Alternatives to Property Investment in Australia: What to Consider After the Negative Gearing Changes

Investment property has been the default wealth-building move for a generation of Australians. Buy the place, wear a few years of losses, use negative gearing to soften the blow, and count on capital growth to do the heavy lifting.

That playbook still works for anyone who bought before Budget night. But for new investors looking at established residential property, the tax maths just got harder. From 1 July 2027, negative gearing will no longer offset salary income on established homes purchased after 12 May 2026. That’s law, not a proposal.

If you’re weighing up your next move, the sensible question isn’t “do I still buy property?” It’s “given the change, are there better alternatives to property investment in Australia for me right now?” This article walks through six of them, including one most investors still haven’t heard of.

The rules have changed, here’s what that actually means

Let’s clear up the confusion first, because a lot of the headlines have overstated things.

Negative gearing has not been abolished. It’s been restricted, and only for one specific type of purchase: established residential property bought after 7:30pm AEST on 12 May 2026. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed both houses of Parliament on 25 June 2026 and received Royal Assent the following day. The rules take effect on 1 July 2027.

Here’s what stays the same:

• If you bought before 12 May 2026, nothing changes. You keep negative gearing under the old rules until you sell.
• Eligible new builds keep full negative gearing and the 50% capital gains tax discount, with eligibility defined in the legislation and covering new residential dwellings and affordable housing.
• Commercial property, shares and super aren’t touched by the negative gearing change at all.

For the full picture on the reform, including the CGT overhaul that runs alongside it, see our detailed 2026 negative gearing changes explainer.

The short version for this article: if you’re buying an established rental after Budget night, the tax offset that used to carry the cash-flow shortfall is going away.

Why the maths on established residential just got tougher

Under the old rules, a top-bracket earner running a negatively geared rental could recover close to half of that annual loss through the tax offset against their salary. The tax system was absorbing a big chunk of the pain, and long-term capital growth was expected to make up the rest.

Take that offset away, and the whole calculation shifts. The property has to work on its own numbers: rent, yield, holding costs, likely growth. The buffer that made “cash flow negative but tax positive” bearable is thinner.

The practical test worth applying to any new property purchase from here:

Would you still buy this property if you couldn’t use the loss to reduce tax on your salary?

If the answer is yes, the property probably has enough going for it on fundamentals. If the answer is no, it may not be the right investment. For a closer look at how the property numbers stack up in the current market, our piece on whether investment property is still worth it walks through the trade-offs in detail.

New residential builds: still tax-advantaged, but read the fine print

Eligible new builds were deliberately carved out of the reform. Buy newly constructed residential property that meets the eligibility definition in the legislation (new residential dwellings and affordable housing) and you keep negative gearing plus the existing 50% CGT discount. That’s the government’s policy lever, pushing investor capital toward building new homes rather than competing for existing stock.

For some investors, that makes new builds the obvious replacement. But there’s a catch worth thinking through carefully.

Future resale is the wildcard. At some point you’ll want to sell. By then, the property won’t be “new” anymore, and the next investor won’t get the same tax treatment on it. That means your buyer pool starts leaning toward owner-occupiers rather than investors, and the price a future buyer will pay depends on whether the property makes sense as a cash-neutral hold.

A new apartment in an investor-heavy suburb with limited owner-occupier appeal is a different proposition to a new house with strong family demand. The building matters. The location matters more.

The other trap: new builds often come with a developer premium built into the price. Some new stock has historically underperformed established property in the first few years because that premium has to be absorbed. The tax benefit doesn’t rescue a bad purchase price.

Commercial property: a different beast, different risks

Commercial property is unaffected by the negative gearing change. On paper, that makes it look appealing right now. In practice, it’s not a simple like-for-like swap for a residential rental.

What works in your favour:

• Commercial tenants often pay outgoings (rates, insurance, sometimes even maintenance) on top of rent
• Leases are typically longer, so tenant turnover is less frequent
• Yields are generally higher than residential

What works against you:

• Banks usually want a bigger deposit, often 30% or more
• Vacancy risk is different. A residential place might re-let in weeks. Commercial can sit empty for months, sometimes years
• Property value depends heavily on tenant quality and lease terms, not just location
• Financing is stricter, and interest rates are usually higher

Commercial property can work well for the right investor. It’s a genuine option, not a straight replacement. Cash flow needs to be strong enough to absorb long vacancies, and the analysis is different from residential in almost every respect.

Shares, ETFs and managed funds: flexibility residential can’t match

Shares aren’t touched by the negative gearing change. The broader CGT reform in the same Act does apply though, and it cuts both ways. The 50% CGT discount is being replaced with cost-base indexation, so you’re taxed on real (above-inflation) gains rather than nominal ones. That can favour long-term holders when inflation runs high. Alongside that, a 30% minimum tax rate applies to gains accruing from 1 July 2027. Whether the new regime works out better or worse for a given share portfolio depends on hold period, inflation, and your marginal rate at the time of sale. It’s not a straight upgrade.

The strengths of shares as a wealth-building tool have always been:

• Low entry cost. You can start with a few thousand dollars rather than a six-figure deposit
• Liquidity. Need cash next month? Sell part of the portfolio. You can’t sell one bedroom of a rental
• Diversification. A single ETF gives you exposure to hundreds of companies across countries and sectors
• Lower transaction costs. No stamp duty, no conveyancing, no building and pest inspections

The trade-off is leverage. You can’t borrow five times your deposit against a share portfolio the way you can against property. That limits the compounding potential, particularly early on.

For most investors coming out of the residential property mindset, index funds and ETFs are the natural first step. If you’re weighing the two side by side, our property vs shares comparison covers the numbers in more depth.

Investment bonds: the option most investors haven’t heard of

Investment bonds are the alternative that’s been quietly gaining ground while everyone’s been arguing about negative gearing. They’re not new. They’ve been around for decades. But recent super and CGT changes have put them back on advisers’ radars for the first time in years.

How they work, in plain terms:

An investment bond is a life-insurance-based investment structure. You put money in. The bond invests it (in shares, property, fixed interest, whatever the underlying option is). Tax is paid inside the bond at 30%, not at your marginal rate. The earnings never appear on your personal tax return.

The key rule: if you hold the bond for at least 10 years and follow the contribution rules (contributions capped at 125% of the previous year’s amount), you can withdraw the full balance tax-free. Withdraw earlier and a tapered tax treatment applies.

Why they’re getting attention now:

Industry estimates cited by Money magazine suggest up to $180 billion could flow out of superannuation in coming years as a result of Division 296 changes affecting balances above $3 million. One major provider reported inflows up 58% over the last 12 months. That’s not the whole industry, but it’s a signal about where money is starting to move.

Who investment bonds suit:

• High-income earners already at or near their super contribution caps. The 30% internal tax rate can beat their marginal rate
• Estate planning. Bonds can be paid directly to nominated beneficiaries outside the estate, which can be useful for blended families or intergenerational transfers
• Saving for children or grandchildren. The bond can often be transferred to a child at a set age without triggering CGT
• Anyone approaching the $3M super threshold who wants a tax-effective structure outside super

Who they don’t suit:

• Lower-income earners. If your marginal rate is under 30%, the internal tax rate works against you
• Anyone likely to need the money inside 10 years, unless they understand the tapered withdrawal rules
• Investors who want maximum control over the underlying holdings (options are set by the bond provider)

Investment bonds aren’t a magic bullet, and they’re not right for everyone. But for the profile of investor who’s been using established residential property as a tax shelter, they deserve a proper look. If you’re a high earner exploring ways to reduce taxable income, investment bonds should be part of the conversation.

Superannuation: harder to ignore, even with the changes

Super has always been the most tax-effective wealth-building structure in Australia, and even with recent changes, it still is for most people.

What hasn’t changed:

• Concessional contributions are still taxed at 15% inside super rather than your marginal rate
• The CGT discount inside super is unchanged. Complying super funds keep their existing one-third discount on gains.
• Earnings on assets supporting retirement income streams are still tax-free

What has changed:

• Division 296 introduces additional tax on earnings for balances above $3 million. If you’re not near that threshold, it doesn’t affect you
• The broader CGT reform doesn’t apply inside super, but the retirement environment around super is getting more complex

The trade-off is access. Money in super is preserved until you meet a condition of release, usually retirement age. That’s a genuine constraint if you’re building wealth for a goal 10 or 15 years before retirement.

For most people, the right answer isn’t “put everything into super” or “avoid super”. It’s a mix. Enough inside super to capture the tax benefits, enough outside super to fund the goals that come before preservation age. Getting the balance right is what our investment advice service is built around, and our super contributions guide covers the mechanics.

SMSFs: control, but read the fine print

Self-managed super funds have been a common vehicle for investors who want direct control over their retirement assets, including using an SMSF to hold property.

SMSFs aren’t caught by the negative gearing restrictions, but the same 2026 package did change what an SMSF can borrow for. 

SMSFs can no longer borrow to buy residential property. The reforms prohibit SMSFs from using a limited recourse borrowing arrangement (LRBA) to acquire residential property, so leveraging into a residential rental inside super is no longer an option. Borrowing to invest in commercial property is still allowed. An SMSF can continue to use an LRBA to acquire commercial property, subject to the usual SMSF rules and lender requirements. If your fund already has a borrowing arrangement over a residential property, get advice before refinancing or making changes to it.

SMSFs still work well for investors who:

• Have a super balance large enough to justify the ongoing running costs
• Want direct control over investment choices, including commercial property, shares, and managed funds
• Have the time and appetite to meet the compliance obligations, or are prepared to pay for the right advice and administration

If leveraged residential property inside super was the plan, that strategy is no longer available and needs a rethink. Our SMSF services page walks through what’s involved and whether an SMSF still fits your situation.

How this might look in practice

The right mix depends entirely on you. But here are three illustrative profiles that show how the same reforms play out differently.

These are composite examples, not actual client scenarios.

Couple in their 30s, no investment property yet, dual professional income. Their instinct was to buy an established rental for the tax benefits. Post-reform, the maths on that has changed. The stronger play is likely a mix of higher super contributions to lock in concessional tax treatment, a diversified ETF portfolio for flexibility, and possibly a new build later if the numbers work on fundamentals.

Pre-retiree in their 50s with one existing investment property, bought back in 2015. Grandfathered. Nothing changes on that property day to day. The bigger question is timing of any future sale, given the CGT change on gains that accrue after 1 July 2027. It may make sense to model different sale timings before committing.

Business owner, high income, family trust structure, no significant investment portfolio outside the business. Bumping into super contribution caps, watching the Division 296 changes carefully. Investment bonds start to look genuinely interesting as a tax structure outside super, alongside a review of how capital gains flowing directly or through the family trust will be treated under the new 30% minimum rate on gains from 1 July 2027.

Three very different starting points, three very different answers.

Frequently Asked Questions

Is negative gearing being abolished in Australia?

No. Negative gearing has been restricted, not abolished. From 1 July 2027, established residential properties purchased after 7:30pm AEST on 12 May 2026 will no longer be able to offset rental losses against other income like salary. Properties owned before that date are grandfathered under the old rules, and eligible new builds continue to receive full negative gearing treatment. Commercial property and shares aren’t touched by the negative gearing change itself, though the same Act reforms the capital gains tax regime, which does apply to share investors.

What are the best alternatives to residential property investment in Australia?

The main alternatives are new residential builds (still tax-advantaged), commercial property, shares and ETFs, investment bonds, and additional superannuation contributions. The right mix depends on your income, timeframe, existing assets, and how much flexibility you need before retirement. There’s no single “best” answer, only the mix that suits your goals and risk profile.

How do investment bonds work in Australia?

An investment bond is a life-insurance-based investment structure. You contribute money, the bond invests it, and tax is paid inside the bond at 30% rather than at your marginal rate. Hold the bond for 10 years while following the contribution rules and you can withdraw the balance tax-free. Withdraw earlier and a tapered tax treatment applies to the earnings component.

Are new build properties still worth buying for investors?

Eligible new builds, as defined in the legislation and covering new residential dwellings and affordable housing, retain both negative gearing and the 50% CGT discount. That makes them tax-attractive compared to established homes bought after Budget night. The catch is future resale. Once the property is no longer “new”, the tax benefits don’t carry over to the next investor. Strong owner-occupier appeal in the location matters more than ever, because that’s your future buyer pool.

Should I put more into super instead of buying another investment property?

For many investors, yes, though it depends on your age, income, and how much flexibility you need before preservation age. Super remains the most tax-effective wealth structure for most people, and the CGT discount inside super wasn’t touched by the recent changes. The trade-off is access. Money in super is locked until a condition of release, so a mix of super and non-super investments usually works better than either extreme.

The right mix depends on you, not the tax headline

The 2026 reforms haven’t killed property as an investment. What they’ve ended is property’s status as the automatic answer.

For investors who bought before Budget night, day-to-day life doesn’t really change. For anyone weighing up what to do next, the calculation is genuinely different. Established residential property has to earn its place on its own numbers now. New builds, commercial property, shares, investment bonds and super all deserve a fresh look.

The best strategy isn’t the trendiest one. It’s the one that matches your income, your timeframe, your risk appetite, and what you actually want your money to do. Two investors with similar-looking finances can end up in very different places depending on the details.

If you’re not sure what these changes mean for your situation, or whether your current strategy still stacks up, that’s the conversation worth having before you commit to your next move. Book a no-cost, no-pressure 10-minute chat with a Direct Wealth adviser, and we’ll help you work out what actually fits.