Negative Gearing isn't completely gone
For years, negative gearing has been a hot topic for Australian property investors, the media, your barista and your family members at gatherings.
For years, negative gearing has been a hot topic for Australian property investors, the media, your barista and your family members at gatherings.
I guess it still is the hot topic with the recent changes in the budget.
Previously, with negative gearing you would be able to claim losses for the financial year during your tax returns each year. With the new budget changes, that may no longer be the case. The changes are not fully confirmed yet - they're proposed changes, not yet passed through the law.
But assuming that the changes go through, they're not completely gone.
How it will work now is that you will be able to carry forward those losses until you sell the property and realize the profit from the sale.
Check out the factsheet below:
Negative gearing & capital gains tax reform
What changes, who's affected, and when it kicks in
The government is limiting negative gearing to new residential builds and replacing the 50% CGT discount with CPI-based cost indexation and a 30% minimum tax on capital gains — effective 1 July 2027.
Start date
1 Jul 2027
Min CGT rate
30%
Existing holdings
Exempt
Negative gearing — new builds only
From 1 July 2027, rental losses on established properties bought after announcement (12 May 2026) can only offset other property income — not wages or salary.
CGT discount replaced by CPI indexation
The flat 50% discount is out. Gains are adjusted for inflation using CPI (as per pre-1999 rules), then a 30% minimum tax rate applies on any real gain.
Main residence & existing investors protected
Your primary home remains fully CGT-exempt. Properties held before announcement keep their negative gearing entitlement indefinitely, until sold.
So, essentially, you will still be able to get the benefits, just a few years down the track.
The Inflation Problem
This is okay however, there was an argument that just like debt, when buying a property you're taking on debt in the currency value today.
Yes, you've paid interest on the loans in those 20 years, however with the previous negative gearing policy, you would be able to deduct losses each year. So a portion of your losses in the financial year will be returned back to you after tax returns. Essentially, this meant that inflation had a negligible effect on your losses.
With the new policy now, investors will have to wait until the profit is realized - meaning that losses that happen over the years might also lose value. At this stage, we are not sure how the net losses will be carried forward.
For example, if an investor was to have a net loss of $5000 in FY26/27 and $4500 in FY27/28, will these losses also be indexed with inflation when they sell in FY46/47?
The Negative Gearing "Strategy"
Something that people don't think about is that this isn't a big deal - negative gearing is never the strategy, it's just a nice little bonus each year. Think about it, why would an investor buy an asset to lose money? Sure, if there is a perk to take advantage of, who wouldn't?
Who doesn't love discounts or getting cash back for their purchases?
But most properties, if purchased in the right locations should become positively geared in the near future. Good investments whether it be property or shares, start with strong fundamentals, not tax schemes.
What's next?
It's business as usual for investors. Sometimes, it's best to ignore the noise around these things. Do what you think is correct for yourself and your situation. Get proper professional advice and network with people who know how to navigate through rough times in property.
Some people think it's a great time to buy, some people think that it's better to be cautious in the current environment. We don't know what will happen with the interest rates at the next meeting.
I will leave you with a few quotes on real estate:
Jessica Willens
Readers should conduct their own independent research and seek professional advice before making any investment or purchasing decisions.
The views expressed are the author’s personal opinions based on publicly available information at the time of writing.
