In This Article
- Budget overview: housing at a glance
- First Home Guarantee extension
- Help to Buy shared equity scheme
- Housing supply and construction funding
- NHFIC and Housing Australia changes
- Stamp duty and state-level reforms
- Negative gearing and capital gains
- Regional housing support
- What it means for first home buyers
- What it means for refinancers
- What it means for investors
- What it means for self-employed borrowers
- Frequently asked questions
Last updated: July 2026 · Reviewed by John Pierre Saliba, Director and Mortgage Broker, MFAA Accredited
Budget Overview: Housing at a Glance
The Albanese Government's May 2026 Federal Budget puts housing front and centre. After years of affordability pressure, particularly in Sydney, the budget includes a mix of demand-side assistance for buyers and supply-side investment intended to increase the national housing stock. Whether you are buying your first home, refinancing an existing mortgage or expanding an investment portfolio, there are specific line items that affect your next move.
I have broken down every major housing measure below, with worked examples showing exactly how each one applies to a typical Sydney borrower.
The headline is continuity, not revolution. First Home Guarantee places are extended, Help to Buy is funded, and there is no change to negative gearing or capital gains. For most of my Sydney clients, the practical impact is this: the schemes you were relying on are still available. If you have been waiting for a policy signal before making your move, the signal is that the status quo holds. The time to act is now.
First Home Guarantee Extension
The budget confirms the First Home Guarantee (FHG) scheme will continue through 2026-27 with 35,000 new places nationally. This is the single most impactful scheme for Sydney first home buyers. Under the FHG, eligible buyers purchase with just 5% deposit and the government guarantees the remaining 15%, eliminating the need for Lenders Mortgage Insurance (LMI).
Eligibility (unchanged)
- Income cap: $125,000 for singles, $200,000 for couples
- Property price cap (NSW): $900,000
- Citizenship: Australian citizen, aged 18+
- Ownership history: Must never have owned property in Australia
- Occupancy: Must intend to live in the property (owner-occupier)
First Home Guarantee: Sydney buyer on $120K income
Sarah earns $120,000 per year and wants to buy a two-bedroom apartment in Marrickville for $890,000.
- Deposit required (5%): $44,500
- LMI without FHG: approximately $18,000 to $22,000
- LMI with FHG: $0
- Stamp duty (first home buyer, under $900K): sliding concession applies, approximately $3,200
- Total upfront saving via FHG: $18,000 to $22,000 in avoided LMI
Without the guarantee, Sarah would need either a 20% deposit ($178,000) to avoid LMI, or she would pay LMI on top of a smaller deposit. The FHG makes this purchase viable with $44,500 in genuine savings plus costs.
The Family Home Guarantee also continues, offering single parents and single legal guardians the ability to purchase with just 2% deposit. This scheme has 5,000 new places for 2026-27.
Help to Buy Shared Equity Scheme
The Help to Buy scheme, now legislated, receives continued funding in the 2026-27 budget. Under this scheme, the government contributes up to 40% of the purchase price for a new home (30% for an existing home) as an equity share. You take out a smaller mortgage, make smaller repayments, and need a smaller deposit.
Key details
- Government equity contribution: Up to 40% (new), 30% (existing)
- Minimum deposit: 2% (the government and your lender cover the rest)
- Income cap: $90,000 single, $120,000 couple
- Property price cap (Sydney): $950,000
- No LMI: The government's equity contribution means no mortgage insurance
- 10,000 places per year nationally
Help to Buy: couple earning $115K combined, buying in Penrith
James and Lisa earn $115,000 combined and are looking at a new three-bedroom townhouse in Penrith listed at $750,000.
- Government equity share (40% new home): $300,000
- Buyer's mortgage: $750,000 minus $300,000 minus deposit = $435,000
- Minimum deposit (2%): $15,000
- Monthly repayment on $435K at 5.99% over 30 years: approximately $2,605
- Compared to full $735K mortgage: approximately $4,403 per month
- Monthly saving: approximately $1,798
The trade-off: when they sell, the government reclaims its equity share (40% of the sale price). If the property appreciates to $900,000, the government receives $360,000 and the couple keeps $540,000 less their remaining mortgage balance.
Help to Buy is powerful but comes with long-term obligations. Not every lender participates, and the shared equity structure means you share capital gains with the government. I walk every client through the full lifecycle cost comparison before recommending this scheme over alternatives like the First Home Guarantee or a family guarantee arrangement.
Housing Supply and Construction Funding
The government reaffirms its target of 1.2 million new homes by 2029 under the National Housing Accord. The 2026-27 budget allocates additional funding to support this target.
- $2 billion Housing Support Program: Infrastructure grants to unlock new housing developments across major cities, including Western Sydney growth corridors
- $500 million for social and affordable housing: Directed through Housing Australia (formerly NHFIC)
- Tradie and construction workforce incentives: Expanded apprenticeship subsidies and migration pathways for construction trades
- Planning reform incentives: Federal payments to states and councils that accelerate rezoning and development approvals
For Sydney, the supply pipeline matters. New housing completions reduce rental pressure and moderate price growth over time. The Western Sydney Aerotropolis and surrounding precincts in Bradfield, Marsden Park and Leppington are expected to benefit directly from infrastructure funding.
Housing Australia (Formerly NHFIC) Changes
Housing Australia, the federal body that administers the First Home Guarantee, Help to Buy and the Housing Australia Future Fund, receives an expanded mandate and additional capital in this budget.
- Housing Australia Future Fund: Now capitalized at $10 billion, up from the original $10 billion commitment, generating ongoing returns for social and affordable housing investment
- Expanded bond issuance: Housing Australia can issue additional bonds to community housing providers at concessional rates
- Scheme administration: Improved digital systems to reduce processing times for guarantee applications
Faster processing is good news for buyers. In previous years, FHG applications could take several weeks. Improved systems should help eligible buyers secure a guarantee place before exchanging contracts.
Stamp Duty and State-Level Reforms
Stamp duty is a state tax, not a federal one. The budget does not directly change stamp duty rates. However, the federal government has signalled support for state-level stamp duty reform through incentive payments tied to housing supply outcomes.
Current NSW stamp duty settings for first home buyers
- Under $800,000: Full exemption ($0 stamp duty)
- $800,001 to $1,000,000: Sliding scale concession
- Above $1,000,000: Full stamp duty applies
NSW also offers the optional First Home Buyer Choice scheme, allowing eligible buyers to opt for an annual property tax instead of paying stamp duty upfront. This reduces the cash required at settlement but creates an ongoing annual cost.
Stamp duty comparison: $850K apartment in Zetland
- First home buyer stamp duty (sliding concession): approximately $5,225
- Non-first-home buyer stamp duty: approximately $33,490
- First Home Buyer Choice (annual property tax): approximately $2,400 per year instead of $5,225 upfront
The right choice depends on how long you plan to hold the property. If you sell within two to three years, the annual tax option is usually cheaper. For long-term holds, paying stamp duty upfront is typically better value.
Negative Gearing and Capital Gains Tax
Despite ongoing public debate, the 2026 budget makes no changes to negative gearing or the capital gains tax (CGT) discount. This means:
- Negative gearing: Investment property losses continue to be deductible against other income, including salary
- CGT discount: The 50% discount for assets held longer than 12 months remains
- No grandfathering provisions needed: Existing arrangements are unchanged
For investors, this is the status quo. If you have been holding off on purchasing an investment property because of reform speculation, the budget provides clarity: current tax settings remain in place for at least the 2026-27 financial year.
Every budget cycle, clients ask me whether negative gearing is about to be scrapped. I have been through this cycle many times. The political reality is that any government proposing to remove negative gearing on existing properties faces significant voter backlash. My advice: structure your investment based on current rules. If rules change in the future, restructuring options exist. Do not let policy speculation prevent you from building wealth.
Regional Housing Support
The budget includes $1.5 billion in regional housing investment, targeting areas with acute housing shortages tied to economic growth (mining, agriculture, tourism). While this is less directly relevant to Sydney buyers, several measures apply to the broader NSW market.
- Regional First Home Buyer Guarantee: Continued with 10,000 dedicated places for regional purchases
- Infrastructure funding: Road, water and sewage upgrades in regional NSW growth corridors including the Hunter Valley and Illawarra
- Remote area housing: Additional funding for Indigenous housing and essential worker accommodation
If you are considering purchasing outside Sydney, whether in Newcastle, Wollongong or the Central Coast, these measures improve infrastructure and may support long-term property values in those markets.
What This Budget Means for First Home Buyers
If you are buying your first home in Sydney, the 2026 budget is largely positive. The key schemes remain available, and there is no reduction in eligibility or funding.
Action items for first home buyers
- Apply for FHG early. 35,000 places sounds like a lot, but they are allocated nationally and are filled on a first-come basis. Do not wait until September or October.
- Check Help to Buy eligibility. If your household income is under $120,000 and you are open to shared equity, this scheme dramatically reduces your deposit and repayments.
- Use the First Home Super Saver Scheme. If you have been making voluntary super contributions, you can withdraw up to $50,000 for a home deposit. This is taxed at just 15% on the way in, plus marginal rates minus a 30% offset on the way out.
- Get pre-approved now. Pre-approval defines your budget and lets you move quickly when the right property comes up. I arrange this at no cost, typically within two to five business days.
Combined scheme stacking: first home buyer in Sydney
Michael, age 29, earns $120,000. He has $50,000 in savings and $15,000 available through the First Home Super Saver Scheme. He wants to buy a $900,000 apartment in Mascot.
- Deposit required (FHG, 5%): $45,000
- FHSS withdrawal: $15,000 (net, after tax)
- Cash savings needed: $45,000 minus $15,000 = $30,000
- Stamp duty (first home buyer, $800K-$1M concession): approximately $11,700
- Legal and conveyancing: approximately $2,500
- Total cash required: approximately $44,200
- LMI: $0 (covered by FHG)
Without the FHG and FHSS combined, Michael would need roughly $180,000 for a 20% deposit, or around $67,000 for a 5% deposit plus approximately $20,000 in LMI. The schemes save him over $35,000 in upfront costs.
What This Budget Means for Refinancers
The budget does not directly change interest rates. That is the RBA's domain. However, the fiscal stance of the budget influences inflation expectations, which in turn influence rate decisions.
Key considerations for refinancers
- Rates remain elevated. The cash rate sits at 3.85%. Most variable home loan rates are between 5.89% and 6.49%. If you have not refinanced in the past 12 months, there is almost certainly a better rate available.
- Cashback offers are winding down. Several major lenders have reduced or eliminated cashback incentives. The window for $2,000 to $4,000 cashback deals is narrowing.
- Serviceability buffer unchanged. APRA's 3% serviceability buffer remains in place. This means lenders assess your ability to repay at your actual rate plus 3%. Some borrowers who could afford their current repayments cannot technically "qualify" for a new loan at the same amount. Talk to a broker about which lenders apply this buffer most favourably.
Refinance saving: $800K loan, switching from a major bank
David and Priya have an $800,000 variable mortgage at 6.39% with a Tier-1 lender. They have 25 years remaining.
- Current monthly repayment: approximately $5,332
- New rate after refinancing: 5.89% (competitive variable via broker channel)
- New monthly repayment: approximately $5,074
- Monthly saving: $258
- Annual saving: $3,096
- Lifetime saving (if rate gap persists): over $77,000
Use our Refinance Calculator to model your own scenario, or book a free rate review and I will compare your current loan against 50+ lenders.
What This Budget Means for Investors
The retention of negative gearing and the 50% CGT discount is the headline for investors. Beyond that, several budget measures are relevant.
- No new investor lending restrictions. APRA has not announced additional macroprudential measures, and the budget does not signal any request for tighter lending standards.
- Rental market remains tight. Sydney vacancy rates sit below 2%. Limited new supply and continued migration mean rental income is strong. The budget's housing supply measures will take years to materially increase stock.
- Depreciation schedules unchanged. Investors in properties built after 1987 can continue claiming building depreciation (2.5% per year on construction cost). Plant and equipment depreciation rules remain unchanged for properties purchased after May 2017 (only new items, not previously used).
- Foreign investor surcharges: The budget increases the foreign investor surcharge on vacant properties. This does not affect Australian citizen or permanent resident investors.
Several lenders have quietly reduced investor rates over the past quarter. The gap between owner-occupier and investor rates, which widened to 0.50% or more in 2024, has narrowed to 0.20% to 0.35% at competitive lenders. If you hold an investment loan that was priced during the wider gap period, a refinance review is worth your time.
What This Budget Means for Self-Employed Borrowers
Self-employed borrowers face a unique tension with budget measures. Tax incentives that reduce your taxable income are good for your tax bill but can reduce your borrowing capacity with lenders that rely on tax returns.
Key measures affecting self-employed borrowers
- Instant asset write-off extended: The $20,000 instant asset write-off for small businesses (turnover under $10 million) continues into 2026-27. If you claim this, your taxable income drops, which may reduce how much a bank will lend you.
- Small business energy incentive: 20% bonus deduction on eligible energy-efficient equipment. Same effect: lower taxable income, potentially lower borrowing capacity.
- Company tax rate unchanged: 25% for businesses with turnover under $50 million.
Self-employed borrower: taxable income vs. borrowing capacity
Tom runs a plumbing business as a sole trader. His gross revenue is $280,000 and his net taxable income after all deductions (including instant asset write-off) is $95,000.
- Borrowing capacity based on $95K taxable income: approximately $520,000 to $580,000
- If Tom had not claimed the $20K write-off, taxable income = $115K: borrowing capacity approximately $630,000 to $700,000
- Difference: $110,000 to $120,000 in lost borrowing power
This does not mean Tom should avoid legitimate deductions. It means he should talk to a broker before lodging his tax return so we can discuss timing, structure and whether an alt-doc loan (which uses BAS, accountant declarations or bank statements instead of tax returns) might be the better pathway.
If you are self-employed and planning to buy or refinance in the next 12 months, talk to me before you see your accountant. The order matters. I can tell you exactly how much taxable income you need to show to qualify for your target loan amount, and your accountant can then structure deductions accordingly. This one conversation can be worth $100,000 or more in borrowing capacity.
