What the Federal Budget Means for Defence Force Members Buying and Investing in Property

The latest Federal Budget announced significant proposed changes to property investment taxation in Australia. While some of the headlines have created uncertainty for property investors, the implications for Defence members may be more positive than they first appear.

A lot of the change steers investor support towards newly built homes. Older, established properties, by contrast, lose key tax benefits over time. Defence members also hold options that civilians don’t have.

Spectrum has worked only with Australian Defence Force members for decades. A budget like this one reads differently when you know Defence life. The detail is involved, yet the message for members is a positive one.

What the Budget Changed for Property

The shift is simpler than the headlines suggest. The government wants to reward investment in newly built housing. Two big changes drive this, and both start on 1 July 2027.

Negative gearing

From 1 July 2027, negative gearing will be limited to new builds. Established homes bought after 7:30 pm on 12 May 2026 are affected. Their rental losses can no longer reduce salary or wages.

Instead, those losses only offset other rental income or rental capital gains. Any unused amount carries forward to later years. The ATO sets out how this works.

Capital gains tax

The Budget also overhauls capital gains tax from 1 July 2027. The 50% discount is being replaced under the new rules. In its place comes inflation indexation, plus a minimum 30% tax on gains.

This applies to assets held at least 12 months by individuals, trusts and partnerships. Gains built up before 1 July 2027 keep the existing 50% discount. The ATO explains how the new method applies after that.

What this means for new builds and existing owners

Eligible new builds are proposed to remain outside these changes. Investors in eligible new builds keep negative gearing and depreciation, as the ATO confirms. They can also choose the 50% discount or the new arrangements when they sell.

Existing owners are protected on negative gearing. Properties held before 7:30pm on 12 May 2026 keep the current rules until sold. Those already under contract before then are covered as well.

The capital gains changes are broader. Even grandfathered owners of existing properties face the new method on gains after 1 July 2027.

Timing matters if you’re buying an established home right now. A purchase made now can still be negatively geared until 1 July 2027. Those salary deductions then stop for established homes.

These are announced measures, and the detail can still change in law. Your own situation may differ in ways that matter. It’s worth getting advice before you act.

Buying Your First Home

The reassurance counts for a lot at the first home stage. This Budget left the main first home schemes untouched. The support Defence members lean on is still here.

For eligible members, a few kinds of support can work side by side:

• The Australian Government’s 5% Deposit Scheme, which may allow a smaller deposit without Lenders Mortgage Insurance.
• DHOAS, which can pay an eligible member a monthly subsidy towards home loan interest.
• HPAS, a one-off Defence payment towards buying a first home in your posting location.
• HPSEA, which can reimburse buying and selling costs when you relocate on posting.
• The First Home Super Saver Scheme, which may let you save for a deposit through your super.
• State and territory stamp duty concessions, which can vary by location.

On their own, each helps a little. Used together, and in the right order, they can bring a first home closer. Spectrum can line them up against your home ownership plans from the start.

Borrowing to Invest

Beyond a first home, the other option to get into the property market is an investment property i.e. rentvesting. Here, the kind of property matters more than before. The split between new and established can shape your whole plan.

Under the proposed rules, eligible new builds may be treated more favourably. Negative gearing and depreciation can stay available on eligible new builds. Both can lower the after-tax cost of holding a property.

Established homes are where the squeeze lands. Without those salary deductions, the after-tax cost of holding one rises. The investment case can weaken as a result.

It also helps to be realistic about borrowing capacity. Each lender weighs your position against their own criteria. Tax treatment shapes your holding costs, rather than acting as a single lever.

So the choice between new and established can shape your plans for years. A purchase that once looked simple may now carry more weight. Coordinated property investment advice can help you think it through.

Building Long-Term Wealth

Borrowing is only the start. The bigger aim is long-term wealth, where the new build rules stand out.

Eligible new builds can retain negative gearing and depreciation. When you sell, you can choose the 50% discount or the new method.

Under the proposed rules, established properties are not expected to have access to the same CGT treatment options as eligible new builds. From 1 July 2027, their gains move to inflation indexation and the 30% minimum tax. Over a long hold, that can lower the final return.

Spectrum has often helped Defence members assess new and off-the-plan property opportunities where appropriate to their circumstances. The approach now sits on the favourable side of these changes. It was built for steady progress, not for chasing a quick win.

What counts as a new build

One catch is what actually counts as a new build. The definition is tighter than it sounds, and the boundaries matter. Broadly, eligible new builds include:

• A brand-new dwelling, such as an off-the-plan apartment.
• A home built on land that was previously vacant.
• A knock-down rebuild, but only where it adds dwellings.

Substantial renovations, granny flats and already-sold homes don’t count. The benefit also goes to the first investor who buys. You can read the ATO definition before you commit.

This also fits neatly with rentvesting. You can rent where you’re posted and invest where the numbers stack up. A new build elsewhere can hold onto its tax benefits while life stays flexible.

None of this works on its own. Your property and loan still need to line up with your tax structure. Pull those together, and a sensible idea becomes a lasting one.

Why Defence Members May Be Well Placed

Put it all together, and the position looks steady. The first home schemes carried over unchanged. The investment rules favour the new builds we already recommend.

Defence entitlements add to that strength. DHOAS and rental support can open up extra options. These are Defence entitlements that civilian investors can’t access.

Even so, the advantage isn’t automatic. The right purchase and loan still need to suit your tax position. Getting that part right is what turns a good idea into a good result.

It also suits the way Defence careers tend to unfold. Income often grows, and postings settle as you progress. A plan that flexes with those changes can keep its value.

How Spectrum Helps

This is where Spectrum comes in. We bring property, lending, tax and Defence entitlements into one plan. We work with current and ex Defence members and their families and charge no client fees.

Our focus is the long game, not a single transaction. We don’t lead with a product, but with your situation and goals. From there, the right structure is far easier to see.

Want to know where you stand after the Budget? Book a consultation with Spectrum, and we’ll talk it through. We’ll look at your pay, lending and property options together.

Frequently Asked Questions

Can Defence members still negatively gear an investment property?

Yes, on eligible new builds, which stay exempt from the changes. For established homes bought after Budget night, negative gearing ends from 1 July 2027. Losses then offset rental income only, not salary.

Do new builds still get the capital gains tax discount?

Eligible new build investors can choose the 50% discount or the new method. For other assets, the 50% discount is being replaced from 1 July 2027. You can read the current rule on the ATO website.

Did the Budget change first home buyer support?

This Budget left the main first home schemes unchanged. The 5% Deposit Scheme and First Home Super Saver Scheme still apply.

Are existing investment properties affected?

Properties held before 7:30 pm on 12 May 2026 keep the current negative gearing rules until sold. The capital gains changes still apply to gains after 1 July 2027.

Can DHOAS be used with the 5% Deposit Scheme?

Eligible members may be able to use both forms of support together. DHOAS pays a monthly subsidy towards home loan interest. You can review eligibility on the DHOAS website.

What happens if I buy a home and then later move out and rent it out?

In this case you could access home owner benefits to buy the property as well as tax benefits depending on when you initially bought the property and/or the type of property it is.

Does it matter what sort of loan I get?

Yes! Which is why it is so important to get loan advice from someone who understands not just ADF entitlements but also how tax works for your situation. Getting bad advice can cost you hundreds of thousands of dollars over the life of the loan.

A Clear Next Step

The Budget rewards careful structure more than it used to. For Defence members, the door to a first home stays open. A sound investment plan is well within reach, too.

The detail can feel heavy, but the takeaway is simple. Plan early, pick the right type of property, and line up your decisions. For more, visit the Resource Centre or have a chat with Spectrum.

Disclaimer:

Important: This article contains general information only and does not take into account your personal objectives, financial situation, tax position or needs. Property, lending and taxation outcomes can vary between individuals. You should seek personalised advice from a qualified lending, tax or financial professional before making any property or investment decisions.