Will New Negative Gearing Rules Affect My Existing Rental Property?

Last updated: 14 August 2026

If you own an investment property, you’ve probably already seen the headlines about negative gearing being “abolished.” It’s the kind of headline that causes a fair bit of unnecessary panic.

So, will the new negative gearing rules affect your rental property?

The quick answer: If you bought your property before 7.30pm AEST on 12 May 2026, you’re grandfathered and nothing changes. If you purchase or have purchased an established¹ property after that date, negative gearing stops applying from 1 July 2027. If you purchase or have purchased a new build², existing negative gearing rules still apply from 1 July 2027.

But before you start rethinking your entire investment strategy, let’s break down what’s actually changing under the 2026-27 Federal Budget reforms, who it affects and what it means if you own or are looking to purchase a rental property.

At a Glance: Key Dates

What Is Negative Gearing?

Negative gearing is when the cost of owning a rental property (think interest, rates, maintenance, management fees) are higher than the rental income it brings in, meaning the investment operates at a “loss”. Under the current rules, that loss can be utilised as a tax deduction against your other income, like your salary or wage, effectively lowering your overall taxable income.

It’s been a core part of property investment strategy in Australia for decades, but has also been at the centre of the housing affordability debate for almost as long. That debate is the main driver of this reform.

When Do Negative Gearing Changes Start?

As part of the 2026–27 Federal Budget, the government announced reforms to negative gearing and capital gains tax (CGT) for residential property. These changes are now law.

From 1 July 2027, negative gearing will no longer be available for established (existing, not newly built) residential properties that were purchased after 7.30pm AEST on 12 May 2026.

That date and time, 7.30pm AEST on 12 May 2026, matters more than almost anything else in this reform. It decides whether your property is grandfathered under the old rules or caught by the new ones.

What If I Already Own A Property?

If you purchased your rental property before 7:30pm on 12 May 2026, you’re grandfathered and nothing changes. This includes if you were already under contract and awaiting settlement, you’re in the clear. This means you can continue negatively gearing your property under the current rules for as long as you own it. There’s no requirement to restructure, no deadline to act, and no reduction in the deductions you’re currently entitled to claim.

This grandfathering also covers properties settling after 12 May 2026, as long as the contract itself was signed before the cut-off date and time. So if you exchanged contracts in early May with settlement falling later in the year, you’re still protected.

Not sure whether these changes affect your situation? Every portfolio is different, and how you hold your property (personally, in a trust, or through an SMSF) changes the answer. Get in touch with our team and we’ll walk you through the rules and requirements that apply to you and your property.

What If I Purchase A Property After May 12th 2026?

For anyone purchasing an established (not new build) residential property after 12 May 2026, the rules will look different once they kick in.

From 1 July 2027, here’s what changes:

• You’ll no longer be able to offset a net rental loss against your salary or other personal income.
• Losses can only be offset against rental income, or against capital gains from residential property.
• Excess losses aren’t lost forever. They can be carried forward and used in future years, once you’re back in a rental income or capital gains position on residential property.

It’s worth noting this limitation applies specifically to residential property. Commercial property, shares and other asset classes aren’t affected by this particular change. So if your portfolio includes a mix of assets, the rest of them are safe from this change.

What About The Capital Gains Tax (CGT) Discount?

Alongside the negative gearing changes, the 50% CGT discount is being replaced with cost base indexation, paired with a minimum 30% tax on capital gains from 1 July 2027.

In practice, this means the cost base of your property will be adjusted for inflation using the Consumer Price Index (CPI), so only your real, inflation-adjusted gain gets taxed. That’s different from the current flat 50% discount, which applies no matter how long you’ve held the asset or how much inflation has increased or eroded its value over that time.

Depending on how long you hold a property and how much inflation moves in the meantime, this could work out better or worse than the current 50% discount. It’s a genuinely different mechanism, not just a rebrand of the old one.

The good news: The main residence exemption remains untouched, so your primary place of residence isn’t affected by any of this, no matter when you bought it.

What If I Have A Property In A Trust, Company Or Super Fund?

The reforms are aimed at individuals, trusts and partnerships. Companies and complying superannuation funds are excluded and keep their existing CGT treatment. If part of your property is held through one of these structures, it’s worth checking how (or whether) the changes apply to your specific setup, since the answer isn’t always the same as it is for a property held in your personal name.

If you currently hold, or are thinking about purchasing property through an SMSF, it’s also worth reading about the recent ban on residential LRBAs for SMSF trustees, a separate but related change reshaping how SMSFs can invest in residential property.

What Do I Do Now?

For most existing property investors, the immediate answer is: relax, nothing changes today. The rules only apply going forward and only to new purchases of established residential property made after 12 May 2026.

If you’re planning to add to your portfolio, refinance, restructure how you hold property, or you’re weighing up an established property against a new build, it’s worth talking through the numbers before you sign a contract, not after. The tax outcome of your next purchase now depends entirely on the purchase date, property type and how it’s held.

If you’re wondering whether any of this year’s Budget changes should shift your overall approach, we’ve covered that in more detail here: Should I Change My Financial Strategy After the Budget?

Property tax rules aren’t getting any simpler and getting the structure or timing wrong on your next purchase can be a costly mistake to unwind. Whether you’re holding, selling, or thinking about growing your portfolio, get in touch with our team today. We can walk you through exactly how these changes apply to your situation and help you plan your next step with confidence.

1. An established property (or dwelling) is an existing building on residential land that has been previously occupied, completed, or owned, rather than a brand new home or off-the-plan build. ↩︎
2. A new build is generally a property that is newly built and has not been sold before, was created through substantial renovations, increases the number of dwellings, or replaces a demolished premises on the existing land. ↩︎

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_{^{The material and contents provided in this publication are general and informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.}}

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