Nov 9, 2026 Joel Hernandez
Navigating Australia’s New Negative Gearing Rules
Property investing in Australia just entered a new era. Following the 2026–27 Federal Budget, Parliament passed major tax reforms. If you own or plan to buy property, here is what you need to know.
What is Negative Gearing?
Historically, if your property expenses (like interest and maintenance) outweighed your rental income, you could use that net loss to reduce the tax on your salary. This strategy is known as negative gearing.
What are the Key Changes?
Starting 1 July 2027, the government is restricting this strategy:
- The Restriction: You can no longer offset net rental losses against your personal wage or salary income if you buy an established (existing) residential home.
- Quarantined Losses: Losses on newly bought established homes are not lost forever; they are “quarantined” to offset future residential rental profits or residential property capital gains tax when you sell.
Exclusions to the Rule
While the law targets individual investors buying existing homes, several exclusions exist:
- Grandfathered Assets: If your property contract was signed before 7:30 pm AEST on 12 May 2026, your tax benefits will continue unchanged.
- New Residential Builds: Buying or building a new home remains fully eligible for negative gearing to encourage new housing supply. Special rules apply for knock-down rebuilds, which need to increase the number of dwellings on the site.
- Commercial and Industrial Real Estate: The new rules only apply to residential property. Commercial assets like offices, retail spaces, and warehouses retain full negative gearing benefits.
- Social and Institutional Housing: Specific exemptions apply to build-to-rent developments, NDIS housing, and affordable or social housing programs.
Maintaining Perspective
These changes generally will not apply existing property, and the transition period before the July 2027 start date provides investors some time to review their cash flows, pivot toward new builds, or adjust their wealth strategies.
Next Steps
Whether you are planning a property acquisition or reviewing your long-term investment plans, preparation is key. Contact our office for help on navigating the new rules.
