Negative gearing changes 2026

How it works

Negative gearing isn't a separate tax scheme, it's just the result of your investment property running at a tax loss. Rental income (gross rent) minus deductible expenses (interest, depreciation, rates, agent fees, R&M, insurance) = net rental position.

If that's negative, the loss flows through to your personal tax return. It reduces your total taxable income, lowering the tax you pay on your salary or other income.

Worked example

$500K interest-only investment loan at 6% = $30,000/year interest. Property rents for $500/wk = $26,000/year gross rent. Other expenses (rates, strata, insurance, agent) = $6,000. Depreciation on a relatively new build = $8,000. Net loss = $30K + $6K + $8K − $26K = $18,000 loss.

Investor's marginal tax rate is 39% (income $135K-$190K bracket including Medicare). $18K loss × 39% = $7,020 tax saving. So the actual cash drain after tax is $18,000 − $7,020 = roughly $10,980, about $211/wk.

Why it only works for higher earners

The tax saving scales with your marginal rate. At the $18,201-$45,000 bracket, now 16% (18% including Medicare) after the tax cuts that took effect 1 July 2024, an $18K loss saves $3,240, your cash drain is $14,760/year. Negative gearing makes financial sense only when your salary is high enough (typically $100K+) AND you expect capital growth to outpace the cash losses.

Negative gearing changes: key dates and what still applies

Changes announced in the May 2026 federal budget limit the ability to offset rental losses against other income for established residential properties bought after 12 May 2026. New builds are excluded from the limit under the current rules, and many off-the-plan purchases fall into the new-build category, so they can generally still be negatively geared in the usual way.

Whether a specific property qualifies turns on contract dates and how the property is classified, and the detail is still settling. Treat the worked example above as the long-standing mechanics, and confirm your own eligibility with your accountant before relying on a negative-gearing benefit for a purchase after 12 May 2026.

General information only, not tax advice. The post-12-May-2026 rules are new and depend on your specific contract and property type, so confirm with your accountant.