Negative Gearing Reform 2026: What Passed and What It Means for Investors

Updated 24 October 2026. The negative gearing and capital gains tax changes announced in the 12 May 2026 Federal Budget are now law. This guide has been rewritten to reflect what passed. It is general information, not tax advice.

The short answer: from 1 July 2027, negative gearing on residential property is limited to new builds. Properties held at 7:30pm AEST on 12 May 2026 are grandfathered and keep the current rules. Established properties bought after that time can be negatively geared until 30 June 2027; from 1 July 2027 their net rental losses are quarantined, so they can't reduce tax on your salary. From the same date, the 50% capital gains tax discount is replaced by cost base indexation and a 30% minimum tax on capital gains, for gains that build up after 1 July 2027.

What passed

The reforms were announced in the 2026-27 Federal Budget on 12 May 2026 and passed Parliament in June 2026 as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026. Both main changes start on 1 July 2027.

Negative gearing: who is affected

Your property	Negative gearing
Held at 7:30pm AEST on 12 May 2026 (including contracts signed but not yet settled)	Grandfathered. Rental losses can keep offsetting your other income until you sell.
Established property bought after 7:30pm AEST on 12 May 2026	Current rules until 30 June 2027. From 1 July 2027, net rental losses are quarantined.
Established property bought from 1 July 2027	Net rental losses quarantined from day one.
New build that adds to housing supply	Negative gearing continues.

Quarantined doesn't mean lost. Losses that can't offset your salary are carried forward and can be used against future residential property income and capital gains. The detail on how quarantined losses are pooled and applied is still being set out in ATO guidance, so check with your accountant before you rely on it.

New builds generally need to add to the housing stock: a dwelling that hasn't previously been sold as a residence or lived in for more than 12 months. A renovation of an existing home doesn't count. Some edge cases, such as knock-down rebuilds and off-the-plan purchases, depend on the final ATO guidance.

Superannuation funds (including SMSFs), widely held trusts and build-to-rent developments are outside the negative gearing changes.

Capital gains tax changes from 1 July 2027

• For individuals, trusts and partnerships, the 50% CGT discount is replaced by indexation: your cost base rises with inflation, and only the real gain is taxed.
• A 30% minimum tax rate applies to that real gain. People on the Age Pension and other income support are exempt from the minimum tax.
• Gains that built up before 1 July 2027 keep the current rules, including the 50% discount. You'll generally need a market valuation at 1 July 2027 or an ATO-approved apportionment method to split the gain.
• The main residence exemption doesn't change, and super funds keep their current CGT treatment.

The ATO's example: a property worth $500,000 on 1 July 2027 sells two years later for $560,000, with inflation of 2.5% a year. The indexed cost base is about $525,313, so the taxable real gain is about $34,688 rather than $60,000. Try your own numbers in the capital gains tax calculator.

What it means for property investors

Every investor's position is different, so treat these as questions to work through with your accountant, not recommendations.

• If you already own: grandfathered properties keep negative gearing until you sell, which makes holding them more valuable than before. Before you sell anything, compare selling before and after 1 July 2027 in the sell before 2027 calculator.
• If you're buying established property now: you can negatively gear it until 30 June 2027, then losses are quarantined. Cash flow matters more: a property that pays its own way is less exposed. Test it in the property cash flow calculator and the negative gearing calculator.
• New builds keep negative gearing, but that doesn't make every new build a good investment. Supply, resale demand and valuation risk still decide returns. See why new builds carry higher risk.
• Get a valuation at 1 July 2027 for any property you plan to sell later, so the pre-2027 gain keeps the 50% discount.
• Structure (personal names, trust or company) affects how both changes apply. Compare them in the investment structure calculator, then confirm with your accountant.

We work only with investors and buy wherever the numbers suit the strategy. See how we buy investment property.

FAQ

Is negative gearing being abolished?

No. From 1 July 2027 it's limited to new builds for property bought after 7:30pm AEST on 12 May 2026. Properties held before then are grandfathered, and losses on established property bought later are quarantined rather than lost.

Am I grandfathered if I signed a contract before 12 May 2026 but settled later?

Generally yes: properties held, including those under contract, at 7:30pm AEST on 12 May 2026 are grandfathered. Confirm your dates with your accountant or conveyancer.

Can I still negatively gear an established property I buy this year?

Yes, until 30 June 2027. From 1 July 2027 its net rental losses are quarantined and can only be used against future residential property income and capital gains.

When does the 50% CGT discount end?

For gains that build up from 1 July 2027. Gains before that date keep the 50% discount; later gains are indexed for inflation and taxed at a minimum of 30%.

Does the change affect my home?

No. The main residence exemption is unchanged.

Sources

• ATO: Tax reform, reforming negative gearing and capital gains tax

General information only. It doesn't consider your circumstances and isn't tax or financial advice. Speak to a registered tax agent before acting.