Negative Gearing Is Changing on 1 July 2027: Who Is Affected, and Who Is Not
Negative gearing on established homes bought after 12 May 2026 ends from 1 July 2027. Here's who is grandfathered, what new builds keep, and what it costs.
For decades, Australians who bought a rental property that lost money could take that loss off their salary and pay less tax. That is negative gearing, and it is one of the best-known tax rules in the country.
It is now changing. The negative gearing limits announced in the May 2026 federal Budget passed Parliament on 25 June 2026, as part of the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026. The same package also brought in the $250 Working Australians Tax Offset and the $1,000 standard deduction for work expenses.
The new rules start biting on 1 July 2027, so there is time to understand them. Plenty of people are still unsure whether they are caught, so here is the plain-English version.
The one-sentence version
If you buy an established home (one that already exists, as opposed to a newly built one) as an investment after 7:30pm AEST on 12 May 2026, then from 1 July 2027 any rental loss on it can no longer reduce the tax on your wages.
That loss does not disappear. It can still be used against income from residential property, and anything left over is carried forward to future years.
Who keeps negative gearing as it is
A lot of investors will not notice any change at all. You keep the current rules if:
- You already owned the property before 7:30pm AEST on 12 May 2026 (Budget night). This is called grandfathering, and it lasts until you sell.
- You had signed a contract to buy before that time, even if settlement happened afterwards.
- The property is an eligible new build. The government's aim is to point tax support at new housing supply, so investors who buy new builds can still deduct losses against their other income.
- The property is not residential. The changes target residential property, so commercial property is not affected.
- The owner is a superannuation fund (including a self-managed super fund) or a widely held trust, which are excluded.
The trap: "negative gearing has been abolished"
It has not. If you already owned your investment property on Budget night, nothing about how you claim a rental loss changes, now or in July 2027. And even for properties that are caught, the loss is not wiped out. It is ring-fenced (kept for use against property income only) and carried forward, rather than taken off your salary.
What changes for everyone else
If you bought an established home as an investment after 7:30pm AEST on 12 May 2026, here is how your rental loss is treated:
- For the 2025-26 and 2026-27 income years, nothing changes yet. A loss can still reduce the tax on your salary in the usual way.
- From 1 July 2027, the loss can only be used against income from residential property, such as rent from other residential properties, including capital gains when you sell a residential property.
- It can no longer be deducted from non-property income such as your wages.
- Any loss you cannot use in a year is carried forward and can be used against residential property income in later years.
Worked example: what the change is worth
Sam earns a $90,000 salary. In August 2026 Sam signs a contract to buy an established apartment as an investment, so it falls after the Budget night cut-off.
The apartment rents for $500 a week, or $26,000 a year. Loan interest is $28,000 and other costs such as rates, insurance and strata come to $6,000. That is $34,000 of costs against $26,000 of rent, so Sam makes a rental loss of $8,000.
In 2026-27, the old rules still apply. The $8,000 loss cuts Sam's taxable income from $90,000 to $82,000. Sam is in the 30% tax bracket and pays the 2% Medicare levy, so the tax saving is $8,000 x 32%, which is $2,560.
In 2027-28, the new rules kick in. If the numbers are the same, Sam's $8,000 loss cannot be taken off the $90,000 salary, so there is no tax saving that year. Holding the property effectively costs Sam the full $8,000 instead of $5,440. The $8,000 is carried forward, ready to use against future rental profits or a capital gain when Sam sells.
Now compare Alex, who earns the same salary and owns an identical apartment bought in 2024. Alex is grandfathered, so Alex still gets the $2,560 tax saving every year the property makes that loss.
Reality check: the loss was never free money
Even under the old rules, Sam is $5,440 a year out of pocket after the tax saving. Negative gearing softens a loss, it does not turn it into a profit. The change mostly affects how fast that tax help arrives: sooner, against your wages, or later, against future property income.
What about capital gains tax?
The same law also changes capital gains tax (CGT, the tax on the profit when you sell an investment). From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is being replaced by indexation (increasing the cost of the asset in line with inflation, so only the after-inflation gain is taxed) together with a minimum tax rate of 30% on the gain.
Gains built up before 1 July 2027 keep the 50% discount. Only gains from that date onwards fall under the new method. This applies to other investments such as shares too, not only property, and the detail matters, so it is worth its own article. Our Capital Gains Tax calculator currently uses today's rules.
Still being finalised
One important detail is not settled yet: exactly what counts as a "new build". Treasury has been consulting on the definition of a new residential dwelling as part of a second round of legislation, and the final definition is expected to be set out in that law.
So if you are thinking of buying an off-the-plan or recently built property specifically to keep negative gearing, check the final rules, or ask a registered tax agent, before you sign.
What to do now
Most people do not need to do anything. But a few checks are worth it:
- Find the contract date for each investment property you own. That date, not the settlement date, decides whether you are grandfathered.
- If you bought an established property after 12 May 2026, work out what it costs you per year without the tax saving, and make sure your budget can handle that from July 2027.
- If you are planning to buy, run the numbers both ways: with the tax saving, and without it.
- Keep good records of every rental loss from now on. Carried-forward losses only help you later if you can prove them.
FAQ
Has negative gearing been abolished in Australia?
No. From 1 July 2027, it is limited for established residential properties bought after 7:30pm AEST on 12 May 2026. Properties owned or under contract before then are grandfathered, and eligible new builds keep full negative gearing. This is general information, not tax advice.
I bought an established investment property in September 2026. Can I still claim the loss this year?
Yes. The limit applies from 1 July 2027, so a rental loss for the 2026-27 income year can still be deducted against your salary as usual. From 2027-28, losses on that property can only be used against residential property income, including capital gains, with any excess carried forward.
What happens to a rental loss I cannot use?
It is carried forward to future years and can be used against income from residential property, such as future rental profits or a capital gain when you sell a residential property. It just cannot be taken off your wages.
Run your own numbers