What changed with negative gearing in the 2026 Budget?

From 1 July 2027, negative gearing for residential investment properties is limited to new builds. For established properties purchased after Budget night (12 May 2026), rental losses can only be deducted against other residential property income — not against salary, wages, or other income. Unused losses can be carried forward to future years.

Does the negative gearing change affect my existing properties?

No. Properties held before 7:30 PM AEST on 12 May 2026 are exempt from the negative gearing changes. You can continue to deduct rental losses against all income, including salary and wages, regardless of when you sell.

What does 'quarantined losses' mean?

For established properties purchased after Budget night, rental losses are 'quarantined' — they can only be offset against income from other residential properties (rental income or capital gains from property sales). They cannot be used to reduce your salary or other income. The losses are not lost — they carry forward indefinitely until you have residential property income to offset them against.

Can I still negatively gear a new build?

Yes. New builds (properties that genuinely add to housing supply) are exempt from the quarantine rules. You can deduct losses from a new build against all income, including salary. New builds also retain access to the 50% CGT discount or can choose CPI indexation.

What counts as a 'new build'?

The ATO will provide specific guidance, but generally a new build is a newly constructed dwelling that genuinely adds to housing supply. Off-the-plan apartments, house-and-land packages, and newly built houses typically qualify. Substantial renovations of existing dwellings may or may not qualify depending on ATO guidance.

When do the negative gearing changes take effect?

The quarantine rules for established properties purchased after Budget night take effect from 1 July 2027. Properties purchased between Budget night (12 May 2026) and 30 June 2027 are subject to the new rules from 1 July 2027 onwards.

Negative Gearing Changes 2026 Budget Australia

What changed with negative gearing?

Negative gearing occurs when the costs of owning an investment property (mortgage interest, management fees, rates, insurance, depreciation) exceed the rental income. Under the old rules, this net loss could be deducted against your salary and other income, reducing your overall tax bill.

From 1 July 2027, this deduction is restricted for established residential investment properties purchased after Budget night (7:30 PM AEST, 12 May 2026). Losses from these properties are "quarantined" — they can only be offset against income from other residential properties, not against salary or other income.

The losses are not lost. They carry forward indefinitely and can be used when you have residential property income — including when you eventually sell the property and realise a capital gain.

The three property scenarios

Properties held before Budget night

Grandfathered

Full negative gearing against all income continues
No quarantine of rental losses
Deduct losses against salary and wages as before

New builds purchased after Budget night

Exempt

Full negative gearing against all income continues
Losses deductible against salary and wages
Also retains access to 50% CGT discount or CPI indexation

Established properties purchased after Budget night

Quarantined losses

Losses can only offset other residential property income
Cannot deduct against salary, wages, or other income
Unused losses carry forward indefinitely
Losses can be used when property is sold (offset against capital gain)

Frequently asked questions

Track your quarantined losses

ClearGain's Property Expenses tracker automatically identifies quarantined losses and generates a Quarantined Losses Report for your accountant.

Track my losses

This page is for general information purposes only. Legislative references: Treasury Laws Amendment (Better Targeted Superannuation and Other Measures) Bill 2026–27.

Negative Gearing Changes 2026: What Australian Property Investors Need to Know