Negative Gearing in Australia: What Investors Need to Know in 2026

Negative gearing still exists in 2026, but its scope is narrowing. From 1 July 2027, losses on established residential properties bought after 7:30pm AEST on 12 May 2026 can only offset residential property income and gains, not wages. Properties held before that time keep current treatment, and new builds remain fully eligible.

Would you still buy the same property if the tax benefit disappeared? 2026 has made that question unavoidable. This article explains what negative gearing is, what changes and when, and how to keep tax treatment in its proper place within a long-term strategy.

What is negative gearing?

Negative gearing occurs when the deductible costs of holding an investment property (loan interest, property management costs, council rates, insurance, maintenance and depreciation) exceed the rental income it generates. Under the current rules, that net loss can offset other income, such as salary, reducing taxable income.

The distinction worth holding onto: negative gearing is a tax mechanism, not a strategy. It lowers the after-tax cost of holding a loss-making asset. It doesn’t make that asset a good investment.

What changes from 1 July 2027

The 2026–27 Federal Budget, announced on 12 May 2026, included two linked reforms. These measures are now law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received royal assent on 26 June 2026 (Federal Register of Legislation; ATO).

Negative gearing

• From 1 July 2027, negative gearing for residential property is limited to new builds.
• Established properties held at 7:30pm AEST on 12 May 2026 (including those under contract but not yet settled) are exempt and can continue to be negatively geared until sold.
• For established properties bought after that time, losses can be deducted against other residential property income, including capital gains, and excess losses carry forward. They can’t be deducted against non-residential income such as wages.

Capital gains tax (CGT)

• From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced by cost base indexation (CPI) and a 30% minimum tax rate on real capital gains.
• The new rules apply only to gains accruing after 1 July 2027.
• Investors in new builds can choose either the existing 50% discount or the new indexation arrangements.

Sources: Treasury, Budget 2026–27 tax system changes; Budget 2026–27 Tax Explainer: negative gearing and CGT (PDF).

Transitional detail matters, and it will differ by circumstance. Treat any summary, including this one, as a starting point and confirm your position with a registered tax agent.

Who negative gearing still suits

Even before the reform, negative gearing was never a universal fit. It tends to suit investors who:

• are on a marginal tax rate high enough for the deduction to make a meaningful difference;
• have a cash flow buffer that can absorb a holding loss for several years;
• invest with a medium-to-long-term horizon, where expected growth outweighs accumulated holding costs; and
• have planned an exit strategy and understand how CGT will apply on sale, under both the current and new rules.

Who it works against

Negative gearing tends to undercut investors who:

• are on a lower marginal tax rate, where the deduction delivers modest benefit against real cash flow strain;
• need a property that is cash flow neutral or positive early in the hold; or
• rely on the deduction to justify a property that doesn’t stand up on fundamentals such as location, tenant demand and supply.

A property that only makes sense because of the tax refund is relying on the tax system to do work the asset should be doing. That’s a fragile position when the rules have just changed.

Fundamentals first, tax treatment second

Tax settings change; the quality of the asset doesn’t. A well-located property in an area with genuine population and employment growth, a constrained supply pipeline and solid rental demand is more likely to perform over time than a poorly located one, whatever the tax treatment. Our guide on how to choose the best suburb for property investment sets out how to judge that underlying quality.

If you already hold established property that is exempt, use the reform as a prompt to review your portfolio’s fundamentals, not as a reason to act immediately. If you’re planning a purchase, model the after-tax cash flow under the rules that will actually apply to you. Our process explains how we plan for both scenarios, and our notes for experienced investors cover multi-property portfolios.

Interest rates also shape what any deduction is worth. Track the RBA’s cash rate decisions alongside your lender’s rates.

Talk through your plan

Equimax Property Investment Advisors is a national advisory, helping investors across Australia build long-term portfolios through strategy, planning and research. To discuss how the reforms fit your plans, book a strategy session or call 1300 943 232. The strategy session takes 60 minutes.