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The 2026–27 Federal Budget announced changes to negative gearing and if you’re a property investor, an accountant, or a financial adviser, you’ve probably already seen the headlines.
The good news? For the bulk of investors, it’s business as usual.
The reforms are narrower than the coverage suggests. They only target negative gearing on established residential property purchased after 12 May 2026, and only from 1 July 2027. Commercial property, new builds, grandfathered contracts, super funds and widely held trusts are all untouched. And in every case regardless of where your property sits depreciation continues to be claimable.
Not sure where you stand? Work through these four questions.
First: Is it commercial or non-residential property?
Commercial, industrial and other non-residential property is outside the scope of the reform entirely. Full negative gearing and depreciation continue with no end date. The same applies to any property held in a super fund including an SMSF or a widely held trust such as most managed investment trusts. These are excluded from the negative gearing changes altogether.
If your property falls into any of these categories, you can stop here. Nothing changes.
For residential property: houses, units, apartments, townhouses, duplexes and granny flats, work through the four questions below.
Q1: Is it a new build or an established property?
Eligible new residential builds are unaffected. Negative gearing and full depreciation continue under existing rules with no end date.
To be eligible, a build must involve construction on previously vacant land, or demolition replaced by a greater number of dwellings. That means a newly constructed apartment bought off-the-plan qualifies, as does any residential construction on previously vacant land, or a duplex constructed through a knock-down rebuild that replaces a single free-standing house.
What doesn’t qualify: an established property extended to add bedrooms, a knock-down rebuild that replaces one house with another of the same number, a granny flat built adjacent to an established property that is not eligible for negative gearing, or a newly built property occupied for more than 12 months before being sold to an investor.
If the property is established, move to Q2.
Q2: Is it held via a super fund or widely-held trust?
If yes, the property is excluded from the reform and current rules continue.
If it’s held by an individual, partnership, company or family trust, move to Q3.
Q3: Was the contract entered before 7:30 PM AEST on 12 May 2026?
Settlement date doesn’t matter here; it’s the contract date that counts. If the contract was entered before this deadline, the property is grandfathered. Existing rules apply indefinitely until the property is sold.
If the contract was entered after this date, move to Q4.
Q4: When does the rental loss arise?
If the rental loss arises on or before 30 June 2027, it’s business as usual. Losses offset any income under current rules during this transitional window.
If the rental loss arises from 1 July 2027 onwards, the quarantine rules apply. Losses can only offset other residential property income — rent or capital gains — not salary or other income. Excess losses carry forward indefinitely against future rental income or capital gains on any property sale. The losses are deferred, not lost.
What about depreciation?
Regardless of where your property sits in the above, depreciation continues to be claimable. Division 40 (plant and equipment) and Division 43 (capital works) deductions apply on every eligible asset. The Section 40-27 limits on second-hand plant in established residential property are also unchanged.
General information only. This article summarises the announced reforms as at May 2026 and does not constitute tax, financial or legal advice. Final legislation and rulings may differ. Please consult your accountant or financial adviser before acting on any of the information here.
