Negative Gearing Changes 2026

Negative gearing is not gone. It has been split in two.

The 2026-27 Federal Budget, released on 12 May 2026, drew a line through the middle of the property investment landscape. On one side: investors who already own property, and anyone buying new builds. Their negative gearing works exactly as it always has. On the other side: anyone purchasing established residential property from that date forward. Their deductions are ring-fenced to property income only.

A separate CGT overhaul runs alongside these changes and applies even more broadly, reaching shares, trusts, and pre-1985 assets.

This article breaks down both reforms, the grandfathering rules, and what each change means for your next investment decision.

What Changed on Budget Night

Two reforms were announced on 12 May 2026, both taking effect from 1 July 2027.

Negative gearing restriction. The Government will limit negative gearing to new builds from 1 July 2027, to focus tax support on new supply. For established residential properties acquired after 7:30pm AEST on 12 May 2026, net rental losses can no longer be deducted against income that is not rental income or gains from rental property.

CGT discount replaced. The existing 50% CGT discount will be replaced with cost base indexation and a 30% minimum tax on net capital gains from 1 July 2027.

Both measures were framed as improving housing affordability, but the CGT changes are broader in scope, applying across all CGT assets, not just housing.

For a deeper look at the CGT side, see our CGT changes guide for property investors.

The Grandfathering Rule: 7:30pm AEST, 12 May 2026

This is the single most important detail for anyone who already owns investment property.

If your property was acquired by contract date before 7:30pm AEST on 12 May 2026, it remains subject to the current rules and is not affected by these changes until it is sold. This applies to contracts entered into before that date even if settlement has not yet occurred.

The operative word is “contract date.” If you exchanged contracts at 7pm on Budget night but settlement is months away, you are grandfathered. If you exchanged at 8pm, you are not.

For investors holding existing properties, nothing changes. Your negative gearing continues to work as it always has, for as long as you hold that property.

Buying Established Property After Budget Night

For established residential properties acquired from 7:30pm AEST on 12 May 2026, the rules shift from 1 July 2027.

Rental losses from these properties will only be deductible against rental income or capital gains from residential properties. You cannot deduct them against wages, salary, business income, or dividends.

If rental losses cannot be fully used in a particular year, they may be carried forward and applied against future residential property income or gains.

The tax benefit from negative gearing on established property is not eliminated. It is deferred and contained. Investors who hold multiple rental properties can still offset losses against the rental income from their portfolio. Those with a single negatively geared property will carry forward losses until the property becomes positively geared or they realise a capital gain on a residential property.

For a worked example of how negative gearing flows through a tax return, see our negative gearing example with real numbers.

What Stays Unchanged

The negative gearing changes 2026 carved out several significant exemptions.

New builds. Eligible new builds are exempt from the negative gearing restriction. Full deductibility against all income types continues.

Superannuation funds. Widely held trusts and superannuation funds are excluded from the restriction. If you hold property through an SMSF, the negative gearing rules remain as they are. The CGT discount for superannuation funds is also not expected to change.

Build-to-rent and government housing. Build-to-rent developments and private investors supporting government housing programs are excluded.

Commercial property and shares. Commercial property and other asset classes, such as shares, will continue to be taxed under existing arrangements and are not affected by the negative gearing changes.

Main residence. No change to the main residence CGT exemption.

The full list of investment property tax deductions beyond negative gearing remains relevant regardless of which side of the line your property sits on.

The CGT Overhaul: Broader Than It Looks

Running parallel to the negative gearing restriction is a fundamental restructure of how capital gains are taxed.

From 1 July 2027, the 50% CGT discount is replaced with two mechanisms: cost base indexation (adjusting your purchase price for inflation) and a 30% minimum tax on net capital gains. The Government says this means investors will only pay tax on their real capital gain, restoring the original intent of the CGT arrangements.

Three details investors need to register.

It applies to everything. The changes apply broadly across all CGT assets, including pre-1985 assets, where those assets are held by individuals, trusts and partnerships. Shares, collectibles, business assets. Not just property.

Transitional split for existing holdings. For assets held before 1 July 2027 but sold after, the 50% CGT discount applies to gains accrued up to that date, while cost base indexation and the minimum tax apply to gains accruing from 1 July 2027 onwards, with the asset's value at that date forming its cost base.

New build investors get a choice. Investors in new residential property may choose between the existing CGT discount or the new regime on disposal. This flexibility is a meaningful advantage for new build purchases.

Income support recipients, including Age Pension recipients, are exempt from the 30% minimum tax.

For a detailed breakdown of how the CGT changes affect property specifically, see our CGT changes guide.

Positioning Your Portfolio From Here

The negative gearing changes 2026 create a decision framework with three paths.

Path 1: Hold existing properties. Grandfathered indefinitely. No action required. Your negative gearing and CGT treatment continue under current rules until you sell.

Path 2: Buy new builds. Full negative gearing preserved. Choice of CGT regime on disposal. The policy explicitly channels investor activity toward new supply, and the tax treatment reflects that.

Path 3: Buy established property. Losses ring-fenced to rental income and residential property gains. The carry-forward mechanism means deductions are preserved, not lost. Over time, as properties shift toward positive gearing or you sell, those accumulated losses offset real tax. The immediate cashflow impact is what changes: you no longer receive a tax refund against your salary each year.

SMSF structures remain viable for property investment under either set of rules, since superannuation funds are excluded from the negative gearing restriction and the CGT discount for super funds is unchanged.

The strategic question for every investor is the same: which side of the line does your next purchase land on, and are you making that decision deliberately rather than by default?

FAQ

Does the negative gearing change apply to properties I already own?

No. Properties acquired by contract date before 7:30pm AEST on 12 May 2026 are grandfathered and remain subject to the current rules indefinitely, even if settlement has not yet occurred.

Can I still negatively gear a new build after 1 July 2027?

Yes. Eligible new builds are exempt from the negative gearing restriction. Full deductibility against all income types continues for new builds.

What happens to my unused rental losses under the new rules?

Excess rental losses can be carried forward to future years and applied against future residential property income or capital gains from residential properties.

Do the CGT changes only affect property?

No. The changes apply across all CGT assets held by individuals, trusts and partnerships, including shares and pre-1985 assets. Commercial property and shares are unaffected by the negative gearing changes but are subject to the new CGT regime.

Are SMSF properties affected by the negative gearing changes?

No. Superannuation funds are excluded from the negative gearing restriction, and the CGT discount for superannuation funds is not expected to change.