The negative gearing changes at a glance
The 2026 Federal Budget introduced a ring-fencing rule for losses on established residential investment properties. This change starts on 1 July 2027.
What does ring-fencing mean?
Currently, if your investment property makes a loss (i.e. expenses including interest exceed rental income), you can offset that loss against your wages or other income — reducing your total tax bill. This is negative gearing.
Under ring-fencing, losses on established residential properties purchased after Budget night can only be offset against:
- Income from other rental or residential property
- Future profits from the same property when it becomes positively geared
- Capital gains when you sell the property
They cannot be offset against wages or other income immediately.
What properties are affected?
| Property type | Purchased | Outcome |
|---|---|---|
| Any property (residential or other) | Before 12 May 2026 | Fully grandfathered — no change |
| New residential build | After Budget night | Full negative gearing retained |
| Established residential property | After Budget night | Ring-fenced from 1 July 2027 |
What about the CGT changes?
From 1 July 2027, the 50% CGT discount is replaced with an inflation-adjusted discount for established properties purchased after Budget night. A minimum 30% tax rate applies to the gain. Investors in new builds can choose whichever rule is more favourable at the time of sale.
Does depreciation still matter under the new rules?
Yes. Depreciation deductions reduce the size of your ring-fenced loss, which means you recover more income sooner when the property eventually turns profitable. A depreciation schedule is still important.
See the full guide: 2026 Property Tax Changes: Negative Gearing, CGT and SMSF Borrowing.