Important: The proposals discussed below are not currently law and may change significantly before any legislation is introduced. We will continue to monitor developments and provide updates as further details become available.
The Federal Government’s 2026 Budget included proposed changes to Australia’s negative gearing rules that could affect future residential property investors from 1 July 2027.
Importantly, these changes are not yet law, and draft legislation has not yet been released. However, the proposals have generated significant discussion among investors and the property industry.
What Has Been Proposed?
The Government has proposed restricting negative gearing for residential property investments to newly constructed homes from July 2027.
Under the proposal:
- Existing property investors would generally be unaffected.
- Investors purchasing newly built properties would continue to have access to negative gearing.
- Investors purchasing established residential properties after the commencement date would face new restrictions.
What Is Negative Gearing?
Negative gearing occurs when the costs of owning an investment property exceed the rental income it generates.
Common deductible expenses include:
- Interest on investment loans
- Property management fees
- Council rates
- Insurance
- Repairs and maintenance
Under current rules, these losses can generally be offset against other income, including salary and wages, reducing an investor’s overall taxable income.
What Would Change?
For investors purchasing established residential properties after the proposed commencement date, property losses would no longer be deductible against salary and wage income.
Instead:
- Losses could only be applied against future rental income or future capital gains.
- Unused losses would be carried forward.
- Immediate tax benefits would be reduced.
For many investors, this would significantly change the cash-flow benefits traditionally associated with negative gearing.
What About Existing Investment Properties?
One of the most important features of the proposal is the proposed grandfathering of existing investments.
According to the Budget announcement, residential investment properties owned on 12 May 2026 would continue to operate under the current negative gearing rules.
For existing investors, this means no immediate change to current arrangements if the proposal proceeds in its current form.
New Builds Remain Favoured
The Government has indicated that negative gearing concessions would remain available for newly constructed residential properties.
The stated objective is to encourage investment into new housing supply rather than existing housing stock.
As a result, future investors may increasingly compare the tax treatment of new and established properties when making investment decisions.
Who Could Be Affected?
These proposed changes may be relevant to:
- First-time property investors
- Investors planning to expand their portfolio after July 2027
- High-income earners who currently rely on negative gearing benefits
- Investors considering whether to purchase new or established properties
The impact will vary depending on individual circumstances, financing arrangements and long-term investment objectives.
Should Investors Change Their Plans?
At this stage, we do not recommend making property decisions based solely on Budget announcements.
Tax outcomes are only one part of an investment decision and the final legislation may differ from the current proposal.
However, investors considering future property purchases should remain informed and factor potential tax changes into their long-term planning.
CGH Accounting’s View
The proposed negative gearing reforms represent a significant shift in the taxation of residential property investment and could influence how future investors structure their property portfolios.
While existing investors appear largely protected under the announced grandfathering arrangements, future purchasers of established residential property may face very different tax outcomes.
CGH Accounting is monitoring developments closely and will continue to provide updates as further details become available.
If you are considering purchasing an investment property, expanding your portfolio, or reviewing your investment strategy, we encourage you to discuss the potential implications with our team before making major decisions.
CGH Accounting Services | Special Bulletin | June 2026
Proposed Capital Gains Tax Changes: What Investors Need to Know
Proposed Trust Tax Changes Could Impact Family Trusts and Investment Structures
