Under the negative gearing changes, from 1 July 2027 rental losses on an established home bought after 7:30pm AEST on 12 May 2026 can no longer reduce your salary income. They can only offset residential rental income and residential capital gains, with any excess carried forward. New builds can still be negatively geared, and properties held before Budget night are grandfathered.
| When you bought (contract date) | Established home | New build |
|---|---|---|
| Before 7:30pm AEST, 12 May 2026 | Negative gearing kept until you sell | Kept |
| 12 May 2026 to 30 June 2027 | Kept until 30 June 2027, then losses quarantined | Kept |
| From 1 July 2027 | Losses quarantined from the start | Kept |
Is this law now?
Yes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and the ATO describes the measures as law. The changes start on 1 July 2027. A further bill is expected to deal with jointly owned properties where one owner dies or a property passes in a divorce, so check the latest position with your tax agent if that applies to you.
What does “quarantined” mean for a rental loss?
The loss is not thrown away. It is set aside and can only be used against other residential property income: net rent from other homes you own, or a capital gain when you sell a residential property. If those are not enough in a year, the rest carries forward to later years. What it can no longer do is reduce the tax on your wages.
The rules apply to individuals, partnerships, companies and most trusts. Super funds, including self managed super funds, and widely held trusts are excluded. Commercial property and shares are not affected.
What counts as a new build?
The Budget explainer describes a new build as a home that genuinely adds to supply:
- A dwelling built on vacant land.
- A site where an existing home is demolished and replaced with more dwellings than before, such as one house replaced by a duplex.
A knock-down rebuild that replaces one house with one house, or a large renovation, does not count. The home also cannot have been sold before, unless the builder owned it and it was not occupied for more than 12 months. Later buyers of that home do not get the new build treatment, so an off-the-plan unit you buy first keeps it, but the next buyer from you does not. The exact definition is being set by a legislative instrument.
Who keeps negative gearing?
- Anyone who held the property at 7:30pm AEST on 12 May 2026, including where contracts were signed but not yet settled. They keep it until they sell.
- Owners of new builds, before and after 1 July 2027.
- Owners of commercial property, which is outside the change.
A worked example on a Sydney unit
An investor on a 37% tax rate (39% with Medicare) buys an established $750,000 unit in Sydney in August 2026 with a $600,000 interest-only loan at the 6% example rate. The figures are illustrative.
| Item | Amount |
|---|---|
| Rent, $650 a week | $33,800 |
| Interest at 6% | $36,000 |
| Strata, rates, insurance and management | $8,000 |
| Net rental loss | $10,200 |
| Tax saving against salary until 30 June 2027 | $3,978 |
| Tax saving against salary from 1 July 2027 | $0, loss carried forward |
Before 1 July 2027 the unit costs this investor about $120 a week after tax. From 1 July 2027 it costs about $196 a week, because the $10,200 loss waits until there is residential income or a capital gain to absorb it. If the same investor had bought a new apartment, the old treatment would continue.
How do lenders see the change?
When a lender works out your borrowing power, many add back part of the tax benefit of an existing negatively geared property. For established property bought after Budget night, that benefit ends on 1 July 2027, so the cash flow a lender can count may be lower, and a property that only works after tax may no longer pass. The guide to negative gearing explains how lenders treat geared property today, and the negative gearing calculator compares the weekly cost under both sets of rules.
Should you buy new or established now?
That depends on what the property is for. New builds keep the tax treatment, but they can carry higher prices, smaller land content and valuation risk when bought off the plan. Established homes in good Sydney locations may hold land value better, but now need to stand up on rent and growth. The article on choosing an investment property in Sydney walks through the trade-off, and the off-the-plan home loans page covers how lenders value a new unit at settlement.
What should you check before you sign?
- Whether the property is new under the definition, in writing from the developer or builder.
- The cash flow without any tax benefit, using real rent and costs.
- How a lender will assess it, before you exchange.
- How the capital gains tax changes will apply when you sell; see the capital gains tax changes.
Questions people ask
Can I still negatively gear an established property?
Yes, if you held it at 7:30pm AEST on 12 May 2026. If you bought it after that, you can until 30 June 2027; from 1 July 2027 its losses only offset residential income and gains.
Do the changes affect my own home?
No. Negative gearing is about investment property, and the main residence exemption from capital gains tax continues.
Are the lost deductions gone for good?
No. Quarantined losses carry forward and can reduce future net rent or a residential capital gain.
How will the negative gearing changes affect me?
If you already own an investment property, or bought one before 7:30pm AEST on 12 May 2026, nothing changes while you hold it. If you buy an established home after that, plan for its losses to be carried forward from 1 July 2027 rather than reducing tax on your salary.
Charles Touma models investment purchases with and without the tax benefit, so you know whether the loan works on rent and income alone. A free 30-minute call covers the numbers and how lenders will assess them. General information only, not tax, legal or credit advice; speak with a registered tax agent about your own position.
Sources: ATO, reforming negative gearing and capital gains tax; Budget 2026-27 tax explainer, transitional arrangements and new build definition, checked 18 October 2026.
General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.
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