Negative gearing changes start on 1 July 2027. From that date, a rental loss on an established home bought after 7:30pm AEST on 12 May 2026 can no longer be deducted against your salary or other income.
Negative gearing is not being abolished. Properties already held at that time keep the current rules, and new builds keep the concession. What changes is where the loss on an affected property can be used.
These changes are already law. They were announced in the 2026-27 Federal Budget on 12 May 2026, and the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. They sit alongside the capital gains tax changes from 1 July 2027, so most investors need to look at both.
Key takeaways
- Residential properties held at 7:30pm AEST on 12 May 2026 can still be negatively geared until they are sold.
- Established homes bought after that time lose the salary offset from 1 July 2027.
- New builds keep the concession.
- Quarantined losses can still be used against residential property income, including residential capital gains, and carried forward.
- Commercial property and shares are not affected. Widely held trusts and super funds, including SMSFs, are excluded.
- Buying through a trust or company does not bring back the salary offset.
Old rules vs new rules at a glance
| Property | Loss against salary from 1 July 2027 | What it means |
|---|---|---|
| Held at 7:30pm AEST, 12 May 2026 | Yes | Current rules continue until the property is sold |
| Established home bought after the cutoff | No | Loss is quarantined to residential property income and gains |
| New build | Yes | For example, built on vacant land, or a knock-down replaced with more dwellings |
| Commercial property and shares | Yes | Existing rules continue |
You can follow updates on the ATO’s legislation page: ATO tax reform, negative gearing and capital gains tax.
What is negative gearing?
A property is negatively geared when its deductible expenses, such as loan interest, are more than the rent it earns. Under the current rules, the ATO says you can claim that loss against salary, wages or business income, and carry forward any loss your other income can’t absorb.
It is not just a tool for high earners. In 2012-13, over 1.9 million people earned rental income, around 1.3 million reported a net rental loss, and nearly 70% of people with a negatively geared property had a taxable income under $80,000 (Treasury).
For the basics, see our guide to negative gearing in Australia. For the costs you can claim, see our tax deductions guide.
This has happened before
Rental losses were quarantined for real estate bought after 17 July 1985. The change was reversed with effect from 1 July 1987 (Senate Economics Committee report).
When do the negative gearing changes start?
The new rules apply from the 2027-28 income year. Two dates matter:
- 7:30pm AEST on 12 May 2026 decides whether a property is grandfathered
- 1 July 2027 is when losses on affected properties start being quarantined
The purchase date is what counts. If you signed a contract for an established home after the cutoff, a later settlement date does not protect you.
Who is affected by the negative gearing changes?
The changes cover residential property held by individuals, partnerships, companies and most trusts. They affect established homes bought after the cutoff.
These are not affected:
- Properties held at the cutoff, until they are sold
- New builds
- Commercial property and shares
- Widely held trusts and super funds, including SMSFs
Source: the Treasurer’s second reading speech. For the full detail, see the Parliamentary Library bills digest.
What happens to a quarantined rental loss?
The loss is not wasted. It can still be used in three ways:
- Against other residential rental income in the same year
- Carried forward when there is no residential income to absorb it
- Against a future capital gain on residential property
Deductions tied to the property, including depreciation and capital works, still count inside the property calculation. They just can’t reduce salary or other non-rental income. To estimate a future gain, try our capital gains tax calculator.
Worked example: a $20,000 rental loss
Example facts
- Sarah earns $110,000 as a PAYG employee
- Her investment property runs at a $20,000 net rental loss for the year
- Her marginal rate is 30% plus the 2% Medicare levy (2026-27 resident rates)
Current rules: property held before the cutoff
The $20,000 loss reduces her taxable income to $90,000. That saves about $6,400 in tax, so her real holding cost is about $13,600.
New rules: established home bought after the cutoff
From 1 July 2027, the loss can’t reduce her salary. She pays tax on the full $110,000, so her holding cost is the full $20,000 until the loss can be used against residential property income or a residential capital gain.
| Held before the cutoff | Bought after the cutoff | |
|---|---|---|
| Loss against salary | Yes | No |
| Tax saving this year | About $6,400 | Nil |
| Out-of-pocket holding cost | About $13,600 | About $20,000 |
| Unused loss | Carried forward if other income isn’t enough | Carried forward for residential property income or gains |
Figures are rounded and ignore other income, offsets and the Medicare levy surcharge.
Rule of thumb
If a purchase only works because of the tax refund, test the numbers without it before you sign.
How can affected investors plan?
- Test the deal without the salary offset. Rent should cover interest, maintenance, insurance, rates and land tax, or the shortfall should be affordable. State land tax and stamp duty differ across VIC, NSW, QLD, WA and TAS.
- Consider whether a new build suits you. New dwellings keep the concession.
- Keep your contracts. For properties held before the cutoff, the contract date is your evidence.
- Don’t restructure for tax alone. Moving a property into a family trust or company does not restore the salary offset, and it can trigger CGT and stamp duty.
- Get advice before you sign or refinance. A property tax review costs less than fixing the wrong structure later.
Common mistakes to avoid
- Relying on the settlement date. The purchase date is what counts.
- The trust fix myth. A trust or company doesn’t turn a quarantined loss back into a salary offset.
- Adding a spouse to the title later. It doesn’t restore the old treatment and can create CGT issues of its own.
- Ignoring CGT and main residence rules. Ownership changes can affect the tax when you sell.
- Mixing private and investment borrowing. Interest on redraws used for private purposes was never deductible. Without the salary offset, the mistake costs more.
What changes at tax time?
From 1 July 2027, affected investors need to keep quarantined losses separate from salary and other income. Deductions still go against rental income first. Any excess stays with your residential property income until it can be used.
Make sure your accountant or tax software treats each property correctly. For each property, record:
- Purchase date
- New or established
- Who owns it
- Rental income
- Deductible expenses
If you have several properties, or a mix of grandfathered and affected ones, get the numbers checked before you lodge. Our property accounting team can help.
FAQ about the 2027 negative gearing changes
Is negative gearing being abolished in Australia?
No. From 1 July 2027, negative gearing is limited for established residential properties bought after 7:30pm AEST on 12 May 2026. Properties held before that time and new builds can still be negatively geared.
When do the negative gearing changes start?
The changes apply from the 2027-28 income year, which starts on 1 July 2027. They were announced in the 2026-27 Federal Budget and became law when the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026.
Can I still negatively gear a property I bought before 12 May 2026?
Yes. Residential properties held at 7:30pm AEST on 12 May 2026 can continue to be negatively geared in future years until they are sold.
What happens to a rental loss on an affected property?
It is quarantined. The loss can only be deducted against income from residential property, including capital gains on residential property. Any excess is carried forward to use against residential property income in later years.
Are SMSFs and super funds affected by the negative gearing changes?
No. Widely held trusts and superannuation funds, including SMSFs, are excluded, according to the Treasurer's second reading speech. Commercial property and shares also stay under the existing rules.
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Talk to a registered tax agent
If you are buying, selling, refinancing or restructuring property, speak with a registered tax agent at Nanak Accountants & Associates on 1300 626 258 first. You can also contact our team for a review of your position.
This article is general information only and is not personal financial or tax advice. Information checked against ATO, Treasury and Federal Register of Legislation sources on 30 September 2026.
