What changed in the 2026-27 Federal Budget?
The government announced and legislated reforms that limit negative gearing for residential property from the 2027-28 income year, with grandfathering for properties held before 7:30pm AEST on 12 May 2026.
Established residential property purchased after 12 May 2026
Under the reforms, losses on affected established residential property can be deducted against residential-property income, including relevant capital gains, with excess losses carried forward. They are not deductible against unrelated income such as salary and wages from the 2027-28 income year.
New builds
New residential builds retain access to negative gearing under the new rules, subject to the legislation and eligibility details.
What about properties already held?
Existing residential investments held before the Budget-night announcement are grandfathered from the negative-gearing changes while held, according to the government's published material.
Why this matters when comparing property
The reforms can change after-tax holding costs and may affect the relative appeal of new and established property for some investors. However, tax treatment should not replace market and property due diligence.
Capital gains tax is also changing
Separate reforms apply from 1 July 2027, replacing the general 50% CGT discount with inflation-based treatment and a minimum tax on gains, with different options for eligible new builds. The transition rules are important.
For broader record-keeping and CGT questions, see Investment Property Tax and CGT: Questions to Ask.