Bought an investment property since Budget night? The negative gearing changes are now law

The cut-off is 7.30pm, Australian Eastern Standard Time, on Tuesday 12 May 2026: Budget night. An established home bought as an investment after that moment can still run at a loss, but from 1 July 2027 that loss will no longer reduce the tax paid on a salary. The negative gearing 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 same legislation swaps the 50 per cent capital gains tax discount for inflation indexation and a 30 per cent minimum tax, on gains from 1 July 2027.

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”. Two identical flats in an older block can sit on different sides of the line: the one contracted on the afternoon of 12 May keeps the old negative gearing rules until it is sold, and the one contracted the next morning does not.

The later buyer 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.

How the negative gearing changes treat a loss

From 1 July 2027, losses on an established property bought after the cut-off can be set only against income from residential property, including capital gains on residential property. The Budget summary says such owners “won’t be able to deduct them against other income like wages”. Unused losses carry forward.

In the Act’s own 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 puts figures on what is deferred. It takes 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. In another example, covering ten years, a buyer earning A$100,000 who pays A$519,000, stamp duty included, for an established property bought after the announcement pays A$186 more in nominal tax than under the old settings.

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, when they sell, 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 it 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 12 months set out in the Budget. Under the draft, later buyers inside that window would qualify too. On Wednesday 14 October 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.

Two tax treatments for one sale

Any gain arising before 1 July 2027 keeps the 50 per cent discount. Gains from that date 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 by an apportionment formula when they lodge the return for the year of sale.

A minimum tax rate of 30 per cent then applies to real gains made from 1 July 2027, “with no impact until the income is realised”. It does not affect people whose gains are already taxed at 30 per cent or more, and the Act exempts anyone who receives 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. Remaining aspects of how the capital gains changes apply to foreign, mixed and temporary residents will come in later legislation, the Treasurer said in August.

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.

For any investor who signed for an established home after 7.30pm on Budget night, the property and the loan are unchanged. What moves on 1 July 2027 is where a loss can land: on rent and on a future sale, and no longer on the tax taken from wages.