving $536/year. Applied automatically through PAYG — you don't need to do anything. This directly increases your monthly savings capacity and shortens your deposit timeline.
Is Help to Buy still available in 2026?
Yes. Help to Buy launched in December 2025 and remains fully available. The government contributes up to 40% of the purchase price for new homes and 30% for established homes, meaning you need as little as a 2% deposit. Income caps apply — $100,000 for singles, $160,000 for couples. Available in VIC, NSW, QLD, SA, ACT and NT through participating lenders.
Are these Budget changes confirmed law?
No — the negative gearing and CGT changes are proposed legislation that must pass the Senate before becoming law. The income tax cuts are more straightforward and expected to pass. Always verify the current legislative status of these changes before making property decisions, and consult a licensed financial adviser for advice specific to your situation.
Sources: Commonwealth Bank of Australia Housing Outlook May 2026 · Fraunces Property Budget Guide May 2026 · Baker McKenzie CGT Analysis May 2026 · Perpetual Budget Analysis May 2026 · Domain Budget Coverage May 2026 · Treasury Budget Papers 2026-27. DeltaMap is not a financial adviser. Always seek licensed advice for your specific circumstances.
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