The Federal Government has announced significant changes to Australia’s negative gearing rules for residential property investors. The reforms change how investment property losses can be used for tax purposes and may influence future investment decisions, property acquisition strategies and cash flow outcomes for investors.
What is changing?
Investors will no longer be able to use losses from most established residential investment properties to reduce their salary or other taxable income. Instead, losses from established properties will only be deductible against future rental income or capital gains from residential property. Any excess losses can be carried forward to future years.
Existing investors protected
Properties purchased before 7:30pm AEST on 12 May 2026 (including contracts entered into before that time but not yet settled) will be exempt from the new rules and can continue to be negatively geared until sold.
For established properties purchased between Budget night and 30 June 2027, investors can continue to negatively gear during that period, but not after 1 July 2027.
New builds remain eligible
The Government will continue to allow negative gearing for eligible new residential properties, including:
- newly constructed apartments,
- homes built on vacant land, and
- developments that increase housing supply, such as duplex knock-down rebuilds.
Commercial property and other investment assets, such as shares, are unaffected by the changes.
When do the changes apply?
The changes will apply from 1 July 2027. However, transitional rules will apply depending on when a property was purchased:
- Before 7:30pm AEST on 12 May 2026: Existing arrangements remain unchanged, and negative gearing can continue indefinitely until the property is sold.
- Between 12 May 2026 and 30 June 2027: Negative gearing remains available until 30 June 2027 only.
- From 1 July 2027 onwards: Negative gearing will generally only apply to eligible new residential properties.
Insights
The reforms represent one of the most significant changes to Australia’s property investment landscape in decades. These changes may affect how investors approach future property investment decisions including the types of properties they acquire.
For investors, the distinction between established properties and new builds will become increasingly important when considering future acquisitions. Existing investors who purchased prior to Budget night are largely protected.
If you want to know more about how these changes may impact you, please do not hesitate to reach out to your trusted Hall Chadwick advisor to find out more.
