Negative Gearing Changes Australia 2027: What Property Investors Need to Know
What is negative gearing?
Negative gearing is when the cost of owning a rental property (interest payments, maintenance, management fees, depreciation, etc.) exceeds the rental income it generates. The resulting net loss can be deducted against your other income — most commonly salary — reducing your overall taxable income.
This tax treatment has long been a feature of Australia’s property investment landscape, allowing higher-income investors to offset paper losses from investment properties against their wages while waiting for capital growth.
What is changing and when?
The Australian Government announced at the 12 May 2026 Budget (Budget night) that:
From 1 July 2027, negative gearing on rental properties will be limited to new builds for properties purchased after 12 May 2026.
This means:
- Properties purchased before 12 May 2026: fully grandfathered — existing negative gearing treatment continues as before, for as long as you hold the property.
- Existing (second-hand) properties purchased after 12 May 2026: from 1 July 2027, net losses cannot be deducted against other income.
- New builds purchased after 12 May 2026: negative gearing rules remain unchanged.
Why new builds?
The policy is designed to redirect investor demand from the existing housing stock (where investor purchases push up prices for owner-occupiers and first home buyers) toward new construction — which adds to housing supply rather than competing for existing stock.
What does this mean in practice?
If you already own investment property
Nothing changes. Your existing properties remain fully grandfathered under the old rules. You can continue offsetting rental losses against your income for as long as you hold those properties.
If you’re planning to buy an investment property after 12 May 2026
- New build: negative gearing continues normally — no change.
- Existing property: from 1 July 2027, any net rental loss cannot be offset against other income sources. You can still deduct rental expenses against rental income — you simply cannot carry a net loss across to your salary or other income.
This significantly changes the after-tax cash flow profile of holding an existing investment property bought after the announcement date.
Costs still deductible from rental income
Even for existing properties purchased after 12 May 2026, actual rental expenses (interest, rates, insurance, management fees, depreciation) remain deductible against your rental income. The change only affects what happens when those deductions create a net loss — that excess cannot be used to offset other income.
How does this interact with the CGT changes?
The 2026 Budget also announced changes to the Capital Gains Tax (CGT) discount from 1 July 2027 (replacing the 50% discount with indexation plus a minimum 30% tax on real gains). These two changes operate independently but compound each other for investors in existing properties bought after 12 May 2026:
- Reduced holding cost benefit (no negative gearing offset against salary).
- Reduced capital gain benefit on exit (indexation rather than 50% discount).
Together, the changes substantially reduce the after-tax attractiveness of investing in existing properties compared to new builds. For a full breakdown of the CGT changes, see the CGT article in this section.
What should investors do?
- Existing holdings: no action required — your properties are grandfathered.
- Considering a new purchase: review with your accountant whether a new build or existing property makes more sense given both the negative gearing and CGT changes.
- Watch for legislative detail: policy announced at Budget does not immediately become law. The legislation will provide the precise definition of “new build” and transition rules. Track ATO guidance as it is published.
This article reflects the policy as announced at the May 2026 Budget. Specific legislation may differ. Not a substitute for personal tax advice.