This information is general in nature and does not take into account your personal objectives, financial situation, or needs. It is not tax or financial advice. Speak to a qualified accountant or tax adviser about how these changes apply to you.
If you own an investment property, or you’ve been weighing up buying one, you’ve probably heard that negative gearing changed in this year’s Federal Budget. You’ve probably also heard three different versions of what that means, and at least one of them was wrong.
Understanding negative gearing after the 2026 reforms comes down to a few key dates and a handful of clear rules. Here’s the plain English version, along with something most coverage of this topic has left out. The tax change isn’t even the part affecting borrowers right now.
What Negative Gearing Means for Property Investors
Negative gearing happens when the costs of owning an investment property, things like interest, rates, insurance and repairs, add up to more than the rent you receive. That loss has traditionally reduced your taxable income, which lowers the tax you pay overall.
It’s been part of Australian property investing for decades and remains one of the most talked about pieces of tax policy in the country.
What Changed in the 2026 Federal Budget
On 12 May 2026, the Government announced it would limit negative gearing to new build properties. This became law when the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026.
Here’s what it means in practice.
From 1 July 2027, if you buy an established (existing, not new) residential investment property, losses on that property will no longer reduce your salary or wages for tax purposes. Instead, those losses are quarantined. They can generally be carried forward and used against future residential rental income or eligible capital gains, rather than against unrelated income straight away.
New build properties are treated differently. If you buy an eligible new residential dwelling, you can still negatively gear it against your other income, much like under the current rules.
The cut-off date is Budget night, not 1 July 2027. Whether an established property is grandfathered depends on when the ownership interest was acquired, specifically 7:30pm AEST on 12 May 2026, not when the new tax year begins.
The Capital Gains Tax discount is also changing from 1 July 2027. For most affected properties, the existing 50% CGT discount is being replaced with cost base indexation for inflation, alongside a minimum 30% tax rate on real capital gains. Eligible new residential dwellings and affordable housing keep access to the existing 50% discount as an alternative, so the treatment isn’t identical across every property type.
Are You Affected by the New Negative Gearing Rules?
This is worth reading carefully, because grandfathering covers more situations than people expect.
You’re likely unaffected if you already held your investment property, or were under contract to buy it, before 7:30pm on 12 May 2026. That negative gearing treatment generally continues for as long as you hold that ownership interest.
You’re likely unaffected if you’re buying a new build. Full negative gearing generally remains available for eligible new residential dwellings.
You’re likely affected if you’re planning to buy an established investment property after Budget night. From 1 July 2027, losses on that property won’t reduce your take home pay the way they used to.
A note of honesty here. Some of the finer detail, including exactly what qualifies as a new residential dwelling for these purposes, is still being settled through legislative instruments. If your purchase sits close to any of these lines, that’s a conversation for your accountant rather than a guess based on a blog article. And if you’re restructuring ownership of an existing property, it’s worth checking whether that change affects your grandfathered status before you proceed.
Why Your Borrowing Power May Already Be Different
Here’s the part most articles on this topic miss. The tax rules don’t apply until 1 July 2027, but several lenders have already changed how they calculate borrowing capacity for investors, right now.
Lenders have traditionally allowed for the expected tax benefit of negative gearing when assessing serviceability, which can increase an investor’s calculated borrowing capacity. A number of major and non-bank lenders have already adjusted this for established property purchases made after 12 May 2026, well ahead of the legislation working its way through Parliament.
The impact varies by lender, income, debts and how many properties you hold. Industry modelling has suggested reductions of up to around 20% in some scenarios, though that’s far from universal and depends heavily on individual circumstances. For some investors, particularly those on higher incomes or holding more than one negatively geared property, borrowing capacity for a new purchase can be meaningfully lower than it was a few months ago.
This is exactly the kind of moving target that catches people out. A pre-approval based on assumptions from earlier this year can fall over by the time you’re ready to make an offer, which is why checking current lender policy before you commit matters more than usual.
What to Consider Before Your Next Purchase
A few practical points, without the doom and gloom.
If you already own investment property, nothing needs to happen in a hurry. Your existing arrangement is generally protected while you continue holding that property.
If you’re weighing up a new build against an established property, the tax and lending treatment now favours new builds more clearly than it used to. That’s a real factor to weigh alongside build costs, location and rental demand, not the only one.
If you’re planning to buy soon, get your borrowing capacity checked against current lender policy rather than last year’s numbers. Not every lender has moved at the same pace or in the same direction, which means the right lender for your situation matters more than ever.
This is where local knowledge and knowing which lender fits your circumstances makes a real difference. Have a look at our investment property loan options or read Why Use a Mortgage Broker Instead of Going to Your Bank? for more on why lender by lender knowledge counts for so much in a market that’s still moving.
For official information on the reforms, Treasury’s 2026-27 Budget tax reform material and the Federal Register of Legislation are the most reliable sources. The ATO is expected to publish detailed administrative guidance as the changes are implemented.
Not Sure Where You Stand? Let's Talk It Through
If you’re trying to work out what these changes mean for your next purchase, or whether your existing pre-approval still holds up, book a free call with Stephen. No jargon, no obligation, just a straight conversation about where you stand with the lenders who matter for your situation.
This information is general in nature and does not take into account your personal objectives, financial situation, or needs. You should consider whether it is appropriate for you before acting on it, and seek independent tax advice for your specific circumstances.
Published at September 9, 2026