The 2026–27 Federal Budget, handed down on 12 May 2026, delivered what several major banks and advisory firms have called the most significant change to residential property taxation in over two decades. Negative gearing has been narrowed. The 50% capital gains tax discount is being replaced. A further amendment in June 2026 banned new superannuation fund borrowing for residential property outright. And layered on top of all of it, the Government has dramatically expanded first-home buyer support schemes.
For Muslim Australians and Meezan Wealth clients using Ijarah-based home finance, this is a moment worth understanding properly — not because the changes upend the halal home-buying model, but because they reshape the environment around it. Home ownership among Muslim households in Australia already sits below the national average (around 54% versus a national rate of roughly 68.6%, per ABS data), and access to genuinely Shariah-compliant finance remains one of the biggest reasons why. These reforms create both new opportunities and new things to check carefully before you sign anything.
Negative gearing: narrowed, not abolished
From 1 July 2027, negative gearing will only be available on newly built residential properties. If you buy an established (existing) residential property after 7:30pm on 12 May 2026 (Budget night), any rental losses can only be offset against income from that property or other residential property — not against your salary or other income — though they can be carried forward to future years. Properties already owned before Budget night are fully grandfathered and unaffected.
For conventional investors, this closes off the classic “negatively gear an established home, offset the loss against my salary, bank the tax-free capital gain later” strategy — a strategy that was always built on interest-based borrowing in the first place. It’s worth pausing on that: Ijarah and diminishing Musharakah home finance was never structured around negative gearing or interest deductibility to begin with. Our model is asset-backed and rental-based — the financier and client co-own the property, and the client’s rent and equity payments reflect real ownership, not a tax-minimisation loop. In that sense, this reform doesn’t force Meezan Wealth clients to rethink their approach — it validates it. New builds still retain access to negative gearing and the current 50% CGT discount, which may make new-construction property a more attractive category generally, halal financing included.
Capital gains tax: from a flat discount to inflation indexation
Alongside negative gearing, the Government is replacing the 50% CGT discount with a system based on inflation indexation plus a flat 30% minimum tax rate on real gains, from 1 July 2027. In practice, this means investors will be taxed on the inflation-adjusted gain rather than receiving an automatic 50% discount regardless of how long they held the asset or how much genuine growth occurred. Assets held before 1 July 2027 retain the existing discount for gains accrued up to that date; only gains after that date fall under the new rules. New-build properties retain the option to choose whichever system produces a better outcome.
The practical effect for anyone selling an investment property from mid-2027 onward is that returns will need to be judged on real, inflation-adjusted growth — not headline nominal gains. That’s a useful discipline for any investor, and it aligns naturally with the Islamic finance principle of investing in real, productive assets rather than speculative appreciation.
The SMSF residential property loan ban — and why it doesn’t touch your Ijarah finance
On 23 June 2026, the Government agreed to a Greens amendment banning new limited recourse borrowing arrangements (LRBAs) for residential property inside super funds, including SMSFs. It received Royal Assent on 26 June 2026 and takes effect roughly 45 days later, around 10 August 2026.
This is worth being precise about, because it’s easy to see the words “borrowing,” “property” and “Islamic-style shared ownership” and assume it might apply to Ijarah home finance. It doesn’t. The ban is specific to superannuation funds — mainly SMSFs — borrowing to acquire residential property as an investment inside the super environment. Existing SMSF property loans are grandfathered, commercial and business real property borrowing is untouched, and personal, non-super home finance — including Meezan Wealth’s Ijarah facilities for owner-occupied and investment property — is entirely unaffected. If you were, however, planning to use your SMSF to acquire residential property with borrowed funds, contracts need to be exchanged before the commencement date to be protected under the transition rules — talk to us urgently if that’s your situation.
First Home Buyer schemes: bigger, broader, but not automatically halal
Separately from the tax reforms, the Government has significantly expanded support for first-home buyers. The Australian Government 5% Deposit Scheme now has no income caps and no annual place limits, and higher property price caps in most cities — for example, up to $1.5 million in Sydney and regional NSW centres, $950,000 in Melbourne, and $1 million in Brisbane. The Help to Buy shared-equity scheme, meanwhile, has the Government co-purchase your home alongside you, contributing up to 40% of the price for a new build or 30% for an existing home, materially reducing the deposit and loan size you need.
These are valuable reforms for affordability generally, and they matter for our clients too — but it’s important to understand that these are government support mechanisms layered on top of a home loan, not home loans themselves. Accessing them requires going through a participating lender, and at present the panel of lenders offering these schemes alongside genuinely Shariah-compliant structures is still developing. Before assuming a scheme is available to you through an Islamic finance provider — or ruling it out — get advice. We’re actively working through which of these schemes can sit alongside an Ijarah facility as lender panels expand through 2026.
What to do next
If you already own an investment property, your existing arrangements are grandfathered — no immediate action required, though it’s worth reviewing your long-term strategy given the 2027 changes on the horizon. If you’re planning to buy an established property as an investment, factor the narrower negative gearing rules into your numbers now, since they apply to any purchase from Budget night onward. If you’re a first-home buyer, the expanded 5% Deposit Scheme and Help to Buy are worth investigating alongside a halal finance conversation, not instead of one. And if an SMSF property purchase was on your radar, treat the August 2026 commencement date as a hard deadline for advice.
Australia’s property tax settings just changed more than they have in a generation. The principles behind halal home finance — real ownership, shared risk, no interest — haven’t changed at all. If anything, they’re looking more aligned with where policy is heading than the model they’re replacing.
This article is general information only and does not constitute personal financial, legal or Shariah advice. Speak to Meezan Wealth’s team about how these changes apply to your specific home finance or property investment plans.
