How negative gearing works today
If your rental property costs more to hold than it earns, mostly loan interest, but also things like maintenance, agent fees and council rates, the shortfall is a loss. Under negative gearing, that loss can be deducted against your other income, such as your salary, reducing your total taxable income and your tax bill for the year.
It's called "negative" gearing because the loan (the gearing) produces a net cash loss rather than a profit, at least on paper, in exchange for the tax deduction and the hope of capital growth over time.
The 2026 budget change
From 1 July 2027, established residential properties purchased after 7:30pm on 12 May 2026 lose this treatment. Rental losses on those properties can no longer be offset against salary and wages. Instead, losses can only be deducted against:
- Rental income from your other properties
- Capital gains from eventually selling a rental property
- Excess losses carried forward to future years
Who's actually affected
The change isn't retroactive. It only applies to established residential properties bought after the 12 May 2026 cutoff. You keep the existing rules if:
- You already owned the property, or had it under contract, by that date
- The property is a new build, which stays exempt along with keeping the current CGT discount
- It's held through a widely held trust, a superannuation fund, a build-to-rent development, or a government housing program
For most existing investors, nothing changes. The rule mainly affects future purchases of established (not newly built) residential property.
Questions people actually ask
What is negative gearing?+
Deducting a rental property's loss (when costs exceed rent) against your other income, such as salary, to reduce your tax bill.
Is it being abolished?+
Only for established properties bought after 12 May 2026, from 1 July 2027. Properties already owned, under contract, or newly built keep the current rules.
What can I still offset a rental loss against?+
Other rental income, capital gains from selling a rental property, or future years, just not salary and wages for affected properties.
General information only, based on Treasury and budget guidance current as of September 2026, not personal tax or investment advice. This is a legislated future change and details may be refined before it takes effect; confirm current details at ato.gov.au and speak with a registered tax agent about your own properties.