Negative Gearing Changes from 1 July 2027: What Property Investors Need to Know
Status at 5 September 2026: The core framework and new-dwelling rules are law (Treasury Laws Amendment (Tax Reform No. 1) Act 2026). A second Act (Tax Reform No. 2, 26 August 2026) preserves negative gearing for property received through inheritance or a relationship breakdown. Further technical rules, including exemptions for affordable, NDIS, public and build-to-rent housing, were consulted on in August 2026 and are not yet law. Key dates: 7:30 pm AEST on 12 May 2026 is the grandfathering cut-off. The new loss rules apply from 1 July 2027. In one sentence: Established residential property held under a contract before the Budget-night cut-off is protected; qualifying new builds can continue to be negatively geared.
The Government has limited negative gearing for residential property — it has not removed it altogether. For some investors, nothing changes. For others, a rental loss that once reduced salary or business income will instead be carried forward or used against residential property income. Contract timing and new-build status are now very important.
What is negative gearing?
A residential investment is negatively geared when deductible costs exceed its rental income. Under the longstanding rules, an individual could generally use that net loss to reduce other assessable income, including salary and wages. The tax saving never made the underlying cash loss disappear.
From 1 July 2027, that treatment depends on what you bought and when you committed to buy it.
Which properties are grandfathered?
An established residential property held at 7:30 pm AEST on 12 May 2026 is grandfathered. The Government’s guidance confirms this includes a property where a contract had been entered into before that time even if settlement had not occurred.
The owner can continue to offset an eligible rental loss from that property against other income in future years, until the property is sold.
A later buyer does not inherit the seller’s grandfathered treatment (with limited exceptions now legislated for property received through inheritance or a relationship breakdown).
What happens if you buy an established property after the cut-off?
There are two timing periods to understand:
If you entered into the purchase after 7:30 pm on 12 May 2026 but before 1 July 2027, the existing negative gearing treatment can apply up to 30 June 2027. The new restriction then applies from 1 July 2027.
If you acquire an established residential investment from 1 July 2027, the restriction applies from the beginning.
An affected loss cannot generally reduce salary, wages or unrelated business and investment income. It can reduce other residential property income, including relevant residential gains; any excess is quarantined and carried forward.
New builds remain eligible
Qualifying new residential builds can continue to access negative gearing. The policy is designed to direct the tax benefit towards homes that genuinely add to housing supply.
Based on the enacted rules and Government guidance, examples include an apartment bought off the plan, a dwelling built on vacant land, or a development that creates additional homes. A one-for-one rebuild, renovation that adds no dwelling, or granny flat on an ineligible established property will not automatically qualify. Check the definitions and your documents before relying on the exception.
What is outside the change?
Commercial property and shares retain existing deduction rules. The measure covers most structures but excludes widely held trusts and complying super funds, including SMSFs.
A practical example
Amelia earns $110,000 and signs a contract in September 2026 to buy an established rental property. The property makes a $12,000 tax loss in both 2026–27 and 2027–28.
For 2026–27, Amelia may be able to apply the loss under the existing rules. From 1 July 2027, she cannot use the next $12,000 to reduce her salary. With no other residential property income, it is carried forward and may later reduce positive rent or an eligible residential capital gain. A qualifying new build would be treated differently.
Private use, ownership, interest deductibility and the CGT rules can all change the result.
What should property investors do now?
Start with a property-by-property review:
Keep the signed contract and evidence of its date and time.
Confirm whether each property is established, grandfathered or a qualifying new build.
Update cash-flow forecasts. A tax benefit that previously arrived each year may be deferred.
Keep complete records of quarantined losses and all rental expenditure.
Model the combined negative gearing and CGT changes before buying, selling or changing ownership.
Do not invest solely for a deduction. Cash flow, risk and your ability to hold the property come first.
Frequently asked questions
Has negative gearing been abolished in Australia?
No. Grandfathered residential investments remain eligible, and qualifying new builds can continue to be negatively geared. The change mainly limits how losses from affected established residential properties can be used from 1 July 2027.
Will my carried-forward rental losses expire?
No expiry period has been announced. The framework carries excess affected losses forward for later use against qualifying residential property income, including eligible residential capital gains. Keep clear records.
Is a renovated property treated as a new build?
No. The test focuses on genuine additions to housing supply; a renovation or one-for-one rebuild generally does not qualify by itself.
Talk to Regans Accountants before your next property decision
If you own an investment property — or are considering buying one — Regans Accountants can review the contract date, new-build status, likely cash-flow effect and interaction with the new CGT rules. A short planning conversation now can prevent a costly assumption later.
General information only, current at 5 September 2026. Speak with us about your own circumstances.
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