Negative Gearing Changes Explained

Published: 5 August 2026

The Australian Government has announced major changes to negative gearing that could have a significant impact on property investors and the housing market.

There has been plenty of discussion since the announcement, but one thing is important to understand from the beginning. Negative gearing is not being abolished. Instead, the rules are changing to encourage more investment in newly built homes.

Key dates

12 May 2026
The Federal Government announced the proposed changes as part of the 2026 Federal Budget.

7:30 pm AEST on 12 May 2026
This is the proposed grandfathering cut off. Investors who owned a residential investment property before this time are generally expected to remain under the existing negative gearing rules.

1 July 2027
The proposed commencement date for the new rules, subject to the legislation being passed.

What is negative gearing?

Negative gearing occurs when the cost of owning an investment property is higher than the rental income it generates.

These costs can include loan interest, council rates, insurance, repairs, maintenance, property management fees and depreciation.

Under the current system, investors are generally able to claim these losses against their taxable income, reducing the amount of tax they pay.

What is changing?

From the proposed commencement date of 1 July 2027, investors who purchase an existing residential property after the cut off date will generally no longer be able to claim rental losses against their salary or wages.

Instead, those losses will generally be carried forward and offset against future investment income or capital gains.

If you purchase an eligible new residential property, the current negative gearing rules are expected to continue to apply.

The Government says the aim is to encourage investment in new housing and increase the supply of homes rather than directing investor demand towards existing properties.

What about existing investment properties?

Existing investors are expected to be protected under grandfathering provisions.

If you owned an investment property before 7:30 pm AEST on 12 May 2026, the current negative gearing rules are expected to remain in place for as long as you continue to own that property.

This means the proposed changes are aimed at future property purchases rather than existing investments.

What could this mean for the property market?

The long term impact remains uncertain and there are differing opinions about what the changes may mean.

Some economists believe the reforms will encourage more housing construction by making new developments more attractive to investors.

Others believe investor demand for established homes could soften, which may place downward pressure on prices in some areas.

There are also concerns that if fewer investors purchase established homes, the supply of rental properties could tighten unless new housing is built quickly enough to meet demand.

As with any major policy change, the overall outcome will depend on a range of factors including interest rates, housing supply, population growth and market confidence.

What should investors do?

If you are considering purchasing an investment property, it is worth understanding how these proposed changes may affect your plans.

The tax treatment of a newly built property may differ from that of an established home, which could influence future investment decisions.

Every investor's circumstances are different, so it is important to obtain advice from your accountant or financial adviser before making any decisions.

Final thoughts

The proposed changes represent one of the biggest reforms to Australia's property tax system in many years.

While negative gearing is not disappearing, the way it applies to future investment purchases is expected to change.

If you are planning to invest in property, now is a good time to understand how these proposed changes could affect your strategy before they are expected to commence on 1 July 2027.

Disclaimer: This article is general information only and should not be considered financial, taxation or legal advice. You should seek independent professional advice before making any investment or taxation decisions.