Since the 2026 Federal Budget proposal was announced, many property investors have asked one question: is negative gearing abolished in Australia? The answer is not as simple as some headlines suggest.
The proposed rules do not affect every property or every investor. From 1 July 2027, negative gearing benefits may change for some types of investment properties.
So the key issue is not whether negative gearing is gone, but it is about whether your property type, purchase date and plans fall inside or outside the proposed rules.
Why are people saying negative gearing has been abolished?
People are saying negative gearing has been abolished because some investors may lose a tax benefit they use now. This mainly affects some established residential properties bought after the Budget announcement.
For many years, investors have used negative gearing to offset rental property losses against salary, wages or other income. Under the proposed changes, this may not work the same way for every property.
However, negative gearing will not end for all investors. New builds, existing investments and some other property types may still have different rules. The government aims to show how negative gearing encourages investment in the property market, which helps to maintain rental supply and can keep rental prices more affordable for tenants.
What changed in the 2026 Federal Budget?
The 2026 Federal Budget proposed a change to how investors use rental property losses. The Australian Government plans to limit negative gearing to new builds from 1 July 2027. Some established residential properties bought after 7:30 pm AEST on 12 May 2026 may face limits.
This does not mean all rental losses are gone. For affected properties, losses may be carried forward. Investors may use them later against residential rental income or a future capital gain from residential property.
The Australian Government plans to limit negative gearing to new builds starting from July 1, 2027, while existing arrangements will remain unchanged for properties held before that date. This will depend on the final legislation.
| Investor question | What the proposed change means |
|---|---|
| Did the Budget remove negative gearing completely? | No. The reform targets some established residential properties, not every investment property. |
| Does timing matter? | Yes. The 12 May 2026 Budget night cut-off may affect whether a property is grandfathered. |
| Are new builds treated differently? | Yes. New residential properties are expected to keep access to negative gearing. |
| Are affected losses gone forever? | No. They may be carried forward and used against later residential property income or gains. |
| Why does this matter for investors? | Property type, purchase date and cash flow may matter more when comparing investments. |
Does negative gearing still apply to existing investment property?
Existing investment properties are expected to keep their current negative gearing treatment if they were held before 7:30 pm AEST on 12 May 2026. This is known as grandfathering.
For property investors, this means an established rental property bought before the Budget night cut-off may not be affected in the same way as one bought after that time.
Existing owners may still be able to offset eligible rental losses against salary, wages or other income while they hold the property.
Which properties could be affected by the new rules?
The proposed negative gearing changes mainly target established residential investment properties bought after 7:30 pm AEST on 12 May 2026. These are homes that already existed before purchase. They are not new residential premises.
Properties that may be affected include:
- Established houses
- Existing units or apartments
- Villas and townhouses
- Older residential properties bought after the Budget night cut-off
New residential properties are expected to have different rules. The policy aims to maintain housing supply by preserving tax incentives for new builds.
Properties and assets less likely to be affected in the same way include:
- New build investment properties
- Existing properties held before the Budget night cut-off
- Commercial property
- Shares and other assets
Investors should still wait for the final legislation before buying, selling or restructuring. The exact rules may affect how each property type is treated.
What happens to rental losses and tax deductions if negative gearing is restricted?
If negative gearing is restricted, affected investors may not be able to use a net rental loss from certain established residential properties to reduce salary, wages or other unrelated income in the same financial year.
Under current negative gearing arrangements, investors can deduct that loss from taxable income to reduce income tax.
Those losses may not be lost. Under the proposed rules, they may be carried forward. Investors may use them later against future residential rental income or a capital gain from residential property.
For property investors, the main issue is cash flow. Negative gearing can lead to ongoing cash flow strain, as investors must cover the shortfall out of pocket until tax returns are processed..
How could the changes affect property investors?
| Area of impact | What investors may need to consider |
|---|---|
| Cash flow | If rental losses cannot reduce taxable income straight away, investors may need to cover more holding costs themselves. |
| Property choice | New builds may become more attractive if they keep negative gearing benefits. Established properties may need stronger rental returns. |
| Borrowing capacity | Lenders may focus more on rental income, loan costs and after-tax cash flow if quick tax benefits are reduced. |
| Rental yield | Investors may look more closely at properties with higher rent compared with costs. |
| Purchase timing | The Budget night cut-off may affect whether an existing property is grandfathered or subject to the proposed limits. |
| Tax planning | Investors may need to review rental losses, depreciation deductions, cost base records and long-term capital gains tax outcomes. |
How do the negative gearing changes connect with capital gains tax reform?
The 2026 Federal Budget also proposed changes to capital gains tax. These changes may affect the tax investors pay when they sell an investment property.
The main proposed CGT changes are:
- The current 50% CGT discount would be replaced with cost base indexation for affected assets.
- A 30% minimum tax on capital gains may apply in some cases.
- Investors may need stronger records for purchase costs, ownership expenses, improvement costs and capital works deductions.
Negative gearing and CGT reform affect different stages of owning property. Negative gearing can affect cash flow while you own the property. CGT rules can affect the final tax result when you sell.
Why new build investors should review depreciation
If new builds become more attractive under the proposed negative gearing changes, depreciation may play a bigger role in property investment planning.
A tax depreciation schedule helps show eligible depreciation deductions for an investment property. These can include capital works deductions for the building structure. They can also include plant and equipment depreciation for eligible removable or mechanical assets.
This may support more accurate tax reporting and give investors a clearer view of after-tax cash flow.
What should investors do before the rules start?
Before the proposed negative gearing changes begin, property investors should review how the rules may affect their current properties and future plans.
Key steps include:
- Check whether existing investment properties may be grandfathered
- Compare the cash flow of established properties and new builds
- Review rental income, loan interest and holding costs
- Keep clear records of purchase costs, expenses and improvements
- Check whether a tax depreciation schedule could support eligible deductions
- Speak with a registered tax agent before buying, selling or restructuring
The goal is to understand the numbers before the rules change. This can help investors make better decisions about property type, timing, tax deductions and long-term capital gains tax outcomes.
Is Negative Gearing Abolished? What the 2026 Federal Budget Really Means
Negative gearing has not been fully abolished after the 2026 Federal Budget. The proposed rules are more about limiting who can use rental losses straight away and which residential properties qualify.
For property investors, the key details are property type, purchase timing and whether the property is an existing investment, an established property bought after the Budget cut-off or a new build.
Before making major investment decisions, investors should review their records, compare property options and speak with a registered tax agent. Get started today with a free quote when you get your tax depreciation schedule from Thrifty Tax.
FAQs
Is negative gearing abolished in Australia?
No, negative gearing has not been fully abolished. This is how negative gearing works: investors can offset rental losses against other income. That can reduce taxable income and is one reason some people use it when investing in property.
The proposed reform would restrict negative gearing for some established residential investment properties.
When do the negative gearing changes start?
The proposed start date is 1 July 2027, with grandfathering expected to apply to some properties held before the Budget night cut-off.
Can investors still negatively gear new builds?
New build investment properties are expected to retain more favourable treatment under the proposed rules, unlike positive gearing, where the income earned from rent exceeds expenses and investors may still pay tax on the surplus rental income.
What happens to rental losses under the new rules?
Some rental losses may be carried forward instead of being immediately offset against salary or other income.
Can tax depreciation still help if negative gearing rules change?
Yes, tax depreciation can still help investors understand eligible deductions for an investment property. A tax depreciation schedule may identify capital works deductions and plant and equipment depreciation, which can support more accurate tax reporting.
