Negative Gearing Changes in the 2026 Federal Budget: What Property Investors Need to Know
- Future Accounting
- 2 days ago
- 4 min read
Written by: Melissa Cunliffe (CA)
Since the 2026 Federal Budget was handed down, one question has dominated conversations with property investors: 'Should I still invest in residential property?' While many headlines suggested the end of negative gearing, the reforms are far more targeted. Existing investors are largely protected, while future investors will need to think more carefully about the type of property they purchase.
At Future Accounting Group, our Future Prosperity Model is built around helping clients Protect, Preserve and Prosper. Understanding these proposed changes is the first step toward making informed investment decisions.
Negative gearing changes 2026: What has changed?
The Government has passed legislation intended to commence from 1 July 2027. Broadly:
Existing investment properties are grandfathered.
Qualifying new residential properties continue to access negative gearing.
Established residential properties purchased after the Budget announcement are generally intended to lose the ability to offset rental losses against salary and wages once the reforms commence.
Capital gains tax concessions are also changing.
Existing investors: good news
If you owned a residential investment property before 7:30 pm (AEST) on 12 May 2026, the current negative gearing rules are generally preserved. Likewise, where a home owned before Budget night later becomes an investment property, the existing treatment is generally expected to continue.
Example: Sarah purchased an investment property in 2021 that generates a $12,000 annual rental loss. She continues to claim that loss against her salary under the grandfathering rules.
Buying an established residential investment property
The negative gearing changes 2026 are expected to have the greatest effect on investors purchasing established residential properties after the Budget announcement. From 1 July 2027, rental losses are generally intended to be quarantined and carried forward to offset future rental income or capital gains from residential investment property rather than reducing salary or business income.
Example:
Current rules:
Salary: $180,000
Rental loss: ($15,000)
Tax calculated on: $165,000
Under the new rules:
Salary: $180,000
Rental loss carried forward: ($15,000)
Tax calculated on: $180,000
Future benefit: loss available against future rental income or capital gains.
Buying a new residential property
The reforms are designed to encourage additional housing supply. Investors purchasing qualifying new residential properties are generally expected to continue accessing traditional negative gearing.
What counts as a new residential property?
While Treasury has indicated the intention is to encourage new housing supply, further practical guidance is still expected.
Likely to qualify:
• Brand new homes on vacant land
• Newly constructed apartments sold for the first time
• House and land packages
• Certain off-the-plan purchases
Unlikely to qualify:
• Established homes
• Renovated properties
• Certain knockdown-rebuilds where excluded
• Granny flats that do not satisfy the supply test.
When does a property stop being 'new'?
This remains one of the biggest unanswered questions. Investors are still waiting for detailed guidance around first occupation, first sale, subsequent purchasers and when 'new' status expires. We expect further Treasury and ATO guidance before commencement.
Should you rush to buy before 1 July 2027?
Not necessarily. While timing may influence tax outcomes, purchasing property simply to secure a tax deduction can be a costly mistake. Every investment should be assessed on its commercial merits, long-term capital growth, cash flow and affordability.
How could these changes affect property values?
Many commentators expect increased investor demand for qualifying new developments, while demand for some established investment properties may soften. However, long-term performance will still depend primarily on location, supply, demand, interest rates and economic conditions.
Future Prosperity Tip
The best investment is rarely the one that saves the most tax. Tax should support your investment strategy—not determine it.
What should investors do now?
Review your investment strategy.
Seek taxation advice before signing contracts.
Compare after-tax outcomes of new versus established properties.
Consider long-term capital growth alongside tax outcomes.
Review borrowing capacity and cash flow.
Understand the interaction with the proposed capital gains tax changes.
Protect. Preserve. Prosper.
Property investment is about far more than tax. At Future Accounting Group, we help clients Protect their wealth, Preserve what they have built and Prosper through informed long-term advice. Obtaining advice before signing a contract could significantly improve your after-tax outcome.
Frequently asked questions
Are existing investment properties affected?
Generally no, existing properties are expected to be grandfathered.
Can I still negatively gear a new property?
Qualifying new residential properties are generally expected to retain access.
Should I buy before 1 July 2027?
Not solely for tax reasons. Investment decisions should consider all financial factors.
What is a new residential property?
Further Treasury and ATO guidance is expected, although brand-new dwellings sold for the first time are generally intended to qualify.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
