Negative Gearing Australia 2026 — Rules Changed 12 May Budget (Established Property Losses Ring-Fenced 1 July 2027)

Updated 15 June 2026. Negative gearing is when you own a rented investment property that costs you more to hold each year than it earns in rent, and you subtract that yearly loss from your salary to pay less tax. It only ever applies to investment property you rent out — never your own home. The 12 May 2026 federal budget changed the rules for new buyers of established homes, but for grandfathered owners and new builds the old maths still applies.

This guide explains negative gearing in Australia simply: what it is, how it works step by step, the tax benefits at every income level, two worked examples with 2026 numbers, and why some people want it scrapped. Then we get into the part most guides skim over — exactly what the 12 May 2026 budget changed, who is grandfathered, the new-build carve-out, and what it all means if you are a first home buyer weighing whether to rentvest. No jargon, no sales pitch.

What Is Negative Gearing? Simple Explanation

Negative gearing, explained simply: you borrow money to buy an investment property, and the costs of owning it exceed the rent it brings in. You are making a loss on the property each year, and you can deduct that loss from your other taxable income — usually your salary — which lowers your tax bill.

"Gearing" just means borrowing. If the property earns more than it costs to hold, it is positively geared. If it costs more than it earns, it is negatively geared. You are paying extra each week to hold an asset you expect to grow in value over time. The tax deduction softens the loss; it does not erase it.

This is not a loophole or a dodge. It is a basic principle of Australian tax law: any income-producing investment where costs outrun income can have that loss deducted. It applies to shares, businesses and other assets too. Property is simply where most Australians run into it.

How Does Negative Gearing Work in Australia?

Here is the mechanics, step by step:

1. You buy an investment property with a home loan. The borrowed money is the "gearing".
2. You rent it out and collect rent from the tenant.
3. You total up the costs of owning it: mortgage interest, council rates, insurance, property management fees, maintenance and depreciation.
4. You subtract the rent from the costs. If the costs are higher, you have a net rental loss.
5. You deduct that loss from your salary on your tax return, which lowers your taxable income.
6. You pay less tax, because your taxable income is lower. The saving equals your loss multiplied by your marginal tax rate.

The key insight: you accept a short-term loss in return for a tax deduction, while betting on the property rising in value over the long term. When you sell, the hope is that the capital gain outweighs every annual loss you carried along the way.

Negative Gearing Worked Example — Real 2026 Numbers

Here is a realistic example with current 2026 numbers. (All the interest rates and growth figures below are assumptions for the illustration, not predictions.)

The property

You buy a $650,000 investment house in Perth. You put down a 20% deposit ($130,000) and borrow $520,000 at 6.2% per annum. On top of the deposit you also pay stamp duty and other purchase costs.

Annual rental income

The property rents for $540 per week, or $28,080 a year. That is your gross rent before expenses.

Annual costs of ownership

The loss

Rent ($28,080) minus expenses ($47,986) leaves a net rental loss of $19,906 a year.

But $8,000 of that is depreciation, a non-cash deduction you never actually pay out. Your real out-of-pocket cash loss is $11,906, or about $229 a week.

The tax saving

You earn $120,000 a year in your day job. Your marginal rate is 30% plus the 2% Medicare levy, so 32%. You deduct the $19,906 loss against your salary.

Tax saving: $19,906 × 32% = $6,370 a year.

Your after-tax cost of holding the property: $11,906 cash loss minus $6,370 tax refund = $5,536 a year, or roughly $106 a week out of pocket.

Run your own negative-gearing numbers: There is no single magic "negative gearing calculator" — the figure comes down to two numbers you can work out right now. Check what you could borrow with our borrowing power calculator, then see the weekly interest cost with the mortgage repayment calculator. Those two outputs are 90% of any negative-gearing sum.

The growth equation

You are paying about $80 a week to hold a $650,000 asset. For the investment to make sense, the property has to grow by more than $4,143 a year, which is under 0.7% annual growth. If Perth property grows at a long-term average of 5% a year, you gain $32,500 in equity annually, far more than the $4,143 holding cost.

Over 10 years at 5% growth, that $650,000 property would be worth roughly $1,059,000, a gain of $409,000. Take off cumulative holding costs of about $41,430 and your net wealth gain is around $367,570, before capital gains tax on sale. Even after CGT at the discounted rate, the return is large.

The flip side: if prices are flat or falling, as they were in some markets between 2017 and 2019, you simply lose $4,143 a year with no growth to show for it.

Negative Gearing Tax Benefits — Who Benefits Most in 2026?

The tax benefit of negative gearing in 2026 depends entirely on your marginal rate. The same $19,906 rental loss produces very different tax savings depending on what you earn (the rates below use the 2025-26 resident scale plus the 2% Medicare levy):

Higher earners get more back. Someone on $200,000-plus saves $9,356 against the same loss for which someone on $90,000 saves $6,370 — a tax refund roughly 47% bigger for an identical loss.

The biggest user group, though, is not wealthy investors. ATO 2022-23 data shows about 1.12 million Australian taxpayers claimed a net rental loss, and most are middle-income earners — teachers, nurses, police officers and tradies — using it as a long-term wealth play alongside super. The average claimed rental loss works out at around $9,000 per taxpayer, on the ATO's published figures.

Why Negative Gearing Is Controversial

Not everyone thinks negative gearing is a good thing, and the debate is the whole reason the rules just changed. Critics argue it lets investors on high incomes use a tax break to outbid first home buyers for existing homes, pushing prices up without adding a single new dwelling. Because the benefit is worth more the higher your tax bracket, the saving flows disproportionately to people who already own property and earn well — that is the fairness objection you will hear quoted most.

Defenders counter that most negative gearers are ordinary middle-income earners with one or two properties, that rental losses are a normal feature of how tax treats any geared investment, and that scrapping it could thin out rental supply. There is no settled answer; reasonable people land on both sides. The 2026 reform is essentially the government trying to keep the strategy for new housing supply while turning it off for established stock.

Negative Gearing vs Positive Gearing — What Is the Difference?

The difference matters before you buy anything:

• Negative gearing: the property costs more than it earns. You make a loss each year, claim a tax deduction on it, and rely on capital growth to make up the gap when you sell. Higher risk, potentially higher reward.
• Positive gearing: the rent beats the costs. You make a profit each year, pay tax on it, and have positive cash flow from day one. Lower risk, more conservative.
• Neutral gearing: income and costs roughly match. You break even — no deduction, no surplus, but the tenant is effectively paying down your mortgage.

One thing that trips people up: you can't negative-gear your own home. Negative gearing only ever applies to an investment property you rent out — the home you live in (your owner-occupied property) is never negatively geared, because it earns no rent and its costs are not deductible.

Negative gearing tends to suit higher-income earners (37%-plus) chasing growth in a high-demand area. Positive gearing suits people who want reliable cash flow, investors nearing retirement, or those buying in high-yield regional markets. Neither is universally "better" — positive gearing is often the more sensible, conservative choice, especially if you are not in a high tax bracket.

Negative Gearing Changes 2026: What the 12 May Budget Did

The 2026–27 federal budget delivered the biggest negative gearing changes in more than a generation, plus a companion change to the 50% CGT discount. Here is what changed, who it hits, and what it means for first home buyers.

The two big changes (in plain English)

1. Negative gearing on established residential property is being phased out for new buyers. Any established residential investment property bought from 7:30pm AEST on Tuesday 12 May 2026 will lose the ability to offset its rental losses against salary or other personal income — but not immediately. The change takes effect from 1 July 2027, so a property bought in the transitional window between 12 May 2026 and 30 June 2027 keeps full negative gearing (salary offset) for the rest of FY2026-27, then falls under the new rules from 1 July 2027. From that date, the losses can still be carried forward to offset future residential rental income (from any residential rental property) or future capital gains on that residential rental property — they are simply ring-fenced away from your wage.
2. The 50% CGT discount is being replaced by cost-base indexation plus a 30% minimum tax. From 1 July 2027, the flat 50% discount gives way to a discount based on inflation — the purchase price is indexed to inflation — with a minimum 30% tax on net gains. Gains accrued before 1 July 2027 keep the existing 50% discount.

Both reforms are legislated to take effect from 1 July 2027, but the trigger date for the negative-gearing change is the announcement itself, 7:30pm on 12 May 2026. That timing stops a stampede of pre-deadline buying.

New negative gearing rules: who they apply to

The new negative gearing rules apply only to a buyer who signs a contract on an established residential investment property from 7:30pm on 12 May 2026 onwards. If that is you, salary offset is removed from 1 July 2027 — you keep it for the rest of FY2026-27, then lose it. If you bought a new build, or you owned (or were under contract on) the property before that moment, the new rules do not touch you. That is the whole test in one sentence.

Who is grandfathered

If you already owned an investment property, or were already under contract, before 7:30pm on 12 May 2026, the existing negative-gearing rules keep applying to that property. Existing investors keep the old rules indefinitely on existing holdings. The reform is forward-looking, not retrospective.

You only fall under the new rules if you sign a contract on an established residential investment property from 12 May 2026 onwards. Off-the-plan contracts signed before that date for properties not yet titled count as pre-budget purchases.

Check your status in 30 seconds: Scroll down to the Negative Gearing Grandfathering Status Checker at the bottom of this guide. Answer three questions — contract date, property type, buyer entity — and it tells you which rules apply to your property: grandfathered, new-build carve-out preserved, or ring-fenced from 1 July 2027. It is built specifically for the post-12-May-2026 rules.

The new-build carve-out

Newly constructed residential property is exempt from both reforms. Buy a brand-new investment property and you can still:

• Offset rental losses against your salary, exactly as the old rules allowed
• Choose between the existing 50% CGT discount and the new cost-base-indexation method when you sell

The budget papers are explicit about why: redirect investor money away from established stock, where investors compete with owner-occupiers including first home buyers, and toward genuine new housing supply.

Established vs new build — side-by-side comparison

If you are weighing a post-budget investment purchase, the two property types now sit on completely different tax rails. This table sums up where they diverge:

In practice, a 37%-bracket earner choosing between two near-identical $800,000 properties — one new build, one established — is now looking at roughly $3,500–$5,000 a year of after-tax cash-flow difference in favour of the new build. Over a 10-year hold, that gap compounds.

Worked example — new-build investor (post-1-July-2027 rules)

Same investor as earlier ($120,000 salary, 32% marginal rate incl. Medicare, 30 years to retirement), but this time buying a new-build townhouse for $750,000 with a 20% deposit and an 80% mortgage at 6.4% interest. We keep the same rental-yield assumptions for a like-for-like comparison.

• Rental income: $620/week × 52 = $32,240
• Loan interest (year 1, 80% LVR on $750K): $600,000 × 6.4% = $38,400
• Council rates, strata, insurance, property management, maintenance: ~$8,800
• Depreciation (a new-build advantage — Division 40 + Division 43 schedules typically deliver $9,000–$13,000 of non-cash deductions per year in years 1–5): ~$11,000
• Total deductible costs: $38,400 + $8,800 + $11,000 = $58,200
• Net rental loss for tax: $58,200 − $32,240 = $25,960
• Tax saving (30% marginal + 2% Medicare = 32%): $25,960 × 32% = $8,307 off your tax bill
• Real out-of-pocket cash: $25,960 cash loss − $11,000 paper-only depreciation − $8,307 tax saving = about $6,653 a year cash cost

The new-build version stays fully eligible for salary offset and captures the depreciation uplift established property no longer offers, because depreciation rules tightened in 2017 for second-hand assets and established-property buyers cannot claim Division 40 plant on existing fittings. So the post-budget tax outcome on a new build can be better than the equivalent established property even before the carve-out — the carve-out compounds an advantage that already existed.

One genuine caveat: new-build pricing usually carries a "developer premium" of 5–15% over established stock of similar size and location. Run your numbers against an established comparable. The carve-out alone does not justify overpaying for a new build.

How big is the cohort actually affected?

ATO 2022-23 data on Australia's 2.26 million property investors gives a sense of scale:

• About 1.12 million claim a net rental loss in any given year — these are the "negative gearers"
• Of those, most own one or two properties, making weekly cash contributions in exchange for the salary offset
• The average claimed loss is around $9,000 per investor per year

None of those 2.26 million existing investors lose anything on their current holdings. The reform changes the maths for the next investment purchase, and tilts it sharply toward new builds.

Edge cases — SMSFs, family trusts, and partnerships

The budget papers and the ATO's new-legislation page describe the reform as it applies to a person holding investment property directly. For indirect ownership structures, some of the detail still depends on the enabling legislation. Three structures to watch:

• Self-managed super funds (SMSFs). SMSFs are explicitly excluded from this measure, and the practical reason is simple: an SMSF's income is taxed inside the fund at 15%, separately from your personal return, so it never offsets your salary in the first place. The 12 May 2026 change does not alter anything for SMSF-held property at the salary-offset level. Super funds, including SMSFs, are also excluded from the CGT change — an SMSF keeps its existing 33.3% CGT discount on gains in the accumulation phase.
• Family discretionary trusts. Widely-held trusts (managed investment trusts) and super funds are excluded along with SMSFs. The genuine open question, flagged by Pitcher Partners, is narrower than it first looks: whether income from a residential investment keeps its character when it is received indirectly through a partnership or trust, which affects how losses can be applied. If you hold investment property in a trust and distribute losses to a high-rate beneficiary, get written advice on how the new rules read for your structure before you act.
• Partnerships and joint tenancy. Two people (often spouses) holding investment property as a partnership or joint tenants are each treated as direct individual investors. The reform applies the same way as for any sole investor — a two-name title doesn't dodge the change.

What to do until the legislation lands: if you are considering a purchase through a trust specifically to preserve negative-gearing benefits on established stock, get a written opinion from a tax adviser before signing anything. The policy direction is one-way, and retrofitting a structure after the rules settle is expensive. This guide reflects publicly available information and is not personal advice.

What this means for first home buyers

Three direct effects worth understanding:

1. Investor competition on established stock should ease over time. Removing salary offset on established property makes new investor entries less attractive. Buyers' agents and broker networks are already reporting investor pipelines pivoting toward new builds. Whether that eases auction-clearance pressure on established homes will play out over the next 12–24 months, with early signals likely from late 2026.
2. Rentvesting becomes a different calculation. A rentvester who buys an established investment property from now on can no longer use the tax shield against their salary. The "buy in Brisbane, rent in Melbourne" structure still works mechanically, but the headline tax benefit drops a lot unless you buy new. See the worked comparison further down.
3. New-build supply is being incentivised, not penalised. If you are a FHB looking at a new build (house-and-land package, off-the-plan apartment), you are now operating in a market the federal government is actively tilting your way, both through the carve-out and through the existing First Home Guarantee scheme.

For the full mechanics of how CGT applies to investment property under the new and old rules, see our capital gains tax in Australia 2026 guide.

This section reflects budget announcements and the ATO's new-legislation page. The enabling legislation is expected before 1 July 2027. We update this guide after each major Treasury or ATO ruling.

Is Negative Gearing Worth It in 2026?

Here is the part property investment seminars skip:

Negative gearing only works if the property grows in value. The deduction does not make you money — it reduces how much you lose. You are still out of pocket each year. The strategy only pays off when capital growth beats your cumulative losses, and that is never guaranteed.

The tax benefit is also routinely overstated. In the example above, the saving was $6,370 on a $19,906 loss. You got back 32 cents on every dollar lost and you still wore the other 68 cents. Anyone telling you "the government pays half your costs" is either quoting the top bracket or misreading the maths.

It favours high-income earners, as the tax table shows — someone on $200,000-plus gets nearly half the loss back, where a $90,000 earner gets back about a third. It also ties up capital: the deposit you sink into an investment property is money you cannot use for anything else, including buying your own home, which is a real opportunity cost for first home buyers. If you are not sure how much you could actually borrow, our borrowing power calculator will give you a number.

And it rewards patience. Over 10 to 15 years, even modest growth delivers solid returns. Over 2 to 3 years it is much riskier — buy at a peak and sell in a downturn and you can lose your deposit and then some.

So when does it work? When you are in a high tax bracket (37%-plus), the property is in a high-growth area, you are holding for the long term (10 years or more), and you have surplus income to cover the weekly shortfall comfortably. When does it not? When the property stagnates, you can't cover the cash-flow gap, rates spike, or you have to sell within a few years.

Negative gearing is a legitimate strategy for people with a stable high income, a long horizon, spare cash to cover holding costs and a clear view of the risks. It is not a magic formula, it is not free money from the government, and it is not for everyone.

Negative Gearing for First Home Buyers: Should You Rentvest Instead?

Most negative gearing content is written for established investors. But there is a question first home buyers ask constantly that rarely gets a straight answer: should I buy an investment property to rent out while I keep renting where I actually want to live?

That strategy is called rentvesting, and for some FHB profiles it does make more sense than buying your own home first.

When rentvesting beats buying your own home

Rentvesting can be the better path in a few situations. If your dream suburb is genuinely unaffordable — Perth, Sydney and Melbourne FHBs often face $1.2M-plus for the area they actually want — renting there for $700–900 a week while investing in a $500–700K property in a growth corridor is sometimes more efficient than locking 30 years of mortgage into a smaller home in a suburb you settled for. If you are high-income, single or a DINK couple, both partners on $135K-plus, your marginal rate makes the tax shield meaningful and the cash-flow burden manageable. If your career involves moving around — police, defence, medical, FIFO — you may not be able to commit to five years in one place, but an investment can keep running while you move. And if you are under 30 and want to keep your options open, a $500K investment with tenants covering most of the mortgage is a lighter commitment than tying yourself to a primary residence at 27.

When buying your own home wins

Rentvesting is not a default-better choice. Owning your own home wins when CGT-free growth matters: your primary residence is fully CGT-exempt at sale, while an investment property's gain is taxed (even with the 50% discount). Over 20 years on a strong-growth property, the CGT bill on an investment can run $80K–$200K-plus; on your own home it is zero. (Our capital gains tax guide has the mechanics.) Owning also gives you housing certainty — you can't be evicted from a home you own, and in tight markets rent renewals can jump 10–20%. Most state grants only apply to owner-occupiers, too: the First Home Owner Grant ($10K–$30K depending on state), stamp duty exemptions ($15K–$35K) and the First Home Guarantee (5% deposit, no LMI) generally require you to live in the property for 6–12 months, so rentvesting forfeits that whole stack — check what you qualify for with our eligibility checker and on the grants hub. Finally, if you are on a moderate income (16–30% marginal rate), the tax shield simply is not big enough to outweigh the cash-flow burden.

Worked comparison: First home buyer choosing between paths

Sarah, 28, single, earns $145K a year (37% bracket). She has a $120K deposit. She wants to live in inner Melbourne, but $850K is the stretch number for her dream area.

Path A — Own home, $850K in inner Melbourne:

• Loan: $730K @ 5.5% over 30 years = $4,140/month repayments
• Property pays itself off, fully CGT-exempt at sale
• Stamp duty exemption (VIC FHB): saves ~$32K
• First Home Guarantee eliminates LMI: saves ~$30K (use the LMI calculator to model your own scenario)
• Total grant value: ~$62K
• Monthly cost (interest + rates + maintenance + insurance): ~$3,200 net
• Lifestyle: lives where she wants, fully owns it long-term

Path B — Rentvest in Brisbane:

• Buys $620K investment in an outer Brisbane growth corridor
• Loan: $500K @ 6.0% interest-only = $2,500/month (deductible)
• Rents in inner Melbourne for $750/week ($3,250/month)
• Annual rental loss after costs/depreciation: ~$22,000
• Tax saving at 39% rate: ~$8,580
• Net monthly cost (rent + investment cash gap): ~$3,250 rent + $300 investment cash gap ≈ $3,550
• Loses access to FHB grants (~$32K stamp duty + $30K LMI savings = $62K forfeited)
• Lifestyle: rents where she wants, builds equity in Brisbane

The honest answer: at $145K, Path A is about $350/month cheaper on cash flow, CGT-free at exit, and captures $62K in grants she loses with Path B. Unless Brisbane outperforms Melbourne by roughly $150K–$200K in capital growth over the holding period, Path A wins financially. But if Sarah's salary climbs to $200K within three years, the maths flips — the higher bracket makes Path B materially better, and her grant losses shrink against compounding tax savings.

Key questions before rentvesting as your first property

Before you go down this path, get honest answers on these:

1. Where will I want to live in five years? Locking yourself out of FHB grants is a one-time decision — in most states you only get them on your very first property purchase ever.
2. Can I service two housing costs at once? Rent plus investment loan plus the cash gap can mean $60K–$80K a year of housing exposure. A job loss in that window is brutal.
3. What's my marginal rate, now and projected? If you are not at 30%-plus today and not climbing toward 37%-plus within two to three years, the tax case weakens fast.
4. Am I willing to be a landlord? Tenant disputes, midnight repairs, vacancy periods, tribunal hearings — these are real time costs that owning your own home does not impose.

Get matched with a mortgage broker who handles both investment loans and FHB schemes →

For the mechanics of how investment-property repayments work, including interest-only structuring, see our mortgage repayment calculator or the home loan interest rates guide.

How to Claim Negative Gearing on Your Tax Return

If you do own a negatively geared investment property, here is how to claim the deduction:

1. Declare all rental income in the rental property section of your return. That includes rent received, any bond money you retained, and insurance payouts.
2. Claim all deductible expenses: mortgage interest, council and water rates, insurance, property management fees, repairs, maintenance, advertising for tenants, and travel to inspect the property (limited to one deduction per property per year).
3. Claim depreciation. Get a tax depreciation schedule from a qualified quantity surveyor. It covers the building structure (Division 43 — 2.5% a year for construction commenced after 15 September 1987) and plant and equipment inside (Division 40 — appliances, carpets, blinds, hot water systems). A schedule usually costs $600–$800 and pays for itself many times over.
4. Keep records for five years. The ATO requires you to hold all receipts, bank statements, rental agreements and expense records for at least five years from the date you lodge.
5. Use a registered tax agent who specialises in investment property. The fee is deductible, and a good one makes sure you claim everything you are entitled to without overclaiming. Rental property is a top ATO audit focus, and incorrect claims are common, so getting it right matters.

Frequently Asked Questions

What is negative gearing in simple terms?

Negative gearing is when you borrow money to buy an investment property and the costs of owning it (mortgage interest, rates, insurance, maintenance) exceed the rent it earns. The resulting loss can be deducted from your salary, reducing your tax bill. You are deliberately making a short-term loss while hoping the property rises in value over time.

How does negative gearing work in Australia?

In Australia, negative gearing works by letting investors deduct net rental losses against their other income (salary, wages, business income). You calculate your annual rent, subtract all deductible expenses including mortgage interest and depreciation, and if the result is negative, that loss reduces your taxable income. The ATO treats rental property like any other income-producing investment.

Why is negative gearing controversial?

Negative gearing is controversial because the tax saving is worth more the higher your income, so critics argue it helps wealthier investors outbid first home buyers for existing homes and pushes prices up without adding new housing. Defenders point out that most negative gearers are middle-income earners with one or two properties, and that losing the concession could reduce rental supply. The 2026 reform is the government's attempt to keep the strategy for new builds while turning it off for established stock.

Can you negative gear your own home?

No. Negative gearing only applies to an investment property you rent out. Your owner-occupied home is never negatively geared, because it earns no rental income and its holding costs (mortgage interest, rates, insurance) are not tax-deductible. The trade-off is that your own home is fully exempt from capital gains tax when you sell, which an investment property is not.

Is there a negative gearing calculator?

There is no single dedicated negative-gearing calculator, but you can model the two numbers that actually drive it: your borrowing power and your repayments. Use our borrowing power calculator to see how much you could borrow, then the mortgage repayment calculator to see the interest cost. Subtract your expected rent from those costs and you have your annual loss; multiply it by your marginal tax rate for the tax saving.

Has negative gearing been abolished in 2026?

Not entirely, but it has been materially restricted. The 12 May 2026 federal budget removed salary offset for any established residential investment property bought from 7:30pm AEST on 12 May 2026 onwards — but the change takes effect from 1 July 2027, not immediately. A property bought in the transitional window between 12 May 2026 and 30 June 2027 keeps full salary offset for the rest of FY2026-27, then falls under the new rules from 1 July 2027. From then, losses on those properties can only be carried forward against future residential rental income or capital gains from that residential rental property. Existing investors are grandfathered (current rules continue on properties owned before the announcement) and newly constructed properties are exempt. The legislative effective date is 1 July 2027, but the trigger date for the new rules is the budget announcement itself.

Is negative gearing still worth it in 2026?

For established property bought after 12 May 2026: only if you have other rental income or expect strong capital gains, because you can no longer offset losses against your salary. For grandfathered established property and for new builds (which are exempt): the old maths still applies — best for higher-income earners (37%-plus bracket) in high-growth areas with a 10-year-plus hold. The reform makes new builds materially more attractive than established stock for new investors.

Who benefits most from negative gearing?

Higher tax bracket earners benefit most, because the deduction is worth more per dollar of loss — someone on 47% gets back nearly half of every dollar lost, while someone on 32% gets back roughly a third. That said, ATO data shows about 1.12 million Australians claim a net rental loss, and most are middle-income earners (teachers, nurses, tradies) using it as a long-term wealth strategy alongside super.

What is the difference between negative and positive gearing?

Negative gearing means your investment property costs more than it earns — you make a loss and get a tax deduction. Positive gearing means rent exceeds costs — you make a profit and pay tax on it. Negative gearing suits high-income investors betting on capital growth; positive gearing suits those wanting cash flow and lower risk.

Can a first home buyer use negative gearing?

Yes, but usually at the cost of forfeiting most state First Home Owner Grants and stamp duty exemptions, which generally require you to live in the property for 6–12 months. Rentvesting (buying an investment and renting where you want to live) can make financial sense for high-income FHBs (above $135K) in expensive cities, but the lost grant stack is often $40K–$80K. Run the numbers both ways before committing — our borrowing power calculator is a good starting point.

What's the sweet-spot tax bracket for negative gearing?

Above $135,001 of taxable income, where the marginal rate jumps from 30% to 37% (32% to 39% with the 2% Medicare levy). Below that, the cash-flow burden of a negatively geared property often outweighs the tax shield. Above $190,001 (45%, or 47% with Medicare), the benefits are meaningful and stack with the CGT discount on exit.

Does negative gearing still apply after 1 July 2027?

Yes, but only in two situations. Grandfathered investors (anyone who owned or was under contract on an investment property before 7:30pm on 12 May 2026) keep full negative-gearing rights on those properties, including salary offset, indefinitely. New-build investors (anyone buying a newly constructed residential property at any date) also keep full rights. For anyone else buying established residential property from 12 May 2026 onwards, rental losses can still be claimed against residential rental income or future capital gains on that residential rental property, but no longer against salary. The legislative effective date is 1 July 2027; the trigger date for the new rules is the announcement.

What is the new-build carve-out for negative gearing?

The new-build carve-out is the 2026 budget's exemption that lets investors buying brand-new residential property keep negative gearing and the 50% CGT discount under the old rules. "New build" means a property never lived in before: off-the-plan apartments, house-and-land packages, brand-new townhouses. The intent is to push investor money away from competing with first home buyers for established stock and toward new supply. Combined with the steeper depreciation available on new builds, the post-budget tax outcome on a new-build investment can be meaningfully better than the same investor would have got on established stock pre-budget.

Can I still negative gear a property I already own?

Yes, with no change. The 12 May 2026 reform is forward-looking only and grandfathers every existing investor on every existing property. If you owned (or were under contract to buy) a residential investment property before 7:30pm AEST on 12 May 2026, the existing rules continue to apply to that property indefinitely. You can still offset rental losses against your salary, you can still use the 50% CGT discount on gains accrued up to 1 July 2027, and the property keeps those rights even if you refinance or restructure ownership between spouses (subject to CGT and stamp duty). The reform only affects the maths on your next investment purchase.

How does the 2026 budget change capital gains tax on investment property?

From 1 July 2027, the flat 50% CGT discount on residential investment property is replaced by cost-base indexation plus a 30% minimum tax floor on net capital gains. Cost-base indexation means the purchase price is adjusted for inflation over the holding period, and the gain (sale price minus indexed cost base) is taxed at your marginal rate, with a rule that the effective rate on the indexed gain cannot fall below 30%. The pre-1-July-2027 component of any gain keeps the existing 50% discount. New-build investors (the carve-out cohort) can elect to keep the 50% discount on the whole gain regardless of holding period. The practical effect: for long-hold established-property investors in low-inflation periods, indexation is less generous than the old 50% discount; in high-inflation periods it can be roughly neutral. For the full mechanics see our capital gains tax Australia 2026 guide.