Negative gearing has long been an important part of tax planning for many Australian residential property investors.
However, under the Federal Government’s announced tax reforms, negative gearing for residential property will be limited to new builds from 1 July 2027. Existing arrangements are expected to remain unchanged for properties held before 7:30pm AEST on 12 May 2026, meaning those properties should generally be grandfathered under the current rules.
For investors, this is not just a future tax change. It is a reason to start reviewing property portfolios, cash flow and investment strategy now.
Negative gearing changes: what property investors need to know
Negative gearing has long been an important part of tax planning for many Australian property investors.
Negative gearing generally occurs when the deductible costs of holding an investment property are greater than the rental income received from that property.
These costs may include loan interest, property management fees, repairs, insurance, council rates and other rental property expenses.
Under current rules, many investors can offset rental losses against other income, such as salary or business income. This may reduce taxable income and improve after-tax cash flow.
However, tax benefits should not be the main reason for buying or holding an investment property. A property investment should still make commercial sense based on cash flow, risk, rental demand and long-term growth potential.
What is changing from 1 July 2027?
From 1 July 2027, the Government has announced that negative gearing for residential property will be limited to new builds. The stated policy objective is to direct tax support towards new housing supply.
This means investors who buy established residential property after 7:30pm AEST on 12 May 2026 may be subject to different rules from 1 July 2027.
Properties held before 7:30pm AEST on 12 May 2026 are expected to be exempt from these changes. Investors who buy new builds are expected to continue to be able to deduct losses from other income.
As with any tax reform, investors should monitor final legislation and ATO guidance before making major investment decisions.
Why investors should review their position now
Although 1 July 2027 may seem some time away, property decisions often require careful planning.
Buying, selling, refinancing or restructuring a property investment can take time. Investors may also need to consider loan approvals, tenancy arrangements, interest rates, land tax, depreciation, capital gains tax and ownership structure.
These negative gearing changes may affect after-tax cash flow, borrowing capacity and long-term investment strategy.
A review now can help investors understand whether their current property strategy remains suitable under the upcoming rules.
Key areas property investors should review
1. Whether existing properties may be grandfathered
Investors should confirm whether their existing residential investment properties are likely to fall within the grandfathering arrangements.
Important documents may include purchase contracts, settlement statements, loan records, rental statements and ownership records.
Clear documentation may become especially important if transitional rules apply.
2. Cash flow under the new rules
A property that is affordable under current tax treatment may place more pressure on cash flow if future rental losses cannot be offset in the same way.
Investors should consider modelling different scenarios, including higher interest rates, vacancy periods, repairs, insurance costs and changes to rental income.
Understanding cash flow before and after tax is critical when assessing whether an investment property remains suitable.
3. New builds versus established properties
The negative gearing changes create a clearer tax distinction between new builds and established residential properties.
However, tax treatment should not override investment fundamentals.
Investors should still consider location, rental yield, construction risk, developer quality, rental demand, expected capital growth and ongoing holding costs.
4. Loan structure and interest deductibility
Loan structure remains an important part of property tax planning.
Investors should review interest-only periods, fixed and variable rates, offset accounts, redraw use and whether loan funds remain clearly connected to the income-producing purpose of the property.
Poor loan structuring can create tax and cash flow issues, even where the property itself is a sound investment.
5. Capital gains tax considerations
The Federal Budget also includes capital gains tax reform from 1 July 2027, including changes to the CGT discount rules for relevant assets.
Property investors should consider how CGT may affect future sale decisions, particularly where they hold multiple properties or are considering restructuring ownership.
Capital gains tax should be reviewed before signing a contract, not after the sale has already occurred.
6. Record-keeping
Good records are essential for property investors.
Investors should keep contracts, settlement documents, loan statements, invoices, depreciation schedules, rental records and evidence of property use.
Accurate records can support deductions, capital gains tax calculations and any future review of grandfathering or transitional rules.
Avoid making property decisions based on tax alone
A tax deduction does not make a poor investment a good one.
Before buying, selling or restructuring an investment property, investors should consider the broader commercial picture, including cash flow, debt levels, rental yield, vacancy risk, capital growth potential, maintenance costs, tax outcomes and personal financial goals.
The best property decisions are commercially sound first and tax-effective second.
How J&N Accountants can help
At J&N Accountants, we help property investors understand tax changes and review their investment position before major decisions are made.
We can assist with property tax planning, negative gearing and rental loss reviews, cash flow and tax impact analysis, ownership structure considerations, capital gains tax planning, and record-keeping support.
If you own residential investment property or are considering your next purchase, now is a good time to review your position before the 1 July 2027 changes take effect.
Contact J&N Accountants to discuss how the negative gearing changes may affect your property investment strategy.