Is negative gearing still worth it? It may be the first question on your mind since the May Budget. For decades, Australians invested in property expecting the tax refund 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. Parliament changed that on 25 June 2026, and the negative gearing changes apply from the 2027-28 income year.
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 the 2027-28 income year, that loss comes off other income such as wages, and lowers the tax paid on it. The investor still carries the loss. The tax system shares part of it.
Negative gearing changes: what changes in the 2027-28 income year
For an established home bought after 7.30pm AEST on 12 May 2026, Budget night, a rental loss can no longer come off your wages from the 2027-28 income year. The loss is carried forward instead. It can be used against later rental income from residential property, or against the gain when the home is sold. Until the 2027-28 income year, a home bought after the cut-off is negatively geared in the usual way.
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.
- A home received from a spouse through an inheritance or a separation keeps the old rules, under a second law passed in August 2026. So does a larger share inherited by someone who already part-owned the home.
- 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. Since 10 August 2026, though, a self-managed fund can no longer borrow to buy residential property.
What counts as a new build
In broad terms, a new build adds a home that was not there before: an apartment off the plan, a house on empty land, or a duplex where one house stood. An extension, or a rebuild that simply replaces one house, does not count. The June law leaves the exact definition to come, and a bill introduced on 14 October 2026 would define it.
The 14 October 2026 bill: introduced, not yet law
On 14 October 2026 the Government introduced the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026. It is a bill, not law: Parliament has not passed it, and it can change before it passes, if it passes. Until it passes, the June law above is the law that applies.
As introduced, the bill would define, in the law, what a new residential dwelling is. The Tax Reform No. 3 Bill 2026, introduced on 14 October 2026 and not yet law, would exempt from the negative gearing limits a dwelling enrolled under NDIS rules as a specialist disability accommodation dwelling, from the 2027-28 income year.
The bill’s final wording will decide exactly which homes it covers, if it passes, and this page will be updated then.
It has been tried before
This is not the first time. From July 1985, the Hawke government quarantined rental losses on property bought after that date. In September 1987, with Paul Keating as Treasurer, the old rules came back. At the time, the argument that rents had risen because of it won the day, and economists have argued about it ever since. What it shows is that the goalposts move, and they can move again while you hold.
The capital gains change that comes with it
The same law also changes how capital gains are taxed. For individuals, trusts and partnerships, the 50 per cent discount gives way to indexation, where the cost base rises with inflation. For an individual, a minimum tax of 30 per cent applies to the gain, except in a year they receive the Age Pension or another listed payment. It applies to gains made from 1 July 2027. Gains made before 1 July 2027 keep the 50 per cent discount, with the property’s value at that date, from a valuation or a set apportionment method, marking the line. New builds keep access to the discount.
Is negative gearing still worth it?
For a home held at 7.30pm AEST on 12 May 2026, and for a new build, it works as it always has. For an established home bought since, the tax system now shares the loss later rather than each year, so you carry more of the cost in the meantime. Anyone still meaning to start faces rules that have already moved.
So the question is no longer the refund. It is whether the land is likely to grow, and whether you can carry the weekly cost for the years it takes, under the rules the property falls under.
To see what the change means for a property you hold, or one you are looking at, book a first conversation. It costs nothing.
Nicholas Lockhart
Law as at 19 October 2026; the bill as introduced on 14 October 2026.
Source: Australian Taxation Office, Tax reform - Boosting home ownership - Reforming negative gearing and capital gains tax (updated 29 June 2026); Treasurer, media release, 19 August 2026; Treasurer, media release “Tax reform for a fairer tax system”, 14 October 2026; Treasurer, second reading speech, Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, 14 October 2026; The Conversation, Policycheck: negative gearing reform (2016).