Negative Gearing Changes Explained: What Australian Property Buyers Need to Know in 2026

If you’re considering buying an investment property in Australia, you’ve probably heard about the recent changes to negative gearing.

The Federal Government has introduced significant reforms that will affect many future property investors.

Understanding how the new rules work can help you make informed decisions about your property goals and financing options.

What is Negative Gearing?

Negative gearing occurs when the costs of owning an investment property—including loan interest, council rates, insurance, maintenance and depreciation—are greater than the rental income the property generates.

Traditionally, Australian investors have been able to claim these rental losses against their taxable income, which may reduce the amount of tax they pay.

For many investors, this has been one of the key financial benefits of purchasing residential investment property.

What Has Changed?

Following the 2026 Federal Budget, the Government announced changes designed to encourage investment in new housing supply.

Under the new legislation:

·         Existing investment properties purchased before 7:30pm AEST on 12 May 2026 are generally unaffected by the changes (often referred to as being “grandfathered”).

·         From 1 July 2027, investors purchasing established residential properties after the announcement date will no longer be able to offset rental losses against salary or other personal income.

·         Instead, those losses can generally only be carried forward and used against future rental income or eligible capital gains from residential property.

·         Investors who purchase eligible new residential properties can continue to access negative gearing under the current rules.

Existing vs New Properties: What’s the Difference?

Existing (Established) Properties

If you already owned your investment property before the Budget announcement, your current negative gearing arrangements generally continue unchanged.

However, if you purchase an established property after the relevant commencement date, different tax rules will apply from 1 July 2027. Rental losses generally won’t be deductible against your employment income in the same way they have been previously.

New Residential Properties

The Government has retained negative gearing incentives for eligible new residential properties.

This means investors purchasing qualifying new homes may still be able to claim rental losses against other taxable income, helping encourage construction of additional housing across Australia.

What Does This Mean for new investors?

The financing side of your purchase becomes even more important.

Depending on your circumstances, these reforms may influence:

·         The type of property you choose.

·         Your long-term investment strategy.

·         Your borrowing capacity.

·         Your expected cash flow.

·         The overall cost of owning an investment property.

Importantly, buying a property should never be based solely on tax outcomes. Factors such as location, rental demand, property condition, long-term growth potential and your personal financial situation should all be carefully considered.

Should You Buy a New Build or an Established Property?

There isn’t a one-size-fits-all answer.

New properties may continue to offer access to current negative gearing arrangements and can sometimes include additional benefits such as depreciation opportunities.

Established homes, however, may offer advantages including:

·         Larger land sizes.

·         Established suburbs.

·         Proven rental demand.

·         Renovation potential.

·         Different price points.

The right option depends on your individual goals, budget and borrowing capacity.

How Can a Mortgage Broker Help?

Choosing the right loan is just as important as choosing the right property.

An experienced mortgage broker can help you:

·         Understand your borrowing capacity.

·         Compare loans from multiple lenders.

·         Explore finance options for investment properties.

·         Structure your lending to suit your goals.

·         Navigate changing lending policies.

While mortgage brokers do not provide tax advice, they can work alongside your accountant or financial adviser to help ensure your finance strategy aligns with your broader property plans.

Thinking About Investing?

The recent negative gearing reforms have changed the landscape for many Australian investors—but they haven’t removed opportunities.

Understanding how these changes affect your borrowing power and property choices is the first step towards making a confident decision.

At Homefront Mortgages, we help first-home buyers, owner-occupiers and property investors across Victoria understand their finance options and compare home loans from a wide range of lenders.

Whether you’re considering your first investment property or expanding your portfolio, we’re here to guide you through the lending process with straightforward, personalised support.

Book a free, no-obligation consultation with Homefront Mortgages today and let’s explore your borrowing options together.

Important Information

This article is general information only and has been prepared for educational purposes. It does not take into account your personal objectives, financial situation or needs and should not be relied upon as tax, legal or financial advice. You should consider obtaining independent advice from a qualified accountant, tax adviser or financial adviser before making any investment decisions.