Why "New Builds" Are a Silver Lining in the 2026 Budget

Most of the coverage of the 2026–27 Federal Budget has focused on what investors are losing. And the losses could be significant: negative gearing on established properties bought after 12 May 2026 will no longer offset wages from 1 July 2027, and the capital gains tax (CGT) discount is being overhauled. For investors in established homes, the tax landscape has changed.

But there is another side to this Budget. While the government tightened the rules for established property, it went out of its way to preserve – and in some respects strengthen – the incentives for investing in new residential construction.

If you are a Melbourne investor who has been sitting on the fence about a new build, the 2026 Budget may have just made your decision easier.

This article is general information only and does not constitute financial, legal or tax advice. We recommend seeking advice from a qualified accountant and solicitor before making any decisions.

What the Budget actually preserved for new builds

From 1 July 2027, when the changes come into effect for established properties, eligible new residential properties will retain two significant tax advantages that established properties are losing.

1. Negative gearing

Full negative gearing remains intact. Investors in eligible new builds can still use rental losses to offset wages and other income in the same treatment that has always applied.

2. CGT discount

Where investors in established properties will be subject to a new inflation-based indexation model and 30% minimum tax rate on gains accrued after 1 July 2027, new build investors get a choice. You can apply either the existing 50% CGT discount or the new indexation system when you eventually sell – whichever produces the better outcome at the time.

What counts as an eligible new build

The government has been specific about what qualifies, so it is important to check before you commit to a purchase.

Eligible new builds are residential properties that genuinely add to the housing supply. This includes dwellings constructed on vacant land and projects where existing properties are demolished and replaced with a greater number of dwellings. For example, a duplex replacing a single house or a multi-unit development replacing one older home.

What does not qualify is equally important. A knock-down rebuild that replaces one house with another house does not increase supply and therefore will not be eligible. Substantial renovations that do not add dwellings to the market will not qualify either. And a new build that has been previously sold and occupied for more than 12 months before you purchase it loses its new build status, so timing matters.

The Victorian off-the-plan stamp duty concession

For Melbourne investors looking specifically at off-the-plan apartments, units or townhouses, there is an additional incentive. The Victorian government has extended its temporary off-the-plan stamp duty concession to 21 April 2027. Under this concession, stamp duty is calculated not on the full contract price but on the dutiable value, which is the contract price minus outstanding construction costs at the time of signing. For an off-the-plan Melbourne apartment, this can reduce the stamp duty bill by tens of thousands of dollars.

Combined with the Budget's preservation of negative gearing and CGT flexibility for new builds, the stamp duty concession creates a compelling stack of incentives for Melbourne investors considering off-the-plan purchases before April 2027.

Securing the right finance

Financing a new build or off-the-plan purchase works differently to a standard investment property loan, and understanding the difference matters before you sign a contract.

For construction loans, funding is released in progressive stages, also called drawdowns, as each stage of the build is completed. This can include the slab, frame, lockup, fixing and finally, completion. The key difference from a standard mortgage is that interest is only charged on the amount drawn down at any given time, which can reduce your holding costs during the build period. The loan structure, lender requirements and valuation process can also be more complex than a standard purchase, and not every lender offers construction finance.

For off-the-plan purchases, the key consideration is that the loan is typically not settled until the property is completed, which can be 12 to 24 months after you sign the contract. A lot can change in that time, including your financial position, interest rates and the lender's appetite for the particular development. Getting pre-approval or finance advice at contract stage is essential.

At AXTON Finance, we work with a panel of more than 30 lenders and have experience across both construction lending and off-the-plan finance. We can help you understand which lenders are active in this space, what the approval conditions look like and how to structure your borrowing to suit the specific asset you are purchasing.

What to consider before proceeding

While the tax incentives are significant, they should not be the only reason to buy a property. A favourable tax environment does not compensate for a poor location, an oversupplied market or a developer who does not deliver.

Before committing to a new build or off-the-plan investment, it is worth working through some fundamentals. Consider:

Location and long-term demand
Local supply pipeline
Developer reputation
Body corporate costs
Rental demand
Cash flow under different interest rate scenarios

It is also important to stress-test your numbers across different interest rate scenarios. With the Reserve Bank of Australia having raised rates three times in 2026 already, the cash flow picture that made sense at one rate may look different at another. Running the numbers at current rates and at higher rates gives you a realistic picture of where you stand under different conditions.

At AXTON Finance, we use our Next Purchase software to model exactly these scenarios for clients, adjusting purchase price, interest rate, rental income and holding costs in real time to show the precise cash flow and loan-to-value ratio outcomes before you commit. It takes the guesswork out of a decision that has real financial consequences.

Loan structure matters too, and it is often an afterthought when it should be an early consideration. The wrong structure can reduce your flexibility later, particularly if you are planning to build a broader portfolio over time. How one loan is structured affects what you can borrow next.

Timing matters

The window is open for investors to take advantage of the combination of the federal Budget’s tax changes and the state government’s stamp duty concession, but it will not stay open. The Victorian stamp duty concession runs until 21 April 2027.

For Melbourne investors thinking about your next purchase, the combination of preserved negative gearing, CGT flexibility, a generous stamp duty concession and access to quality new stock in Melbourne's growth corridors is an unusually well-aligned set of conditions.

But, as established property tax settings become less attractive, competition for eligible new builds may increase. At the same time, developers and lenders are likely to adjust pricing, incentives and finance structures in response to changing demand.

For investors considering a new build investment property, waiting too long could mean entering a much more competitive market later.