Negative gearing abolished for all but new builds

Negative gearing on residential properties acquired from Budget night will be abolished for all but new builds from 1 July 2027.

From 1 July 2027, the ability to negatively gear an investment property will be limited to new builds and existing investment properties purchased prior to Budget night (including those under contract but not yet settled) – a move designed to prevent a stampede of investors trying to buy property before the 1 July 2027 changes.

While negative gearing will not be available to existing properties purchased after Budget night, they will be deductible against rental income and capital gains from residential property (reducing the capital gain sale or disposal). If you have excess losses, these losses can be carried forward to offset against other income from residential investment properties.

Excluded from the changes are residential investment properties held in widely held trusts and superannuation funds, along with targeted exemptions for build to rent developments and private investors supporting government housing programs.

Changes to negative gearing will only apply to residential property. The rules remain unchanged for commercial property and other asset classes, such as shares.

The Government has also suggested that further exemptions might also apply where private investors invest in affordable housing programs.

What is negative gearing?

Negative gearing is when the expenses associated with a property (including interest and depreciation expenses) are greater than the income earned. Individual taxpayers who are negatively geared can deduct their losses from the property investment against other income, such as salary and wages, which is why negative gearing is used predominantly by higher income earners as the loss reduces their taxable income.

While negative gearing can apply to any type of investment, the changes introduced in Budget 2026 only impact existing residential investment property.

What investors need to think about

Negative gearing is a popular investment strategy, or sometimes an unlucky outcome, used by around 42% of investment property owners, with 28% of those recording losses on more than one property[1].

Michael Zdrilic, Hayes Knight’s Financial Services Director said that investors considering existing residential property investments will no longer be incentivised by the immediate tax benefits and instead will need to focus on whether longer term gains achieve their investment goals.

With residential property held inside an SMSF excluded from the reforms to negative gearing and the CGT discount, holding property inside an SMSF might become preferable depending on your individual scenario. There is no one size fits all solution for this, and investors should take advice specific to their individual position and circumstances.

Need assistance?

For assistance with the changes to negative gearing and its impact on you, contact the Hayes Knight team.

Dara Siyali
Associate Director, Business Services


Michael Zdrilic
Director, Financial Planning
Authorised Representative of HK Financial Services Pty Ltd AFSL 545687

General advice warning & disclaimer
The information presented in this article is general in nature and does not take into account your personal objectives, financial situation, or needs.
Before acting on any information, you should consider whether it is appropriate for you, having regard to your individual circumstances. We strongly recommend that you seek personal financial advice before making any financial decisions.
Whilst every effort has been made to ensure the accuracy of the information presented, laws and regulations may change, and the information may not remain current after the date of this article.

[1] 2022-23 ATO taxation statistics.