Australia's Negative Gearing Changes (2027): Who's Affected and Who's Grandfathered

From 1 July 2027, if you bought an established rental property after the threshold date (7:30pm on 12 May 2026), you can no longer deduct its rental loss against your salary.

The loss does not disappear, instead it gets quarantined, this means that it can only offset rental income or a future capital gain on your investment properties, never your wage.

There are two groups that are untouched. If you already held the property before 7:30pm on 12 May 2026, you are grandfathered and can keep negatively gearing it until you sell. And new builds are exempt, so a brand-new dwelling still gets full negative gearing and the 50% capital gains tax discount.

This is now law. It was legislated as part of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026.

What is negative gearing?

Negative gearing is when an investment property costs more to hold than it earns in rent. Add up the interest, council rates, insurance, maintenance and depreciation, take away the rent, and if you are out of pocket, the property is negatively geared. Under the previous rules (and new rules in special cases) that shortfall is a tax deduction, and it comes off your other income, including your salary, which lowers your overall tax bill. That deduction against your wage is the exact thing these new changes are restricting.

What's changing, why, and when

Negative gearing lets a property investor deduct the shortfall when the costs of holding a rental, the interest, rates, insurance and upkeep, run higher than the rent. Until now that shortfall came straight off your other income, including your salary, and cut your tax bill.

It is argued that this pushed more investors into property and raised prices due to speculation. With the current house affordability crisis, it's claimed that removing the negative gearing would help cool investment demand.

From 1 July 2027 negative gearing stops for established homes bought after the cutoff. The deduction against your wage goes. In its place the loss is ring-fenced: it can only be used against income from residential rental properties, or against a capital gain when you eventually sell one. If you have no other rental income, the loss carries forward until you do.

There are carve-outs for new builds as well.

This sits in the same reform package as the capital gains tax changes, and the two are easy to muddle because they landed together. Keep them separate: this page is negative gearing, and you can model the CGT side with the capital gains tax calculator.

Am I grandfathered?

This is the question most people ask, and the date that counts is: 7:30pm AEST, 12 May 2026.

If you held the property at that moment, you are grandfathered. You keep deducting rental losses against your salary for as long as you own it, under the old rules, with no end date tied to the reform. A property that was under contract and awaiting settlement at that moment counts as held, so a purchase you had already signed is protected.

If you bought after that moment and the property is an established dwelling, you are in the new regime from 1 July 2027. An established dwelling includes a home you once lived in and later rented out, the test is when you acquired it, not how you have used it. Between now and 1 July 2027 nothing changes; the new treatment only applies from the 2027-28 year.

So the cutoff is about when you committed to buy, not when you settle or when you start renting it out.

New builds keep everything

The reform is built to push investment toward new housing supply, so new builds are carved out entirely.

A new build gets full negative gearing against your salary, and it keeps the 50% CGT discount that established properties lose. For this purpose a new build is a dwelling that was never part of the established housing stock: an apartment bought off the plan, a duplex from a knock-down-rebuild, a house you build on vacant land, or a newly built home first sold within 12 months of being occupied. Extensions, a single free-standing knock-down, granny flats, and homes lived in for more than 12 months before sale do not count. Investments supporting government and affordable housing programs are exempt too.

What quarantining costs you

Losing the deduction against your wage is not the same as losing the deduction. The loss still exists. It just has fewer places to go.

Say your rental runs a $15,000 loss for the year. That is your total holding costs, mostly interest but also rates, insurance and upkeep, minus the rent. Under the old rules, on a 37% marginal rate, that loss knocked roughly $5,550 off your tax bill by reducing your taxable salary. Under the new rules for an affected property, the same $15,000 can only sit against rental income or a future capital gain on a rental property. If this is your only investment property and it is not yet cash-flow positive, the loss banks up and waits. You get the benefit later, when the property turns a profit or you sell it, rather than as a refund now.

For a highly geared investor who leans on that yearly refund to hold the property, that is a real cash-flow change, and it is the part that really needs planning around.

The controversial debate: the impact, and will it actually help?

The intended goal of the reform stated that this would help new homeowners get into the market and push more support at building new homes instead of bidding up existing ones. But not everyone is happy about it or believes it will actually work.

The case for it. Supporters say the old system funnelled tax breaks into established houses, which adds nothing to supply. Aim the same incentive at new builds and, in theory, more homes get built. There is a fairness line too: the benefit skewed heavily to higher earners with multiple properties, so trimming it is framed as closing a loophole for the well-off and giving more opportunity to new home owners.

The case against it. Critics think it could backfire. The Conversation argues the new rules might accidentally favour some investors and distort the market in new ways. The property industry is split on whether it delivers a single extra home. Some warn landlords will push higher holding costs onto renters. And the grandfathering builds in a lock-in: if selling means losing your old tax treatment, plenty of owners just will not sell, which tightens the supply of established homes rather than loosening it. It also means the new generation doesn't have the same tools to build wealth as the older generation, which is grandfathered.

Our take. Generally our take is that this has some positives but could also have unintended consequences due to how tight the current rental occupancy is.

This should have been passed years ago, and now runs the risk of raising rents on an already very expensive rental market.

We also believe more needs to be done beyond these reforms to boost housing supply, which is the real issue with affordability.

We believe the bottlenecks are more linked to low margins on new builds, and high labour and material costs from competition with publicly funded infrastructure projects, so until these issues are addressed, changes in tax rules might still have minor impacts.

Grandfathering keeps existing investors happy and reduces shocks, but it also means the promise of "intergenerational equity" still rewards previous investors while penalising future generations' ability to build wealth.

So what you can do

Here's a short checklist. None of this is advice, just some sensible admin.

• If you already own an affected-type property, confirm your grandfathered status and keep the records that prove you held it before the cutoff.
• If you are buying, weigh the new-build gap before you choose between an established home and a new one. The tax outcome now differs materially.
• If you are a geared investor, model your cash flow from 2027-28 without the salary offset, so a lost annual refund does not catch you short.
• Get advice for anything material. Trusts, multiple properties and mixed portfolios all have nuances worth a professional eye.

Model your own situation

Whether a property stacks up turns on your rent, your interest, your marginal rate and, from 2027-28, whether the loss can reach your salary at all. Put your own numbers in.

Model your position in the Orbit negative gearing calculator →

It shows your annual rental shortfall and the tax effect, and pairs with the capital gains tax calculator for the sale side of the picture.

Frequently asked questions

General information only, current as of 29 July 2026. It is not personal tax advice. Verify your situation with the ATO or a registered tax agent.