Negative gearing changes: 12 May 2026 cut-off and the 2027 loss rule
Take two identical flats in the same older block. One is contracted on the afternoon of Tuesday 12 May 2026, the other the next morning. Between them falls 7.30pm, Australian Eastern Standard Time, on Budget night: the cut-off for the negative gearing changes. The first keeps the old negative gearing rules until it is sold. The second, an established home bought as an investment after the cut-off, can still run at a loss, but from 1 July 2027 that loss will no longer reduce the tax paid on a salary.
The changes passed Parliament in June. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on Friday 26 June 2026, and its negative gearing schedule applies from the 2027-28 income year. The Australian Taxation Office puts it in five words: “These measures are now law.”
The contract date decides
Settlement does not set the date. The Budget papers spelt out that properties acquired before the cut-off were exempt, “including contracts entered into but not yet settled”, and for that test the Act treats a home bought under a contract as owned “from the time when you enter into the contract”.
The later flat still has a grace period. The Budget’s tax explainer says established properties bought between the announcement and 30 June 2027 may be negatively geared during that period, but not from 1 July 2027.
The negative gearing changes confine losses to residential property income
From 1 July 2027, losses on an established property bought after the cut-off can be set only against rental income or capital gains from residential property. Unused losses carry forward, but the Budget summary says such owners “won’t be able to deduct them against other income like wages”.
In the Act’s worked example, an owner who buys an established home in July 2028, collects A$50,000 in rent in 2028-29 and has A$65,000 of deductions, including interest, insurance and strata costs, can deduct only A$50,000. The other A$15,000 moves to the next income year.
The explainer illustrates the deferral with a rental loss of A$14,810, roughly the average negative gearing loss in 2022-23 for an individual in the top tax bracket. Deducted against other income, it would be worth A$4,761 to a person with A$80,000 of other income and A$6,961 to one with A$210,000; under the new rules it is carried forward against future property income. A second example covers ten years: a buyer earning A$100,000 spends A$519,000, stamp duty included, on an established property bought after the announcement and pays A$186 more in nominal tax than under the old settings.
Two tax treatments for one sale
For gains from 1 July 2027, the same legislation swaps the 50 per cent capital gains tax discount for inflation indexation and a 30 per cent minimum tax. Any gain arising before that date keeps the discount. Later gains are worked out with the cost base indexed to the consumer price index, starting from the property’s value on 1 July 2027, which owners can set by valuation or an apportionment formula in the return for the year of sale.
The minimum tax applies to real gains, “with no impact until the income is realised”. It spares people whose gains are already taxed at 30 per cent or more, and the Act exempts anyone receiving certain government payments during the income year of the sale, from the Age Pension and JobSeeker to Family Tax Benefit and Parental Leave Pay.
The main residence stays exempt from capital gains tax. The Act already denies indexation to foreign and temporary residents, and the Treasurer said in August that remaining aspects of how the capital gains changes apply to foreign, mixed and temporary residents will come in later legislation.
A new build stays on the old side of the line
New builds are exempt. Investors who buy one can keep deducting losses against wages and, on sale, choose between the 50 per cent discount and indexation with the minimum tax. The Budget-night explainer said later buyers of the same dwelling could not use negative gearing or the 50 per cent discount on it, and drew the line at supply: “Knock-down rebuilds or substantial renovations that do not increase supply will not be eligible.”
The legal definition is still moving. When draft rules went out for consultation in August, the Treasurer said a property would generally count as new where it genuinely adds to housing supply and is acquired within 24 months of a certificate of occupancy being issued, up from the Budget’s 12 months. Under the draft, later buyers inside that window would qualify too. On Wednesday 14 October 2026 the Treasurer said the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, which contains the definition, had been introduced. Until Parliament passes it, the definition is a proposal.
Slower price growth, more owner-occupiers
Treasury modelling cited in the explainer points to around 75,000 additional owner-occupiers over the next decade. The explainer also expects house prices to grow by around 2 per cent less over a couple of years than with no change, and the reforms to lift rents by less than A$2 a week for a household paying the current median rent.
The 2021 Census found mortgages and renting both more common in homes with an India-born resident. Of occupied private dwellings with at least one person born in India, 46.3 per cent were owned with a mortgage, against 35.0 per cent of all dwellings, and 41.5 per cent were rented, against 30.6 per cent.
Until 30 June 2027, both flats in the older block may be negatively geared. After that, the night between their contracts decides where a loss can land: for the flat contracted on the afternoon of 12 May, against wages until it is sold; for the flat contracted the next morning, only against rent and a future sale.
