For decades, many Australians have bought an investment property expecting the tax return to soften the weekly cost. The rent fell short of the loan and the running costs, the shortfall came off their wages at tax time, and the refund made the gap easier to carry. This year that changed. The law passed Parliament on 25 June 2026, and it applies from 1 July 2027.
I want to set out plainly what changed and who it touches, so you can see where you stand.
What negative gearing is
A property is negatively geared when the cost of holding it, the loan interest and the running costs, is more than the rent it brings in. Until now, that loss could be taken off other income, such as wages, which lowered the tax paid on that income. The investor still carried the loss; the tax system shared part of it.
What changed
From 1 July 2027, a loss on an established home bought after 7:30pm AEST on 12 May 2026, Budget night, can no longer come off wages or other income. It is not wiped out. It is carried forward, and can be used against later rental income from residential property, or against the gain when the home is sold. If there is never enough of either to use it against, it may never be used.
A home bought after the cut-off can still be negatively geared in the usual way until 30 June 2027. The change starts with the 2027-28 income year.
Who keeps the old rules
- A home held, or under contract, at the cut-off keeps the old rules for as long as it is held.
- New builds keep the old rules, whenever they are bought.
- Super funds, including self-managed super funds, and widely held trusts sit outside the change. Individuals, partnerships, companies and most other trusts are inside it.
What counts as a new build
In broad terms, a new build adds a home that was not there before: an apartment bought off the plan, a house built on empty land, or a duplex where one house stood. Extensions, granny flats beside an existing home, and a rebuild that simply replaces one house are not expected to count. The exact definition is set by the Minister, and the detail is still being settled, so check the current definition with an accountant before relying on it for a particular property.
The capital gains change alongside it
The same law also changes how capital gains are taxed. For individuals, trusts and partnerships, the 50 per cent discount is replaced by indexation, where the cost base rises with inflation, together with a minimum tax of 30 per cent on the gain. It applies to gains made from 1 July 2027. Gains made up to 30 June 2027 keep the 50 per cent discount, with the value on that date marking the line. New builds keep access to the 50 per cent discount.
Some things are still being settled
Homes owned jointly, inherited, or divided when a relationship ends raise questions the first law did not fully answer. The government has said it will deal with them in a second law later this year. If one of those applies to you, it is worth watching.
The questions I would ask
The law is the same for everyone. What it means for you depends on what you hold and how it is set up. These are the questions I would work through:
- Was this home held, or under contract, before 7:30pm on 12 May 2026?
- Does the rent carry the cost of holding it without a tax refund?
- Is there other rental income from residential property that a loss could be used against?
- How long do you plan to hold, and what does a sale look like under the new capital gains rules?
- Is the loan set up for the position you are in now, or the one you were in when you bought?
The rules changed; the questions didn’t
A property was never meant to be held for its tax refund alone. It is held for what it does across the years: the rent it earns, the land beneath it, and the part it plays in your plans. That has not changed. What has changed is how the numbers add up, and the time to see them is before 1 July 2027, not after.
Nicholas Lockhart
General information only. No advice is given. This article reflects the law as at 10 October 2026. Tax outcomes depend on your own circumstances; an accountant can confirm how the rules apply to you.
Source: Australian Taxation Office, Tax reform: reforming negative gearing and capital gains tax; Treasury Laws Amendment (Tax Reform No. 1) Act 2026.