Grandfathering and negative gearing: what it means for investors
"Grandfathering" is a policy term that means existing arrangements are exempted from new rules. In the context of negative gearing, grandfathering means that investors who already owned established residential property before Budget night (12 May 2026) are not affected by the legislated changes — they keep their existing tax treatment.
How grandfathering works
Under the legislated changes, the negative gearing changes apply only to established residential property acquired after Budget night (12 May 2026), effective 1 July 2027. Properties held before that date continue to be negatively geared under the current rules.
This means:
- Existing property owners would continue to offset net rental losses against other income (salary, business income) at their full marginal rate
- Newly acquired established property after Budget night faces the ring-fencing restrictions from 1 July 2027
- The cut-off date is what the industry calls the "grandfathering date"
Why grandfathering matters
Without grandfathering, a sudden change to negative gearing rules would severely impact the value of existing investment properties as investors priced in the loss of future tax benefits. Grandfathering protects:
- Current investors' after-tax returns
- Property values (by avoiding a sudden investor selloff)
- The expectations of people who made investment decisions based on current rules
What still needs care
The negative gearing changes are legislated, with grandfathering for property held before Budget night (12 May 2026) and effect from 1 July 2027. Some finer points still warrant advice:
- Whether grandfathering applies to just the property or also to subsequent loans drawn on the same property
- How ownership changes (refinancing, transfer) interact with grandfathering
What investors should do now
- Monitor policy announcements closely
- Speak to a tax advisor about your specific portfolio
- Consider the potential effect on new purchases you are planning
- Do not assume you need to sell existing properties — grandfathering protects properties held before Budget night