From 1 July 2027, negative gearing on residential property is limited to new builds. Established property bought after 7:30pm on 12 May 2026 loses the ability to deduct rental losses against your salary — while properties you already owned are grandfathered under the old rules. Here's exactly what changed, who it affects, and what it looks like in dollars.
Negative gearing is when the costs of holding an investment property — loan interest, rates, insurance, management and depreciation — add up to more than the rent it earns. The property runs at a loss on paper, and under Australian tax law that loss has historically been deductible against your other income, like your salary, reducing the tax you pay.
How it works in practice: if your property earns $42,000 in rent but costs $75,000 to hold, the $33,000 shortfall comes off your taxable income. At a 39% marginal rate, that's $12,870 less tax — which is why negative gearing has been the engine of Australian property investing for decades. The 2026 Budget didn't switch that engine off. It changed which properties it works for.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026, announced in the 2026–27 Federal Budget on 12 May 2026, splits residential property into two very different tax worlds from 1 July 2027:
No — negative gearing is not being removed. It's being redirected. The deduction that has always powered property investing continues in full, but from 1 July 2027 it applies only to eligible new builds. The stated policy aim is to point investor capital at new housing supply rather than bidding up existing homes — so the strategy investors have used for decades still works, provided the property is new.
In practice that makes "should I buy established or new?" the most consequential question in Australian property investing right now. The same loan, the same suburb, the same tenant — but only one of the two purchases can reduce the tax on your salary.
Yes — if you owned the property before Budget night, you're grandfathered. Investment properties held before 7:30pm on 12 May 2026 stay under the old rules: rental losses remain deductible against your other income, and the 50% CGT discount continues to apply, for as long as you hold them.
Changes announced, 7:30pm. Established property purchased after this point is captured by the new rules.
New rules commence. Negative gearing limited to new builds; new CGT treatment applies to captured established property.
Exempt throughout. Full negative gearing and the choice of CGT treatment, before and after the commencement date.
A hypothetical investor on a 39% marginal rate (taxable income $135,001–$190,000 including Medicare levy) buys a $1,000,000 new build with an $800,000 loan at 6.5%:
| Each year while you hold | |
|---|---|
| Rental income | $42,000 |
| Loan interest ($800k at 6.5%) | −$52,000 |
| Rates, insurance, management | −$9,000 |
| Depreciation (non-cash, new build) | −$14,000 |
| Net rental loss | −$33,000 |
| Tax saved at 39% (new build only) | +$12,870 |
| Net holding cost after tax | ~$118/wk |
Buy the equivalent established property after Budget night and that $33,000 loss can't touch your salary — the $12,870 stays with the ATO this year, and the loss carries forward instead.
The sale-day difference is bigger again. Sell the new build ten years on for $1,600,000 — a $600,000 gain — and the 50% CGT discount means tax on $300,000 (about $117,000 at 39%) instead of tax on the full gain (about $234,000). The discount alone is worth $117,000; established property bought after Budget night no longer gets it, moving instead to indexation with a 30% minimum tax, which generally leaves a larger taxable gain.
For new builds, the honest answer is that the case just got stronger, not weaker — because the Budget removed the competition. New builds now hold every tax advantage at once: the salary deduction, the choice of the 50% CGT discount, and maximum depreciation from year one. Established property holds none of them for new purchases.
Whether it's worth it for you depends on your income, borrowing position, cashflow tolerance and timeline — a negatively geared property still costs money each week, and tax benefits should sharpen a good investment rather than rescue a bad one. That's a conversation, not a headline: book a strategy call and we'll model your numbers, or start with why investors choose house & land.
This page is general information only and doesn't consider your objectives, financial situation or needs. It is not tax, financial or legal advice. Tax outcomes depend on your circumstances and the law at the time — consult a registered tax agent before acting.
The rules changed; the opportunity didn't — it moved to new builds. A fifteen-minute strategy call models what that looks like on your numbers.
