The federal government announced in the 2026-27 Budget that negative gearing for established residential properties is getting a major overhaul. If you are sitting on the fence about buying an investment property right now, that announcement likely pushed you to start doing some serious numbers.
These measures are now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. This is no longer a proposal you can wait and see on.
Here is what changes, what stays the same, and what this means for your decision right now.
What the Government Announced
The 2026-27 Federal Budget confirmed that from 1 July 2027, negative gearing for established residential properties will be restricted for any property where a contract was entered into after 7:30 pm AEST on 12 May 2026.
Under current rules, if your rental property makes a $15,000 annual loss, you can offset that against your salary and reduce your taxable income. From 1 July 2027, that offset only works against residential property income, not your wages.
Those losses do not disappear. They carry forward and can be used against future residential property income, including rental income from other properties in your portfolio, and capital gains when you eventually sell. But you lose the immediate tax relief against your salary, which is what most investors have historically relied on.
Commonwealth Bank economists estimate the policy will put established property prices roughly 3% lower than they otherwise would have been. For investors, that means the market is already repricing the reduced tax attractiveness of established properties.
What If You Buy Right Now
Say you are looking at buying an established house in Western Sydney or the outer suburbs of Melbourne as an investment. You find something in July 2026, sign a contract, and settle in September 2026.
Your ability to offset rental losses against wage income applies only until 30 June 2027. After that date, those rental losses are quarantined into a residential property pool. You do not lose them, but you cannot use them to cut your annual tax bill the way investors have historically expected to.
One nuance worth knowing: if you own multiple established properties, losses are assessed on an aggregate basis across your entire residential portfolio, not property by property. So if one property generates rental income and another generates a loss, those can net off within the pool. Only the excess is carried forward and quarantined from your wage income.
That is a meaningful shift, especially in a high-interest-rate environment where rental yields often do not cover mortgage repayments.
New Builds Are a Different Story
Investors open to buying off the plan or newly constructed properties are in a different position entirely.
New residential builds are not affected by these changes. Investors who buy an eligible new build can still use rental losses to offset wage income, and they also have a choice at sale: the existing 50% CGT discount or the new cost base indexation method with a 30% minimum tax. Which works out better depends on the asset’s return and your marginal rate.
According to the 2026-27 Budget tax factsheet, an eligible new build includes:
- A newly constructed apartment bought off the plan
- A duplex or multi-dwelling development constructed through a knock-down rebuild replacing a single dwelling, provided it increases the number of dwellings on the site
- Any residential construction on previously vacant land
- A newly built property occupied for less than 12 months before being first sold
New build status applies for up to 5 years from the date the occupancy certificate is issued, provided the property was not an established dwelling at the time of the budget announcement.
What does not qualify:
- An established house extended with extra bedrooms or a granny flat added to an existing property
- A 1-for-1 knock-down rebuild where a single house replaces a single house and dwelling numbers do not increase
- A new build that has been occupied for more than 12 months before being sold on to an investor
The 12-month occupancy rule is a genuine trap for buyers of near-new properties. Before signing a contract on anything advertised as new or near-new, verify the exact date of the occupancy certificate and the documented occupancy history. A property occupied for 14 months by the first owner loses its new build status entirely, even if it is physically only a few years old.
A Practical Comparison to Help You Think It Through
Scenario | Negative Gearing from 1 July 2027 |
Established property, contract before 12 May 2026, 7:30 pm | Fully grandfathered, offset against all income for as long as you hold it |
Established property, contract between 12 May 2026 and 30 June 2027 | Offset against all income until 30 June 2027; from 1 July 2027, losses quarantined to residential property pool (carry forward applies) |
Established property, contract from 1 July 2027 | Losses quarantined to residential property pool from day one; excess carried forward |
Eligible new build (any date) | Full negative gearing preserved against all income including wages |
What Most Articles Get Wrong About This Decision
A lot of coverage frames this as a simple “buy now or miss out” situation. That is not quite right.
If you are buying an established property purely to lock in existing negative gearing rules before 1 July 2027, you have a very short window with limited benefit. You get the traditional offset for at most a year before the restriction applies. After that, losses carry forward rather than disappearing.
The more meaningful question is whether the carry-forward model hurts you given your specific numbers. If your rental property is expected to generate positive income within a few years, the quarantined losses can offset that income and do the same tax work, just delayed. That delayed deduction still reduces your CGT liability when you eventually sell.
On the other hand, if you rely on the annual wage offset to make holding costs manageable, that is where the new rules create a real, ongoing difference for purchases of established properties.
What Property Investors Should Be Doing Now
Check your existing portfolio first. If you already hold negatively geared properties with contracts dated before 12 May 2026, those holdings are fully grandfathered for as long as you hold them. Nothing changes.
For new purchases, run the numbers on new builds in your target market. The negative gearing concession is fully preserved for eligible new builds. Off-the-plan apartments in suburban growth corridors, new house-and-land packages in areas like outer Brisbane, south-east Melbourne, or Perth’s northern suburbs, and duplex or multi-dwelling developments on vacant land are worth a closer look under the new rules, provided the investment fundamentals also stack up. Tax benefits should support a good investment decision, not replace one.
Map out your full tax picture. Your marginal rate, expected rental yield, likely capital growth, how long you plan to hold, and whether you rely on the annual wage offset all feed into whether established or new is the right call for your situation.
A registered tax agent or accountant who understands the transitional rules can model your specific numbers. The ATO has published tools to help investors calculate their position under the new arrangements, including the CGT cost base indexation calculation.
These changes are now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. The details in this article reflect the legislation as passed. Investors should seek professional advice before making any decisions.
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