If your investment property was under contract before 7:30pm AEST on 12 May 2026, your negative gearing arrangements are generally unaffected by the 2026 tax reforms. The ATO confirms that properties held at the time of the Budget announcement are exempt from the changes. The new rules apply only to established residential properties bought from that date: from 1 July 2027, losses on these properties can still be offset against income from residential rental property and carried forward to future years, but can no longer be deducted against other income such as wages. Tax depreciation deductions are a separate matter and are unaffected either way, regardless of when your property was purchased.
Negative gearing hasn’t been abolished, and it hasn’t changed for anyone who already owns an investment property, or already had one under contract, before the cutoff below. What’s changed applies going forward, to established property bought after that point. What this means for your particular situation is a question for your accountant.
Why did the rules change?
The government has framed this package as part of a broader push on home ownership. The ATO’s own guidance on the changes sits under the heading “Boosting home ownership”, and describes the change as limiting negative gearing for residential property investments to new builds, from 1 July 2027.
That’s as far as the government’s guidance goes on the reasoning. It doesn’t change how the rule applies to your own property, which comes down to a single factor: when it was purchased, relative to the cutoff below.
What actually counts as “grandfathered”?
The cutoff is a specific moment, not a date range: 7:30pm AEST on 12 May 2026, the time of the Budget announcement. The ATO’s own guidance puts it plainly: properties held at announcement are exempt from the negative gearing changes altogether. Existing arrangements continue under the current rules for as long as the property is held.
The government’s Budget 2026–27 material uses similar terms: existing arrangements remain unchanged for all properties held before Budget night. If you already owned an investment property, or your contract already existed, before that time, this reform doesn’t change how negative gearing works for you.
In property transactions, “under contract” generally refers to the date contracts are exchanged, which can be well before a purchase settles. If your purchase was mid-way through settling around that date, or the timing is close either way, the exact position can depend on the specifics of your contract, so that’s one worth checking with your accountant directly rather than assuming either way.
| Purchased before 7:30pm AEST, 12 May 2026 | Purchased from 7:30pm AEST, 12 May 2026 | |
|---|---|---|
| Negative gearing now | Existing arrangements remain unchanged | Available under current rules until 30 June 2027 |
| From 1 July 2027 | No change | Losses can be offset against income from residential rental property and carried forward to future years; no longer deductible against other income such as wages |
| Tax depreciation | Unaffected | Unaffected |
What changes after the cutoff?
Buying an established residential property from 7:30pm AEST on 12 May 2026 onward doesn’t switch off negative gearing straight away. Under current rules, it still applies right through to 30 June 2027. The new limit starts from 1 July 2027, not from the date of purchase.
From 1 July 2027, the government’s own description of the change is this: investors who buy established housing after Budget night will still be able to deduct losses against residential property income, and they’ll be able to carry forward unused losses to future years, but they won’t be able to deduct them against other income like wages.
Carrying a loss forward is a standard feature of the tax system, not something unique to this change. It simply means a loss that can’t be used this year isn’t wasted: it’s held and applied against income of the same type in a future year. Under the new rules, a loss on an established property bought after the cutoff can still reduce your tax by offsetting rental income from residential property, this year or in a future one. What it can no longer do, from 1 July 2027, is reduce tax on unrelated income such as your salary.
What about buying a new build?
The government’s own material limits the new restriction to established residential property, and describes the change as limiting negative gearing for residential property investments “to new builds” from 1 July 2027. That points to new builds continuing to attract negative gearing where established property no longer would, though neither government page spells this out as its own standalone rule.
“New build” isn’t defined on either government page checked for this article, so exactly what counts, off-the-plan purchases, knockdown rebuilds, and so on, isn’t something to assume either way. If a purchase you’re considering might fall into this category, that’s a detail to confirm with your accountant or conveyancer before relying on it.
Does this affect Capital Gains Tax?
Not directly, but it’s worth knowing about since it’s part of the same reform package. Negative gearing grandfathering is specifically about negative gearing. Separately, the government is also replacing the 50% CGT discount with cost base indexation and introducing a minimum 30% tax rate on capital gains, from 1 July 2027. The government’s own material doesn’t tie this change to the same 12 May 2026 cutoff used for negative gearing.
That’s a separate topic with its own detail, worth a conversation with your accountant in its own right, and one we’ll cover properly in its own article rather than here.
Will negative gearing be grandfathered?
Yes, for any residential property held or under contract before 7:30pm AEST on 12 May 2026. The ATO’s guidance is direct on this: those properties are exempt from the negative gearing changes. Nothing about how you claim negative gearing on that property changes as a result of this reform, and there’s no date after which that protection runs out. It applies for as long as you hold the property.
Is my negative gearing grandfathered?
It comes down to one thing: when your property was purchased, measured against that same cutoff. Before it, you’re unaffected. From it onward, current rules still apply until 30 June 2027, then the new limits start from 1 July 2027. If you’re unsure exactly where a specific purchase sits, particularly around that date, your accountant can confirm it against your own contract and settlement details, rather than going on a general rule of thumb.
What does negative gearing grandfathering mean?
It means the old rules keep applying to what you already had, while anything new follows the new rules. Your existing negative gearing arrangement doesn’t get rewritten retrospectively, and you don’t need to do anything to keep it in place. What changes is only how negative gearing works for a residential property bought from the cutoff onward, and only once 1 July 2027 arrives.
Does this affect your depreciation deductions?
No. Tax depreciation lets property investors claim deductions for the wear and tear of a building (Division 43 capital works) and the plant and equipment inside it (Division 40). These deductions can lower taxable income, which may reduce the tax payable, depending on individual circumstances. None of that is touched by the negative gearing changes, whichever side of the cutoff your property falls on, and whether or not you’re affected by the new limits from 1 July 2027.
This is a separate deduction with its own rules, including a restriction on claiming plant and equipment in a second-hand residential property bought after 9 May 2017. If you haven’t looked at your property’s depreciation position, our guide to Division 40 vs Division 43 explains how the two categories work, and what a depreciation schedule actually contains.
The short version
- Properties held or under contract before 7:30pm AEST on 12 May 2026 aren’t affected by the negative gearing changes, for as long as they’re held.
- Established residential properties bought from that date keep current rules until 30 June 2027, then face new limits from 1 July 2027.
- From 1 July 2027, losses on those properties can still offset rental income from residential property and carry forward, but not offset wages or other income.
- Tax depreciation deductions are unaffected either way, and follow their own separate rules.
- Confirm exactly how this applies to your situation with your accountant.
Where to from here
For most existing investors, there’s nothing to do. If your property was held or under contract before 7:30pm AEST on 12 May 2026, the current negative gearing rules keep applying for as long as you own it.
For a new purchase, an established property bought after the cutoff still gets the benefit of current negative gearing rules for a while yet, since the new limit doesn’t start until 1 July 2027.
What applies to your situation depends on your circumstances and the date you purchased, so confirm your position with your accountant before making any decisions.
TDA prepares tax depreciation schedules and property valuations across Australia. If you haven’t had your investment property’s depreciation reviewed, you can order a depreciation schedule or call us on 1300 417 317. TDA does not provide tax, financial or investment advice.
