Guide · updated 2026-10-22
Negative gearing from 1 July 2027: who is affected
Rental losses on established homes bought after 7:30pm AEST on 12 May 2026 can no longer reduce your salary from 1 July 2027. Who is grandfathered, what counts as a new build, and what a quarantined loss is still worth.
Salary take-home examples use 2026-27 full-year resident employment, the standard work deduction and no additional deductions. Tables explicitly labelled taxable or repayment income start with that amount instead. Methodology and sources.
The same Act that changed capital gains tax also limits negative gearing. The rules are set out in the Budget 2026-27 tax explainer and confirmed as law by the ATO. From 1 July 2027, a loss on an established residential property bought from 7:30pm AEST on 12 May 2026 can only reduce income from residential property, including residential capital gains. Any excess carries forward.
Who is affected
| Your property | Can the loss reduce your salary? |
|---|---|
| Established, held at 7:30pm AEST 12 May 2026 (including unsettled contracts) | Yes, until you sell it |
| Established, bought after the announcement but before 1 July 2027 | Yes in 2026-27, no from 1 July 2027 |
| Established, bought from 1 July 2027 | No |
| Eligible new build, bought at any time | Yes |
| Commercial property, shares and other investments | Yes (unchanged) |
The limits apply to individuals, partnerships, companies and most trusts. Widely held trusts, such as most managed investment trusts, and super funds, including SMSFs, are excluded.
What counts as a new build
A new build is a dwelling that adds to housing supply. That means one built on vacant land, or a knock-down that replaces one dwelling with more than one, such as a duplex replacing a house. An off-the-plan apartment qualifies. A knock-down rebuild that replaces a house with one house does not. Neither does an extension, or a granny flat next to an established property. The dwelling cannot have been sold before, unless the builder owned it and it was occupied for less than 12 months. A later buyer of a new build does not inherit the concession.
What the change costs, in numbers
Treasury's example: a $14,810 rental loss is worth $4,761 to someone with $80,000 of other income and $6,961 to someone on $210,000. On a property with $30,000 rent, $38,000 interest and $6,810 of other costs, an investor on $120,000 saves $4,739.20 a year if the property is grandfathered. On an identical property bought after the change, they save $0.00 this year, and $14,810 of losses carries forward.
A quarantined loss is deferred, not lost
Carried-forward losses reduce future rent once the property turns positive, and they reduce the capital gain when you sell. Treasury's example investor, Yoonseo, paid $186 more in total nominal tax over ten years than under the old rules. The cost is mostly about cash flow and timing, not the total tax paid. The difference is bigger if the property never becomes cash-flow positive.
What it means if you are buying
- Work out the holding cost of an established property with no tax offset in the early years. A lender's servicing test and your own budget both need to cope with that.
- A new build keeps both negative gearing and the choice of the 50% CGT discount. That is a real difference in value, and part of it will be priced into what the developer charges.
- If you own several residential properties, a loss on one can still offset positive rent from another.
Where these figures come from
Every number on this page is computed by the same engines that power our calculators, using 2026-27 rates taken from the tax office and dated on our methodology page. If a rate changes, this page changes with it. General information only, not tax or financial advice.