Negative gearing: restricted for established residential property

2026 Federal Budget Proposal

Why it matters: For many investors, cash-flow losses on newly purchased established properties will no longer reduce salary or other income—shifting after-tax outcomes and favouring new supply.

• Contracts after 12 May 2026 (7:30pm): established residential property purchases fall under the new regime.
• From 1 July 2027: negative gearing no longer applies to those established properties.
• Investors can no longer offset rental losses against salary or other income for affected properties.

How deductions work (affected properties)

• Rental losses will only be deductible against rental income and/or future capital gains.
• Unused losses must be carried forward.

Grandfathering

• Existing properties, including those under contract before the cut-off time, retain current tax treatment.

Exception: new builds

• New builds remain fully eligible for negative gearing and the CGT discount.

Example (reworked)

• Annual rental loss: $18,000
• Under previous rules: reduces taxable salary
• Under new rules: cannot offset salary; loss carried forward

Key implication

• Investment shifts toward new housing developments, as tax benefits are preserved only for those assets.