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1 July 2027

Negative Gearing Changes 2026 - Limited to New Builds

The 1 July 2027 CGT reset gets most of the attention, but the same legislation — the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026, royal assent 26 June 2026) — also changes negative gearing for residential property. If you own or are considering an investment property, both measures affect the same decision.

What negative gearing is
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A property is “negatively geared” when the costs of owning it (interest, rates, maintenance and other deductions) exceed the rent it earns. Under long-standing rules, that rental loss can generally be deducted against your other income, reducing tax today while you wait for capital growth.

What the legislated reform changes
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Under the reform, negative gearing on residential property is limited to new builds. Two things matter most:

  1. Existing holdings are protected. The cut-off is 7:30pm AEST on 12 May 2026 — Budget night. Established residential investment property acquired on or before that moment is exempt from the negative-gearing changes. The new limits are aimed at future purchases, not at unwinding existing arrangements.
  2. Established dwellings bought after that moment are the target. Going forward, full negative-gearing treatment is reserved for newly built residential property, consistent with the reform’s stated aim of directing investment toward new housing supply.
  3. The deduction is restricted, not destroyed. For an affected property, losses are deductible only against residential-property income, and any excess is carried forward rather than lost. This applies from the 2027-28 income year.

The genuinely open item is what counts as a “new build” — the Act defers the definition to a Ministerial instrument that has not been made yet. That, and how transitional cases are treated, await the instrument and developing ATO guidance. Confirm your specific position with a registered tax professional before acting.

Why it belongs in the same decision as the CGT reset
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  • Buying an established investment property in future may mean both less attractive gearing treatment and the new CGT regime (CPI indexation plus the minimum-rate arrangement) on future gains.
  • Already holding? Your negative gearing is grandfathered, and your CGT starting point becomes the property’s market value just before 1 July 2027, at the end of 30 June 2027 — which is where valuation evidence enters.
  • Comparing new build vs established now involves tax treatment on both the income side (gearing) and the capital side (CGT) — a genuine two-sided calculation for a registered adviser.

See who may be affected, the reform timeline and the reform glossary for the CGT half of the picture.

Common questions
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Is negative gearing being abolished?
No. Under the legislated reform it is limited for residential property rather than abolished: full negative-gearing treatment is directed to new builds, while established residential investment property acquired on or before 7:30pm AEST on 12 May 2026 is exempt from the changes. Even for affected properties the deduction is restricted rather than destroyed — losses are deductible against residential-property income, with any excess carried forward, from the 2027-28 income year. Confirm details with a registered tax professional.
I already own a negatively geared property — am I affected?
If you acquired it on or before 7:30pm AEST on 12 May 2026 — Budget night — it is exempt from the negative-gearing changes, so existing arrangements are protected. Your property is still within the separate CGT reset — its market value just before 1 July 2027 — at the end of 30 June 2027 — becomes the new cost base for future gains.
Does the negative-gearing change alter my CGT?
They are separate measures inside the same Act. Negative gearing concerns your annual rental deductions; the CGT reset concerns how gains after 1 July 2027 are calculated. An investment decision now usually needs to weigh both.
Do new builds get both benefits?
Newly built residential property retains full negative-gearing treatment under the reform. The CGT side may work differently from other property, not the same: s 112-155(1)(e) excludes from the 1 July 2027 deemed sale any asset for which the new residential dwelling concession (s 115-102) or the affordable housing concession (s 115-125) applies to the eventual gain — so such a property may need no 1 July 2027 value at all. Two cautions: “new residential dwelling” is not yet defined (the Act defers it to a Ministerial instrument that does not exist yet), and the test is applied when you eventually sell, not on 1 July 2027 — so it is not a status you can rely on today. Worth putting to a registered tax professional before deciding to skip dated evidence.

Important
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This page is general education only — not tax, financial, legal or valuation advice. Negative-gearing eligibility and transitional rules depend on your circumstances and on developing ATO guidance. Speak with a registered tax professional before acting.