What is changing
As part of the 2026-27 Budget, the Australian Government is limiting negative gearing for residential property to newly built dwellings acquired after 7:30pm AEST on 12 May 2026, with changes coming into effect 1 July 2027. Properties purchased or contracted before that time (for existing established properties) are grandfathered—you can continue with negative gearing until they are sold. (austax.tools)
Examples & edge cases
- If you own an established investment property bought before 7:30pm on 12 May 2026, you’ll still be able to offset net rental losses under current rules until you dispose of it.
- A newly built duplex through a knock-down rebuild that increases housing supply generally qualifies as a “new build” for these rules. Substantial renovations that don’t increase supply may not qualify.(community.ato.gov.au)
Compliance & planning tips
- Check your contract date: Whether you entered into contract (or ownership) before 12 May 2026 determines grandfathering status.
- For those planning new investments: targeting apartments, new build houses or even knock-down rebuilds (if approved) can preserve deductibility under negative gearing.
- For existing properties: maximize other rental income strategies or explore carry-forward opportunities. Losses from established property won’t be deductible against non-residential income post-July 2027.
- Determine what qualifies as “new build” once legislation/regulation defines it clearly. ATO guidance or fact sheets will clarify eligibility.
Implications and strategic insight
- Property investors may prefer new-build developments to maintain full negative gearing benefits. May affect property supply, pricing and development trends.
- Existing owners have incentive to postpone disposals until after the effective date if they wish to maintain current gearing rules.
- Lenders, planners and developers should monitor final rules given their influence on investment returns, rental yields & financing models.