No. Negative gearing has not been abolished across Australia. The enacted 2026 reforms restrict the use of losses from certain residential investment properties from the 2027-28 income year. They preserve exceptions for qualifying pre-Budget ownership interests and eligible new residential dwellings. Core legislation, Schedule 2
The important question is whether your particular ownership interest qualifies for an exception. That depends on acquisition timing, the property’s eligibility and, where ownership has changed, the transfer rules. A rental loss does not automatically become an immediate deduction against salary just because a property is advertised as an investment or a new build.
Have the negative gearing changes become law?
Yes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. Its negative gearing provisions commenced on 27 June 2026, but apply to the 2027-28 income year and later years. For an investor using the usual Australian income year, that means the restrictions apply from 1 July 2027. Section 2 and Schedule 2, item 5
Further ownership-transfer protections were enacted in the Treasury Laws Amendment (Tax Reform No. 2) Act 2026, assented to on 26 August 2026. Schedule 4 commences on 1 October 2026 and applies from the 2027-28 income year. These provisions are already law. Section 2 and Schedule 4
| Question | Position under the enacted legislation |
|---|---|
| Is all negative gearing abolished? | No. The law limits the use of certain residential rental losses and provides exceptions. |
| Does the new restriction apply to the 2026-27 income year? | No. Its application starts in 2027-28. |
| What is the acquisition cut-off for the pre-Budget exception? | Before 7:30 pm AEST on 12 May 2026. The Act specifies legal time in the Australian Capital Territory. |
| Does settlement after Budget night necessarily lose the exception? | No. For an acquisition under a contract, the specific rule uses the time the contract was entered into. |
| Are unused restricted losses simply cancelled? | Generally no. They are subject to the statutory offset and carry-forward rules. Special rules, including bankruptcy rules, can affect them. |
Sources: section 26-155 and Schedule 2 application provision.
When do the negative gearing changes start?
| Date | What it means for investors |
|---|---|
| Before 7:30 pm AEST on 12 May 2026 | Acquisition cut-off for the pre-Budget ownership-interest exception. The statutory time is legal time in the Australian Capital Territory. For a purchase under a contract, the date the contract was entered into counts. |
| 26 June 2026 | Royal Assent to the core reform Act and the related Rates Amendment Act. |
| 27 June 2026 | Commencement of the core negative gearing provisions. Their income-year application is later. |
| 1 July 2026 | Commencement of the core CGT amendments and the Rates Amendment Act, which apply to CGT events on or after 1 July 2027. |
| 26 August 2026 | Royal Assent to the Act containing further negative gearing and transfer protections. |
| 1 October 2026 | Commencement of Schedule 4’s further protections. |
| 2027-28 income year | Application of the negative gearing restriction and Schedule 4 amendments. For usual Australian income years, this starts on 1 July 2027. |
Enactment, commencement and application are different. The restrictions do not begin applying to 2026-27 rental deductions merely because Parliament passed the law in June 2026.
What does negative gearing mean?
Negative gearing describes a borrowed investment whose rental income is lower than its deductible expenses, including eligible interest. Under the ordinary rules, a net rental loss can reduce other taxable income where the taxpayer and deductions qualify. A deduction reduces taxable income; it does not reimburse the loss dollar for dollar. ATO rental properties guidance
The new restriction changes how affected losses are used. It does not turn private expenditure or otherwise ineligible costs into deductions.
Which properties retain an exception?
The legislation tests ownership interests, rather than giving every future owner of a property the same treatment. Our guide to negative gearing grandfathering explains the pre-Budget exception in detail.
| Property or ownership situation | Treatment from 2027-28 | What to check |
|---|---|---|
| An interest last acquired before the Budget cut-off | The pre-Budget exception excludes the related income and deductions from the restriction. | Contract timing, later acquisitions and ownership changes. |
| An established dwelling acquired at or after the cut-off | The restriction applies unless another exception covers the investor or interest. | Property use, ownership structure and any specific exception. |
| A dwelling that meets the new-residential-dwelling requirements in relation to its owner | The new-dwelling exception applies. | Applicable legal requirements and evidence, not the marketing description alone. |
| An interest received following death or relationship breakdown | Specific extensions can preserve an exception. | The transfer route and the eligibility of the relevant interests. |
| Non-residential investments | This residential-dwelling restriction does not itself govern their losses. | Their own deduction rules and any residential component of a mixed-use property. |
The Act also excludes complying superannuation entities and defined widely held unit trusts from section 26-155(1). These exceptions do not mean an individual can deduct a fund’s or trust’s losses against their salary. Section 26-155(2)-(5); Schedule 4.
Can investors still negatively gear new builds?
Yes, where the dwelling satisfies the applicable new-residential-dwelling requirements in relation to that investor. The exception is enacted. Whether a particular purchase qualifies requires a separate assessment. Sections 26-155(2)(b) and 26-160
The final detailed eligibility position needs checking before relying on a purchase. Treasury’s 4 August 2026 release described consultation materials for the definition and exemptions, including a proposed 24-month acquisition period after an occupancy certificate. This review has not verified a later final measure adopting that detail. Do not treat that proposed period as a settled entitlement. Treasury’s consultation release
A renovation, replacement dwelling or off-the-plan purchase therefore needs evidence and advice. The property’s appearance or the fact that building work occurred is not enough to establish the exception.
What happens to affected rental losses?
From 2027-28, section 26-155 limits otherwise deductible amounts relating to affected residential dwellings. The calculation takes account of relevant residential income and statutory adjustments. An excess cannot simply reduce salary, wages, dividends or unrelated business income. Section 26-155
| Use of an affected excess | How the law treats it |
|---|---|
| Offset against salary or wages | Not available under the restriction. |
| Use against relevant residential income | Available through the statutory calculation, including adjustments for net income from exempt residential dwellings. |
| Use against eligible residential capital gains in the same income year | Available through the prescribed capital-gain calculation. It is not always necessary to wait until a later year. |
| Carry forward a remaining amount | Generally carried into the next income year as residential-dwelling expenditure. |
| Add the denied deduction to the property’s CGT cost base | Not allowed to the extent section 26-155 prevents the deduction. The loss has its own treatment. |
Sources: sections 26-155, 102-5, 110-38(8A) and 110-55(9JA), as amended.
The offset is not necessarily confined to a sale of the same property. The legislation defines eligible residential capital gains and prescribes the order in which losses and quarantined amounts are applied. Your accountant needs to reconcile the relevant portfolio income and gains.
Simplified example: a loss carried forward
Assume an individual buys an established rental property in August 2026. No exception applies. In 2027-28, rent is $32,000 and otherwise deductible expenses are $42,000. The investor has no other relevant residential income or eligible gains.
| Item | Amount |
|---|---|
| Rental income | $32,000 |
| Otherwise deductible expenses | $42,000 |
| Expenses deductible against that rent | $32,000 |
| Excess unavailable against salary | $10,000 |
| Amount carried forward on these assumptions | $10,000 |
This is an illustration of the statutory loss rule, not a personal tax calculation. It assumes all expenses would otherwise qualify and no other adjustment applies. If eligible residential gains existed in that year, the excess could be used through the capital-gain calculation instead. Sections 26-155(1) and 102-5
Simplified example: using the carried-forward loss the next year
Assume the same investor carries the $10,000 into 2028-29. Relevant rental income is $40,000 and otherwise deductible current-year expenses are $34,000. There are no eligible gains or other adjustments. The $6,000 rental surplus absorbs $6,000 of the carried-forward amount. The remaining $4,000 carries forward. It is not a $6,000 cash refund.
This example illustrates section 26-155. It assumes the investor remains subject to the same treatment, the amounts otherwise qualify and no special rule, including a bankruptcy adjustment, applies.
What if a property is inherited or transferred after separation?
The enacted extensions distinguish three situations: acquisition from a deceased spouse, acquisition from a deceased non-spouse co-owner, and a qualifying relationship-breakdown transfer. A surviving spouse can inherit a qualifying interest without already being a co-owner. For a non-spouse co-owner, the pre-Budget extension requires both the existing and inherited interests to meet the acquisition test. Sections 26-156 to 26-158
These protections are not a blanket inheritance exemption. Nor does preservation of a negative gearing exception settle the whole CGT outcome. Read the detailed guide to inheritance and property transfers for the separate tests, examples and records to keep.
How should investors assess cash flow and depreciation?
Compare the property’s rental income, cash expenses, loan repayments and tax deductions separately. A cash shortfall and a tax loss can differ. A depreciation deduction, for example, does not represent a fresh cash payment in that year.
Eligible depreciation remains relevant to the otherwise deductible expenses in the loss calculation. A tax depreciation schedule can help document those deductions for your accountant. It does not establish a negative gearing exception or guarantee immediate salary-offset relief. Section 26-155
Model both the immediate cash requirements and the timing of any usable deduction. Potential movements in rents, interest rates, property values and lender assessments remain uncertain. They should not be described as guaranteed consequences of the tax reform.
Before buying, selling or changing ownership, ask your adviser to check the relevant income year, each acquisition date, any exception, carried-forward amounts and CGT consequences. Duo Tax can assist with depreciation schedules and property valuation evidence where those reports are needed.
Frequently asked questions
Is negative gearing being abolished in Australia?
No. The enacted reforms restrict losses from affected residential dwellings from 2027-28. Exceptions include qualifying pre-Budget ownership interests and eligible new residential dwellings.
When do the negative gearing restrictions apply?
They apply to the 2027-28 income year and later years, starting on 1 July 2027 for investors using the usual Australian income year. The core provisions were enacted in June 2026.
Does a contract signed before Budget night qualify if settlement is later?
For the pre-Budget exception, the specific statutory rule treats an interest acquired under a contract as held from the time the contract was entered into. The cut-off is before 7:30 pm AEST on 12 May 2026. Later ownership changes require separate assessment.
Can new builds still qualify for negative gearing?
Yes. The law provides an exception for eligible new residential dwellings. The property must satisfy the applicable legal requirements in relation to the owner; a sales description alone does not prove eligibility.
Are affected losses only usable in a future year?
No. The statutory calculation can use relevant residential income and eligible residential capital gains in the same income year. A remaining quarantined amount generally carries forward. It cannot simply reduce salary or wages.
Does inheriting a property preserve negative gearing automatically?
No. Specific protections cover qualifying acquisitions from a deceased spouse or an existing non-spouse co-owner. The legal route and ownership history matter. Other beneficiaries do not automatically receive the same protection.
Does grandfathering for negative gearing preserve every CGT concession?
No. Negative gearing and CGT have separate tests. The enacted CGT reforms and any applicable transition or new-dwelling rules require their own assessment.
Can I still use the 50% CGT discount on an investment property?
It depends on when you sell. For a contract signed before 1 July 2027, the 50% discount still applies if you have held the property for at least 12 months. If you still hold the property on 30 June 2027, the gain up to then keeps the 50% discount (if you have held the property for at least 12 months when you sell), and the gain after that is worked out with indexation and the 30% minimum tax. Eligible new builds keep a 50% discount, but which homes count as new is still a Treasury draft.
Does the 30% minimum tax apply to the sale price?
No. The 30% minimum tax concerns a defined minimum tax capital gain and a statutory comparison of income tax amounts. It is not 30% of the property’s sale price, and exclusions and payment-based exceptions can apply.
Can a quarantined rental expense also be added to the CGT cost base?
No, to the extent section 26-155 prevents its deduction. The legislation excludes that expenditure from the cost base and reduced cost base. Keep its separate offset and carry-forward treatment in the tax records.
General information only: This article is general in nature and does not take into account your individual circumstances. It should not be relied on as tax, financial or legal advice. Speak with a qualified professional before making decisions about your property, tax position or investment strategy.
