From 1 July 2027, negative gearing rules will change for established residential investment properties purchased after 7:30pm AEST on 12 May 2026. Under the new rules, investors will generally no longer be able to use losses from an established investment property to reduce salary or other personal income. Instead, those losses may only be offset against rental income or future capital gains from residential property, with any unused losses carried forward to future years.
In simple terms, many investors currently use a rental loss to reduce their taxable income. For example, if the rent received is less than the interest and other deductible property expenses, that shortfall can often reduce the investor’s taxable salary income. From 1 July 2027, that benefit will largely stop for established residential properties caught by the new rules, although it will still be available for eligible new builds.
The Government’s stated intention is to encourage more investment into new housing supply. A “new build” will generally need to genuinely add to housing stock, such as a newly constructed home on vacant land or a development where one property is replaced with multiple dwellings. Standard renovations, some knock-down rebuilds, or additions that do not materially increase housing supply may not qualify.
There are important transitional and grandfathering arrangements. Properties owned before 7:30pm AEST on 12 May 2026 will be grandfathered, meaning current negative gearing rules can continue to apply unless the property is sold. Properties purchased between Budget night and 30 June 2027 can still access the current rules during that period, but may be subject to the new rules from 1 July 2027 unless they qualify as eligible new builds.
For investors, the key message is that timing, property type and structure now matter more than ever. Anyone considering purchasing an investment property should seek advice from their accountant, broker and financial adviser before committing, as the final impact will depend on the property, purchase date, ownership structure and future legislative detail.
Important disclosure: This article contains general information only and has been prepared without taking into account your individual objectives, financial situation or needs. It should not be relied upon as personal financial, tax, legal or credit advice. Before making any decision in relation to property investment, SMSF borrowing, superannuation or taxation matters, you should consider whether the information is appropriate for your circumstances and seek advice from a qualified financial adviser, accountant, tax adviser, solicitor and/or licensed credit adviser. Legislative details, commencement dates and lender policies may change, and you should confirm the current position before acting.