Negative gearing — demystified

Does this affect me?

If you don't own an investment property — no, this won't touch you. If you already own one (bought before 7:30pm 12 May 2026) — no, you're grandfathered for life. If you're thinking about buying an investment property after 1 July 2027 — yes, maybe, but only if it's an established (second-hand) dwelling. Brand new builds keep full negative gearing.

Quick test:

Renting and not buying any investment property? Won't affect you directly — though rents might shift slightly (Treasury says <$2/week).
Own an investment property bought before 7:30pm AEST 12 May 2026? Full negative gearing for life — no change.
Buying between 12 May 2026 and 30 June 2027? Gearing works through 30 June 2027, then ring-fenced.
Buying a brand-new build any time? Full negative gearing keeps applying — no change.
Buying an established (second-hand) residential dwelling from 1 July 2027? Losses can only offset other residential property income or carry forward — not your salary.
Investing in shares, ETFs, or commercial property? Completely untouched.

TL;DR

Negative gearing changes from 1 July 2027 affect only future purchases of established residential dwellings. Every property held at 7:30pm AEST 12 May 2026 keeps full negative gearing for life. New builds purchased any time (including after 1 July 2027) keep full negative gearing. Commercial property, shares, ETFs, and other assets are completely unaffected.

The reform is narrower than the public discourse suggests — it's not "the end of negative gearing." It's "no more negative gearing against your salary, on established residential dwellings bought from mid-2027."

Jargon decoder:

Negative gearing = when your rental property runs at a loss (rent < interest + costs), and you currently subtract that loss from your salary on your tax return, paying less tax.

Established dwelling = a second-hand house or apartment that someone else has already lived in. (As opposed to a brand-new build.)

Ring-fenced loss = a rental loss that can't be used against your wages — it has to sit and wait for future rental income or be deducted from a future capital gain.

Carry forward = if you can't use a loss this year, you save it to use in a future year — indefinitely.

Grandfathered = the old rules keep applying to you because you got in before the cut-off.

The four buyer categories

When you bought	What you can do
Before 7:30pm AEST 12 May 2026	Full negative gearing forever — for life of ownership
12 May 2026 → 30 June 2027	Negative gearing works through 30 June 2027, ring-fenced from 1 July 2027
From 1 July 2027 — new build	Full negative gearing continues
From 1 July 2027 — established dwelling	Losses can only offset other residential property income; carry forward indefinitely

What counts as a "new build"

Eligible	Not eligible
Newly constructed apartment bought off-the-plan	Established property extended with new bedrooms
Duplex from a knock-down rebuild replacing one house	Free-standing house from knock-down rebuild (same dwelling count)
Construction on previously vacant land	Granny flat added to an established property
New build occupied <12 months before first sale	Newly built property occupied >12 months before sold to investor

Subsequent purchasers cannot access new-build negative gearing — it's a one-shot benefit similar to state stamp-duty new-build exemptions.

What's NOT affected at all

Commercial property — unchanged
Shares, ETFs, managed funds — unchanged
Super funds (incl. SMSFs) — unchanged
Widely held trusts (most MITs) — unchanged
Build-to-rent investors in government housing programs — unchanged
Affordable housing investors with the 60% CGT discount — retained

How loss ring-fencing works

If you buy an established dwelling after 1 July 2027 and make a $14,810 rental loss in a year, you cannot deduct it against your salary. Instead:

Loss offsets other residential property income (rent from other rentals, or capital gains on residential property), OR
Carries forward indefinitely to future residential property income.

Worked example — Yoonseo:

Yoonseo earns $100,000. Buys an existing property post-announcement for $519,000 (incl. stamp duty). Sells after 10 years for $814,447.

Years 1-5: net rental losses accumulate $22,879 of carry-forward losses.
Years 6-10: positive net rent of $18,079, fully absorbed by carry-forward losses → reduced to zero.
On sale: remaining $4,799 carry-forward losses reduce the $150,083 capital gain to $145,284.
Net difference vs old system: $186 more nominal tax over 10 years.

The carry-forward mechanism means the deduction isn't lost — it's just delayed and ring-fenced. The ATO's rental property guide at ato.gov.au/rental covers how to track carry-forward losses.

Key dates

Event	Date
Cut-off date for grandfathering	7:30pm AEST 12 May 2026
Last day for "transitional" gearing on new buys	30 June 2027
Full restrictions commence	1 July 2027

Treasury impact estimates

~230,000 individuals (1% of taxfilers) acquire negatively geared properties each year today.
~75,000 additional owner-occupiers over 10 years (Treasury modelling) — equivalent to reversing ~10 years of declining home-ownership rates.
House price growth: ~2 percentage points lower over a couple of years vs no policy change.
Rent impact: <$2/week above baseline on median rent.
Housing supply impact: small reduction in investor demand, more than offset by housing supply measures in the same Budget (see Housing Supply demystified).

Myths vs reality

Myth 1: "All landlords lose negative gearing" — FALSE

Only buyers of established dwellings from 1 July 2027. Every existing landlord is grandfathered. New build buyers keep full negative gearing. ~99% of current investors are unaffected on their existing properties.

Myth 2: "Negative gearing on shares is being killed" — FALSE

Only residential property is affected. Margin loans against ASX shares, leveraged ETF positions, geared commercial property — all unchanged.

Myth 3: "The rule is retrospective" — FALSE

Grandfathering is explicit and generous. Properties held at 7:30pm AEST 12 May 2026 keep full negative gearing for life. No retrospective application.

Myth 4: "Even if I bought before the cut-off, I lose it when I refinance / renovate" — FALSE

The grandfathering applies to the property, not the loan. Refinancing the same loan against the same property doesn't reset eligibility. (Tax treatment of new debt drawn for non-property purposes is unchanged — same rules as today.)

Myth 5: "Rents will skyrocket" — CONTESTED

Treasury: <$2/week above baseline. Property Council disputes this. Independent housing economists are split. Some argue rents may fall over time as more owner-occupiers reduce rental demand. The truthful answer: nobody knows precisely. Doom scenarios circulating online aren't supported by Treasury or most independent analysts.

Myth 6: "Investors will dump their existing properties before the cut-off" — UNLIKELY

Treasury designed the rules specifically to avoid this — existing investors keep full benefits for life. There's no incentive to sell. Anyone selling now would still face stamp duty on a re-entry and lose grandfathering forever.

Myth 7: "Build-to-rent is dead" — FALSE

Build-to-rent investors supporting government housing programs are carved out. Build-to-rent keeps negative gearing and other concessions.

Myth 8: "Knock-down rebuilds are all blocked" — DEPENDS

A knock-down rebuild replacing one house with two or more dwellings (duplex, townhouses) counts as a new build. A knock-down rebuild replacing a single old house with a single new house does not count.

Myth 9: "Granny flats count as new builds" — FALSE

Granny flats attached to an established property are explicitly excluded from new-build treatment.

Myth 10: "I'll lose deductions on the cost of repairs, depreciation, etc." — FALSE

You don't lose the deductions. They can still offset other residential property income or carry forward. The carry-forward mechanism preserves the value (with some timing cost).

But what if...

...I already own an investment property — am I caught? No. If you owned the property at 7:30pm AEST on 12 May 2026, you keep full negative gearing for the entire life of your ownership. You can refinance, renovate, switch tenants — all fine. The grandfathering attaches to the property, not the loan.

...I'm buying a brand new apartment off the plan after 1 July 2027? You're fine — new builds keep full negative gearing. You can offset rental losses against your salary like today. The catch: if you later sell that new build to another investor and they buy it as an "established" dwelling, they can't access full negative gearing.

...I rent — does this push my rent up? Treasury models rent rising less than $2/week above where it would have been. Property Council disputes that. Independent economists are split. Realistically: no one knows for sure, but the disaster scenarios doing the rounds aren't backed by the modelling.

...I want to buy a second-hand apartment as an investment in 2028? You can still buy, still claim deductions, still get the rental income. The change is that any year your rent doesn't cover your costs, the loss can't be subtracted from your salary — it sits ring-fenced until you have other residential rental income or a capital gain. You don't lose the deduction, you just have to wait for it.

...does this affect my shares, ETFs, or margin loan? No. Only residential property is touched. Margin loans against ASX shares, leveraged ETF positions, geared commercial property — all unchanged.

...I'm renovating an old house — does it become a "new build"? No. Only knock-down rebuilds that increase the dwelling count (one house → duplex / townhouses) count as new builds. A renovation, granny flat, or knock-down-rebuild that puts a single new house on the same block does not.

Where genuine debate lives

Whether investor exit reduces rental supply faster than owner-occupiers absorb it — short-term timing mismatch is real.
Whether new-build incentives produce enough volume to offset reduced established-dwelling investor demand — depends on builder response.
Whether the 1 July 2027 cliff edge encourages a buy-up in 2026-27 — Treasury argues no (grandfathering removes incentive); some property economists disagree.
Whether commercial property investors will pivot into Build-to-rent to capture the carve-out.

A useful filter

When you see a claim:

What date was the property bought? Pre 12 May 2026 → unaffected.
New build or established? New build → unaffected (with caveats).
Residential or commercial? Commercial → unaffected.
Shares, ETFs, or property? Not property → unaffected.

Sources

Theme 04 — Tax Reform (full policy detail)
Capital Gains Tax demystified
Housing Supply demystified

The date that decides every investment property in Australia