Property Investment • Negative Gearing • Tax Reform
Negative gearing is changing: what Australian property investors need to know before 2027
Australia has changed the rules around negative gearing and capital gains tax, with the main property reforms due to take effect from 1 July 2027.
The headlines can make it sound as though negative gearing is disappearing completely. It is not. The more useful question for property investors is whether a property is established, new, grandfathered under the old rules, or affected by one of the transitional arrangements.
The change is real — but negative gearing has not simply been abolished
The core tax reforms have now passed Parliament. From 1 July 2027, the way rental losses are treated will depend heavily on when an investment property was acquired and whether it qualifies as new housing.
For many investors who already owned property before the Federal Budget announcement on 12 May 2026, the existing negative gearing arrangements are generally intended to continue under grandfathering provisions.
Investors buying established residential property after the Budget-night cut-off face a different position. From 1 July 2027, affected property losses generally will not be available to reduce unrelated income such as wages.
The loss is not necessarily wasted. Under the new regime, it may generally be carried forward and used against qualifying residential property income, including future rental income or residential property capital gains.
Core point: the new system does not treat every investment property the same. Purchase date, property type and ownership history are becoming much more important.
1. What is actually changing with negative gearing?
Negative gearing occurs when the deductible costs associated with an investment property exceed the income it produces.
Under the traditional system, an eligible rental loss can generally reduce other taxable income, such as salary or wages.
From 1 July 2027, that treatment changes for affected established residential properties acquired after 7:30 pm AEST on 12 May 2026.
Instead of using the loss to reduce unrelated personal income, affected investors will generally be limited to using those deductions against residential property income.
Unused amounts can generally be carried forward for later years.
Important distinction: a rental loss being quarantined is not the same as the deduction disappearing altogether.
Source: Australian Treasury, Budget 2026–27 tax system changes. View Treasury guidance.
2. Existing investment properties have grandfathering protection
One of the most important details for existing investors is the grandfathering rule.
Residential investment properties held before 7:30 pm AEST on 12 May 2026 are generally exempt from the new negative-gearing restrictions while the existing ownership continues.
That means someone who made an investment decision under the old rules is not automatically pushed into the new system simply because 1 July 2027 arrives.
This distinction may become particularly important for long-term investors deciding whether to retain, refinance or eventually sell an established property.
If you already own an investment property and are considering changing your loan, our refinancing information explains the lending side of reviewing an existing home or investment loan.
Don't assume you need to leave your current lender untouched: simply refinancing a grandfathered investment property does not, by itself, necessarily remove its existing negative-gearing treatment. Loan increases and restructuring can be more complicated, so tax advice matters.
3. New builds receive different treatment
The Government's policy is designed to redirect more investor demand towards housing that increases Australia's supply.
Eligible new residential properties can continue to access negative gearing under the new rules.
This can include genuine new dwellings and certain developments that increase the total number of homes. For example, replacing one dwelling with two genuinely separate dwellings may qualify where the required conditions are met.
A renovation does not automatically turn an established property into a new build. Likewise, adding another structure to a property does not necessarily satisfy the rules simply because construction has occurred.
The Government has been consulting on the detailed definition of a qualifying new dwelling. Recent draft changes reported in August 2026 would broaden the time in which a newly completed property may qualify, including a proposed move from a 12-month to a 24-month acquisition window after the relevant occupancy certificate.
Don't buy a property for the tax treatment alone: a new build receiving favourable tax treatment does not automatically mean the property itself is a good investment.
This is particularly important in markets where new apartments compete against substantial similar stock. Our article on Melbourne unit investment risks explains why property quality, building risk, resale demand and holding costs still matter.
4. Death and relationship breakdown exposed an unintended problem
The original legislation created concern around properties transferred because of the death of an owner or a relationship breakdown.
Consider a couple who have owned a grandfathered investment property for years. If one owner dies and the surviving spouse becomes the sole owner, that ownership change should not logically be treated in the same way as somebody deliberately buying a new investment after the Budget cut-off.
Similar concerns apply when ownership changes as part of a formal property settlement after separation or divorce.
The Government has acknowledged the problem and has been developing further legislation intended to preserve relevant negative-gearing treatment in these circumstances.
In August 2026, further draft measures were released addressing these situations. Because the implementation legislation is still being refined, anyone dealing with an inheritance, separation or property settlement should obtain specific tax and legal advice before relying on the transitional treatment.
Life events matter: tax rules written around an acquisition date can become complicated when ownership changes without an ordinary sale taking place.
5. Capital gains tax is changing as well
Negative gearing is only one part of the reform.
From 1 July 2027, the existing 50% capital gains tax discount for affected individuals, trusts and partnerships is being replaced for future gains by a system based on inflation-adjusted cost-base indexation together with a minimum tax rate on real capital gains.
Broadly, the policy seeks to separate inflation from the real increase in an asset's value.
Transitional rules mean gains accrued before and after 1 July 2027 may receive different treatment. That can make the eventual calculation substantially more complicated than simply taking the sale price, subtracting the purchase price and applying one percentage.
Eligible new residential builds receive special treatment and may be able to choose between the existing 50% CGT discount approach and the new inflation-based arrangements, subject to the rules applying at the time.
This is where your accountant earns their coffee: mortgage brokers can help with the finance, borrowing capacity and loan structure, but personal CGT calculations belong with a qualified tax adviser.
The core reforms are contained in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. View the legislation.
6. Why this can affect borrowing power before July 2027
The tax changes may not commence fully until 1 July 2027, but mortgage lending decisions are made using a borrower's expected future income, expenses and debt position.
Some lenders are therefore already changing the way negative-gearing benefits are treated inside their serviceability calculators.
Macquarie, for example, currently distinguishes between new purchases, refinancing existing investment properties and homes that later become investment properties.
Its published broker guidance states that a purchase contracted after 12 May 2026 will generally only receive a negative-gearing benefit in its serviceability assessment where the property meets the qualifying new-build requirements.
The practical result is that two investors with similar incomes and similar loan sizes may not always receive identical borrowing outcomes if one property qualifies for the tax treatment and the other does not.
The tax rule and the lender rule are not the same thing: lenders decide how they assess income and tax benefits for serviceability, and policies can vary between lenders.
That makes lender selection and loan structure increasingly important when arranging investment property finance.
7. New properties also receive special treatment under APRA's high-debt lending rules
Tax reform is not the only policy change affecting property investors.
Since February 2026, APRA has limited the proportion of new lending that banks can write where a borrower's debt-to-income ratio is six times income or higher.
The limit applies separately to investor and owner-occupied lending. However, loans used to purchase or construct qualifying new dwellings are exempt from the DTI limit.
That does not guarantee that somebody purchasing a new dwelling will be approved or allowed to borrow more. Every lender still applies its own credit policy, serviceability tests and lending criteria.
It does, however, show the broader policy direction: both the tax system and prudential settings are increasingly designed to avoid discouraging finance for additional housing supply.
Source: Australian Prudential Regulation Authority — debt-to-income lending limits.
What property investors should check now
You do not need to become a tax expert to prepare for the changes. You do need to know which questions to ask.
Investment property checklist
- Check your acquisition date: establish whether the property falls before or after the 12 May 2026 Budget-night cut-off. ```
- Keep your contract: the contract date may become important evidence for grandfathering.
- Identify whether a property is genuinely new: do not rely solely on marketing language such as "new", "renovated" or "recently completed".
- Keep construction and occupancy records: these may become relevant where a property relies on the new-build rules.
- Review borrowing power before purchasing: lenders may not all recognise negative-gearing benefits in the same way.
- Review an existing investment before refinancing: grandfathering may continue, but additional borrowing or restructuring can introduce other considerations.
- Get tax advice before changing ownership: this is particularly important after separation, divorce, death or estate transfers.
- Look at the whole investment: tax treatment should sit alongside purchase price, rent, interest costs, property quality, ongoing expenses and resale prospects.
- Keep watching the implementation rules: further legislation is still refining parts of the new-build and ownership-transfer framework.
The bottom line
Australia's property investment tax rules are changing, but the useful story is more nuanced than "negative gearing has been abolished".
Existing investment decisions receive substantial grandfathering protection. Eligible new housing continues to receive negative-gearing concessions. Established residential property bought after the Budget-night cut-off moves into a more restricted system from July 2027.
At the same time, lender serviceability policies are beginning to adapt, meaning the distinction between an established property, a grandfathered property and a qualifying new build may affect the finance conversation well before the new financial year begins.
None of that means buyers should choose a property simply because its tax treatment looks attractive.
A strong investment still needs to work as a property, as a cash-flow decision and as a lending decision.
Final thought: tax concessions can change the numbers around an investment. They cannot turn the wrong property, the wrong price or an unaffordable loan into the right decision.
Thinking about buying, keeping or refinancing an investment property?
The lending side of property investment is becoming more dependent on the individual property, its acquisition history and the way different lenders assess the scenario.
Loan Location can help you review borrowing power, compare lender servicing outcomes and structure the finance around your circumstances. For personal tax consequences, we recommend obtaining advice from your accountant or qualified tax adviser.
General information only: This article does not take into account your personal objectives, financial situation or needs and does not constitute financial, investment, tax or legal advice. Tax treatment depends on individual circumstances and legislation may be subject to further implementation changes. You should obtain advice from an appropriately qualified tax or legal adviser before making decisions based on the tax consequences of owning, buying, selling, transferring or refinancing property. Lending is subject to lender eligibility criteria, credit assessment, terms, conditions, fees and availability.