Negative Gearing and what it means for you

The recent changes to negative gearing announced in the 2026 Federal Budget affects different Australians in very different ways. Here's what it actually means..

What Actually Changed

The core rule change

Negative gearing for established residential properties is abolished from 1 July 2027 for any property purchased after 7:30pm AEST on 12 May 2026 (Budget night). Investors affected will no longer be able to offset rental losses against their salary or other personal income. Losses can only be offset against residential rental income or future capital gains from rental properties.

What's protected (grandfathered)

Properties currently held as at 7:30pm on 12 May 2026, including those already under contract awaiting settlement can continue to be negatively geared under the old rules until they are sold. Existing investors are fully protected.

What's exempt from the new rules

The changes apply only to established residential properties. Commercial property and other asset classes such as shares continue under existing arrangements. Eligible new builds remain exempt. Investors in new construction can still access both negative gearing and the 50% CGT discount. Widely held trusts, superannuation funds, build-to-rent developments, and investors supporting government housing programs are also excluded.

What It Really Means for Different Australians

If you already own an investment property

You're completely untouched, as far as negative gearing is concerned. Existing property owners can continue to access negative gearing under the current rules for as long as they hold the property. No change to your tax position whatsoever.

If you're a new property investor (buying established homes)

The tax maths changes significantly. You can no longer use a rental loss to reduce your income tax bill. A strategy millions of Australians have used to subsidise holding costs while waiting for capital gains. Your losses aren't gone, they just accumulate and can only be used against future rental income or when you sell.

If you're a first home buyer or aspiring owner-occupier

The government expects the suite of measures to help reverse the last decade of home ownership decline and see 75,000 additional owner-occupied properties come onto the market over a decade. The theory is that fewer tax incentives for investors means less competition at auctions. Dwelling price growth is expected to slow to around 3% over 2026, down from a prior forecast of 5%, with the policy subtracting roughly 0.6–1 percentage point from annual price growth. Modest, but real.

If you're a renter

This is the genuine tension in the policy. EY Chief Economist Cherelle Murphy described this as a ‘step in the right direction’ but doubts it will have a major impact. The risk is that some landlords exit the market, tightening rental supply. The combined effect is expected to modestly increase rental pressure over time, while providing some relative support for new construction.

The CGT change, this is the bigger one many are missing

The 2026-27 Budget also removes the current 50% CGT discount, replacing it with cost base indexation and a 30% minimum tax on net capital gains from 1 July 2027. This applies broadly across all CGT assets, including pre-1985 assets.

Some final thoughts

Some are arguing the existing system was a $10.9 billion annual tax concession that disproportionately benefited wealthier investors and pushed up house prices, locking out first home buyers.

While others argue reducing investor returns doesn't automatically create more homes it just means fewer rentals, which pushes rents up and hurts the very people the policy is meant to help.

Both are partly right. The grandfathering means the full effect won't be felt for many years. The new build exemption is designed to redirect investor demand toward adding housing supply rather than bidding up existing stock. Whether that redirection actually happens at scale depends on construction costs and feasibility, which remain high right now. 

We’ll keep you updated as these changes are rolled out. In the meantime if you have any questions please reach out to me paul@congdonfuzi.com.au