In this article 9 sections
The federal negative gearing changes passed into law on 26 June 2026 and start on 1 July 2027. From that date, losses on established residential investment properties bought after 7:30pm AEST on 12 May 2026 can only be offset against residential property income, while properties held before that time are grandfathered until sold and new builds keep full negative gearing.
Key takeaways
- The changes are in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and apply from 1 July 2027.
- Established residential properties held, or contracted, before 7:30pm AEST on 12 May 2026 can be negatively geared until sold.
- Established properties bought after that time can be negatively geared only until 30 June 2027. After that, losses only offset residential property income, with excess losses carried forward.
- New builds keep negative gearing, but the detailed new build definition sits in a separate bill that is not yet law.
- The same package replaces the 50% CGT discount with cost base indexation and a 30% minimum tax on capital gains accruing from 1 July 2027.
What negative gearing changes start on 1 July 2027?
Negative gearing lets you deduct a net rental loss against your other income, such as your salary. The Government’s Budget tax explainer sets out how that changes from 1 July 2027 for residential property.
For established residential investment properties bought after the Budget announcement at 7:30pm AEST on 12 May 2026, losses are only deductible against other income from residential properties, including capital gains. Any loss you cannot use in a year can be carried forward to offset residential property income in later years.
The Treasurer’s release on 25 June 2026 summed it up: future negative gearing will apply only to new builds from 1 July 2027, with grandfathering for current investment property owners.
The changes apply to individuals, partnerships, companies and most trusts. Widely held trusts and superannuation funds, including SMSFs, are excluded. Commercial property and shares stay under the existing rules.
Who is grandfathered under the new rules?
The cut off is the moment of the Budget announcement: 7:30pm AEST on 12 May 2026. The Budget explainer groups investors into three positions.
Held before 7:30pm AEST on 12 May 2026. These properties can continue to be negatively geared in future years until sold. A property counts as held if a contract had been entered into before the announcement, even if it had not yet settled.
Bought between the announcement and 30 June 2027. Established properties in this window can be negatively geared until 30 June 2027 only. From 1 July 2027 their losses fall under the new residential income rules.
Bought from 1 July 2027. Established properties bought from this date cannot be negatively geared against other income unless they are new builds.
Grandfathering follows the property while you own it. Once you sell, a later buyer of that established property is under the new rules.
How are new builds treated, and what is the status of the definition?
New builds are the main exception. The Budget explainer says negative gearing continues for properties that genuinely add to housing supply, including dwellings built on vacant land and knock down rebuilds that replace one dwelling with more dwellings. Knock down rebuilds or substantial renovations that do not increase supply are not eligible.
The detailed definition of a new residential dwelling was not in the Act passed in June. On 4 August 2026 the Treasurer released exposure draft legislation, the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, for consultation. That release says a property will generally be new where it genuinely adds to housing supply and is acquired within 24 months of a certificate of occupancy being issued. That extends the 12 month window used at Budget time, to give builders time to sell stock on hand.
Treasury’s consultation on that draft closed on 21 August 2026. The bill was introduced to Parliament on 14 October 2026 and, as at 3 November 2026, the ATO legislation tracker does not show it as passed. Treat the new build definition as draft until it becomes law, and check the tracker before relying on the detail.
If you are weighing up new against established stock, our guide to new build or established property covers the wider trade offs beyond tax.
What CGT changes are in the same package?
The same Act changes how capital gains are taxed from 1 July 2027. According to the ATO and the Budget explainer:
- The 50% CGT discount is replaced for resident individuals, trusts and partnerships by cost base indexation, which adjusts your purchase cost for inflation using the CPI.
- A 30% minimum tax applies to real capital gains accruing from 1 July 2027. Recipients of certain means tested payments, such as the Age Pension and JobSeeker, are exempt.
- Gains accrued before 1 July 2027 keep the 50% discount. The asset is treated as sold and reacquired at its value on 1 July 2027, set either by a valuation or an apportionment method that the Government is still developing.
- New builds get a choice. When you sell, you can choose either the 50% discount or indexation with the minimum tax.
- Some things do not change. The main residence exemption stays, the affordable housing CGT discount is retained, and the small business CGT concessions remain.
The 12 month ownership rule still applies. Indexation or the discount requires owning the asset for at least 12 months before the CGT event.
What this means for investors
The biggest practical question for anyone buying now is which category the purchase falls into. An established property bought today can be negatively geared only until 30 June 2027. After that, its losses can only reduce residential property income, so the property’s cash flow needs to stand up on its own numbers.
A new build that meets the final definition keeps full negative gearing and a choice of CGT treatment. The definition is still in draft, so the exact timing rules around occupancy certificates and prior sales are not settled. Confirm how any new build you are considering would be treated once the bill passes.
For grandfathered owners, selling ends the grandfathering for that property. That makes the hold or sell decision on an existing property more important than it used to be.
None of this changes the fundamentals of choosing a sound property. As a licensed buyers agency, Citadel Agency still starts with rental demand, yield and the property itself, then works through the tax position with the client’s accountant. Our 2026 federal Budget guide covers the wider package, and our earlier explainer on the truth about negative gearing explains how the strategy works.
What to do now
- List each property you own with its contract date, so you know which are grandfathered.
- Keep the contract for any purchase signed before 7:30pm AEST on 12 May 2026, as it shows the property was held.
- For any property you are buying now, run the numbers assuming losses can only offset residential property income from 1 July 2027. Our cash flow investment tool can help.
- If you are looking at new builds, check the status of the Tax Reform No. 3 Bill and the final new build definition.
- Keep records of purchase price and improvements, as the value at 1 July 2027 will matter for CGT.
- Speak to your accountant about your own position before you sign.
Frequently asked questions
Is negative gearing being abolished in 2027?
No. From 1 July 2027, losses on established residential properties bought after 7:30pm AEST on 12 May 2026 can only offset residential property income. Grandfathered properties and new builds can still be negatively geared against other income.
Is my existing investment property grandfathered?
If you held it, or had signed a contract for it, before 7:30pm AEST on 12 May 2026, it can continue to be negatively geared until you sell it.
What happens to losses I cannot use after 1 July 2027?
For affected properties, losses can offset other residential property income, including capital gains. Any excess can be carried forward to offset residential property income in future years.
Does the new build exemption already have a final definition?
Not yet. The definition is in the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, released as an exposure draft on 4 August 2026. The draft uses a 24 month window from the certificate of occupancy, but it is not law until the bill passes.
Do the changes apply to SMSFs?
The negative gearing changes exclude superannuation funds, including SMSFs, and widely held trusts. They apply to individuals, partnerships, companies and most trusts.
Sources
- Budget 2026 to 27: Tax explainers, negative gearing and capital gains tax
- ATO: Capital gains tax reform
- Treasurer: Tax reform bill passes Parliament (25 June 2026)
- Treasurer: Consultation on next tranche of tax reform legislation (4 August 2026)
- Treasury: Tranche 2 consultation, negative gearing and CGT reforms
Buying in the lead up to 1 July 2027? Book a free strategy call with our team.
General information only. It does not take into account your objectives, financial situation or needs. Speak to a qualified professional before acting.
General information only. It does not take your objectives, financial situation or needs into account and is not financial, tax, credit or legal advice.
