What is negative gearing?
Negative gearing, put simply, is investing in something whereby the income produced by that investment will be exceeded by the costs incurred in holding that asset. Thus a rental property can be negatively geared where the rent you receive is less than the rental expenses. Similarly, investments in shares can be negatively geared if you borrow money to buy the shares and the interest on that loan exceeds the income (dividends) produced by those shares.
Negative gearing is a popular way of increasing your tax refund at the end of each tax year as your taxable income will be reduced by the loss created by the negatively geared investment. However, make sure your investment is a sound one. You don't want to invest in something just for the tax deduction!
Changes to Negative Gearing from 1 July 2027
The 2026 Federal Budget introduced major changes to negative gearing for residential rental properties. These changes have now been legislated.
Properties held before Budget night
An established residential property held before 7:30 pm AEST on 12 May 2026—including a property under a binding purchase contract at that time—will be grandfathered.
Rental losses from these properties can continue to be deducted against other taxable income, such as salary, business income and investment income.
Established properties acquired after Budget night
For an established residential property acquired after 7:30 pm AEST on 12 May 2026:
The existing negative gearing rules continue until 30 June 2027.
From 1 July 2027, a net rental loss cannot be deducted against salary, wages or other non-residential income.
The loss may be applied against other residential property income, including relevant capital gains.
Any remaining loss can be carried forward for use against residential property income in a future year.
The expenses themselves do not disappear. The change affects when, and against what type of income, the resulting rental loss can be used.
New residential properties
Qualifying new residential properties will continue to have access to negative gearing.
Broadly, a new build must genuinely add to the housing supply—for example:
A dwelling constructed on previously vacant land
A newly constructed apartment purchased off the plan
A duplex replacing a single dwelling
A substantial renovation or knock-down rebuild that does not increase the number of dwellings will generally not qualify.
Commercial properties
The negative gearing changes apply only to residential property. Commercial properties remain subject to the existing deduction rules.
Do the Negative Gearing Changes Apply to Other Investments?
The new restrictions on negative gearing apply only to residential rental properties. They do not apply to commercial property, shares, managed investments or other income-producing assets.
