Negative Gearing — What Actually Changes

The headlines say negative gearing is "gone." For most investors, that is not what the new law does.

The Tax Reform No. 1 Bill 2026 passed both houses of Parliament on 25 June 2026 and received Royal Assent on 26 June 2026. It is now law — though the negative gearing changes do not take effect until the 2027–28 income year, so nothing changes in the meantime.

What is actually changing

Negative gearing lets an investor whose property costs — loan interest, rates, repairs, management fees — exceed the rent deduct that net loss against their other income, such as salary, reducing their overall tax.

From the 2027–28 income year, that ability is wound back for established residential investment properties, but only for properties purchased after 7:30pm on 12 May 2026 (Budget night). For those properties, a net rental loss can no longer be deducted against salary or other non-property income. The loss is not lost: it is quarantined, carried forward, and can be applied against residential property income — other rental income, or the capital gain when you eventually sell a residential property.

Who is protected

Two important groups are unaffected:

• Properties you already held at Budget night. Anything you owned, or had under contract, at 7:30pm on 12 May 2026 is fully grandfathered. You can keep negatively gearing it against your other income in the ordinary way for as long as you hold it.

• New builds. Eligible new-build residential property retains full negative gearing — and, as it happens, the more favourable capital gains treatment when sold. The policy is deliberately steering investment toward new housing supply.

What is not affected at all

The change is confined to residential property. Commercial property, shares and other investments are untouched and continue to be negatively geared as they are today. Superannuation funds, including SMSFs, and widely held trusts are also excluded from the new rules.

Where this leaves you

If you already own an investment property bought before Budget night, you don't need to do anything — your position is unchanged.

If you are thinking about buying an established residential property from here on, the tax calculus has shifted. From 2027–28 you won't be able to use a rental shortfall to reduce the tax on your salary, so cash flow and yield matter more than they used to. A new build keeps the existing treatment; and if you are weighing residential against commercial, commercial property is now relatively more attractive on this measure.

This article covers negative gearing only. The same Act also changes the CGT discount — covered in our separate article on the new 30% minimum tax — along with several other measures we will address in future editions.

None of this is a reason to rush a purchase or a sale. The better move is to map out how the changes affect your particular holdings and plans before you commit. We are happy to work through that with you — just get in touch.