New-Build Property Finance After the FY27 Reform
New-Build Property Finance in FY27 | Switchboard Finance
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New Builds · Development Finance · FY27
New-Build Property Finance After the FY27 Reform
From 1 July 2027, the tax rules that make residential investment work start to favour new builds over established stock. For self-employed investors, that moves the funding question from your payslip to the project in front of you. Here is what each owner position can fund in the new financial year, tier by tier.
Quick Answer
The coming tax reform narrows negative gearing on residential investment toward new builds, which changes where the funding case is strongest. A new build is read on its feasibility rather than a payslip, so a commercial property loan or development finance is built around the project itself.
What the FY27 reform changes, and who it changes it for
The reform changes which property carries the tax benefits, and that single shift is what moves the funding question for self-employed investors. Demand for new dwellings is still running, even as the latest monthly approvals figure cools, so the appetite to build has not gone away; what changes is where the numbers work best.
The two Tax Reform No. 1 Bills passed both houses of Parliament on 25 June 2026, with Royal Assent still pending, and are intended to apply from 1 July 2027. From that date, negative gearing on residential investment is steered toward new builds: the new-build carve-out keeps full negative gearing on new builds, while established stock held at budget night is grandfathered so its existing treatment continues. The 50 percent capital gains tax discount is also replaced with cost-base indexation plus a 30 percent minimum tax on gains accruing after that date.
One point matters for how you read all this. Net rental losses on established residential investments bought after the change are not denied; they are quarantined, carried forward to offset future residential income or gains, which is a narrower benefit rather than a lost one. The change is set out on the ATO new-legislation guidance, which still reads as not yet law while assent is pending, and the passage and timing are confirmed in the Budget tax-reform material. Where this commonly lands for a self-employed investor is a simple sorting question: are you building new, holding what you already own, or buying established from here.
Tier one: building or buying a brand new investment
If you are building or buying a brand new dwelling to hold, you sit in the strongest FY27 position, because the new-build carve-out keeps full negative gearing on new builds and the deal is read on the project, not a payslip.
A build is underwritten feasibility-first, not on the payslip, illustrative and varies by lender: the lender sizes the facility against gross realisation value and total development cost, then sets the leverage from there. Expect an equity contribution typically 20 to 35 percent of total development cost, indicative and varies by lender, and remember the exit sets the facility term, because the loan is repaid from the sale or the refinance of the finished project. The LVR the lender works to follows the feasibility, and a clean development approval is usually the thing that unlocks the better settings.
More of this lending sits with non-bank lenders and specialist funders than it did a few years ago, where the feasibility and the equity behind the deal are read with more flexibility than a major bank's template allows. The files that clear underwriting tend to be the ones where the numbers stack at conservative assumptions, presales or a sell-down plan are evidenced where the lender wants them, and the exit is dated. A build that does not rely on presales is its own conversation, walked through in development finance without presales, and the product itself is set out on our development finance page.
Tier two: established stock you already hold
If you already hold established stock that you owned at budget night, you are grandfathered, so the negative gearing treatment that applied when you bought continues and your FY27 question is about funding, not the tax change.
For this tier the move is usually a refinance or an equity release against a property whose position has strengthened, rather than a new purchase decision. A commercial property loan can refinance a held investment onto cleaner senior debt or release equity to fund the next move, read on the asset and your trading cash flow rather than a payslip. Because you are not buying established stock under the new rules, the reform does not reset your position; it simply makes the timing of any new purchase the thing to think about.
If part of the plan is to move from holding into building, the choice between a straight purchase facility and a development line is worth mapping early, and the trade-offs are covered in commercial property loan versus development finance.
Tier three: buying established stock from here
If you plan to buy established, second-hand stock from here, the deal has to stand on its own cash flow, because from 1 July 2027 net rental losses on established residential investments are quarantined and carried forward rather than offset against your other income each year.
That makes the yield and the serviceability the load-bearing parts of the file, not the tax shield. The funding is still available through a commercial property loan read on the asset and your figures, but the deal that holds together is the one that works before any tax benefit, with a credible dated exit, a sale or a refinance, behind it. Where a sell-down is part of the plan, the sell-down evidence shapes the offer, and the current pricing read for these deals is covered in commercial property loan rates.
What Works
- A feasibility or a yield that stacks at conservative numbers, before any tax benefit
- A real equity contribution behind the land or the purchase, not just the site
- A credible dated exit, a sale or a refinance, that sets the facility term
What Stalls
- A deal that only works on the tax position, not the cash flow
- No equity beyond the land, so there is nothing for a lender to read behind it
- No dated exit, which leaves the facility term with nothing to anchor to
The FY27 reform does not switch property finance off; it sorts it. The new-build carve-out keeps full negative gearing on new builds, established stock held at budget night is grandfathered, and established purchases from here have their losses quarantined rather than denied. Across all three tiers the funding read is the same: a new build is underwritten feasibility-first, not on the payslip, and a held or purchased asset is read on its own cash flow and a dated exit. The wider stack, development, commercial and private, is mapped in the property lending hub.
Key takeaway: Work out which tier you sit in first, because the new-build carve-out, the grandfathering and the quarantine rule each point to a different funding path for FY27.Frequently Asked Questions
Development finance is usually structured around an equity contribution rather than a flat cash deposit, and that contribution typically sits around 20 to 35 percent of total development cost, indicative and varies by lender. Lenders size the facility against gross realisation value and total development cost, so a feasibility that stacks at conservative numbers matters more than a single deposit figure. You can see how the product is put together on our development finance page and how the headline metric works in the gross realisation value glossary entry.
The FY27 negative gearing change keeps full negative gearing for new builds while narrowing it for established residential stock, and it has passed both houses of Parliament as at 25 June 2026, intended to apply from 1 July 2027. New builds keep the existing treatment, so the funding case for building or buying brand new stays strong. The change is set out on the ATO new-legislation guidance, which is still being updated, and a build that does not lean on presales is walked through in our guide to development finance without presales.
Existing investment properties held at budget night are grandfathered, so the negative gearing treatment that applied when you bought them is intended to continue. The reform passed both houses on 25 June 2026 and is intended to apply from 1 July 2027, with the change aimed at new purchases of established stock rather than properties already held. Because the rules are still settling, the position is worth confirming against the Budget tax-reform material, and the funding side for a hold or refinance, including the LVR a lender works to, is set out on our commercial property loan page.
Negative gearing on an established property bought after the reform is narrowed rather than removed: from 1 July 2027 net rental losses on established residential investments are quarantined and carried forward against future residential income or gains, instead of offsetting your other income each year. That makes the yield and the deal's own cash flow the thing the funding has to stand on. The practical lender read for that kind of purchase is covered in commercial property loan rates and on our commercial property loan page.
Lenders assess a new-build investment loan on the project rather than a payslip, reading the feasibility, the gross realisation value and the total development cost, with the exit setting the facility term. Equity contribution, presales or sell-down evidence and a credible dated exit all shape the offer, and the numbers are read conservatively. Non-bank lenders and specialist funders often sit most comfortably here, and the comparison in commercial property loan versus development finance shows where each fits, with the metric explained in the gross realisation value glossary entry.
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