Negative Gearing Reform Is Now Law: What Investors Must Do

Labor's negative gearing and CGT overhaul cleared Parliament on 25 June — here's what every Australian property investor needs to know now.

Australia's most significant property tax reform in a generation is done. Labor's negative gearing and capital gains tax overhaul passed both houses of parliament on Thursday 25 June 2026, becoming law after the bill cleared the Senate with Greens support and was ratified by the House of Representatives 98 votes to 39.

For existing investors who purchased before 12 May 2026, grandfathering provisions protect your negative gearing entitlements. But for anyone buying an established investment property from that date forward, the landscape has fundamentally changed — and lenders are already pricing it in.

What the Law Actually Says

[Australian Broker](https://www.brokernews.com.au/news/breaking-news/negative-gearing-and-cgt-overhaul-becomes-law-289572.aspx) reports that Treasury confirmed 85% of the additional tax revenue over the forward estimates will come from the negative gearing changes, not the CGT overhaul. Of the estimated $3.6 billion in new revenue, approximately $3 billion flows from restricting negative gearing to new builds. The CGT changes contribute just 15% in the near term.

The changes take effect from 1 July 2027. Transitional arrangements allow existing investors to retain the 50% capital gains discount on gains accrued before that date. From 1 July 2027, cost-base indexation applies alongside a minimum 30% tax on real gains. Over a decade, the combined CGT and negative gearing measures are projected to raise more than $40 billion. A separate minimum 30% tax on discretionary trust distributions is forecast to raise at least $4.4 billion a year from 2029-30, and more than $40 billion over ten years.

One unresolved issue is what crossbenchers called the "widow's tax." Under the legislation as passed, existing investment properties held in joint names could lose their grandfathered exemptions if one of the owners dies or the property transfers through divorce. Finance Minister Katy Gallagher confirmed in the Senate that this will be addressed in a second tranche of legislation.

How Lenders Have Already Responded

Don't wait for 1 July 2027 to feel the effect on your borrowing capacity. ANZ, NAB and Macquarie have already updated their serviceability policies, with negative gearing now recognised only on new builds or properties purchased before 12 May 2026. Macquarie, NAB, Westpac, ING and Great Southern Bank have each issued updated serviceability calculators, generally distinguishing between properties acquired before and after 12 May and adding cross-checking steps to deals already in progress.

The borrowing capacity impact is material. Investor borrowing capacity has fallen by an estimated 8% to 12% on a like-for-like basis since the negative gearing changes took effect on 12 May, according to brokers managing the transition — with reductions of up to 30% at some lenders, depending on how each has applied the new rules.

This sits on top of APRA's debt-to-income limits, which took effect 1 February 2026. Those limits cap the share of new lending any bank can write at six times income or more at 20%, applied separately to investor and owner-occupier loans. Melbourne's investor segment in particular is absorbing tighter macroprudential settings, new serviceability calculators, and the loss of negative gearing on established properties within the space of a few months of each other.

What This Means for Your Strategy

The structural shift rewards investment in new builds and penalises buyers targeting established housing outside pre-12 May grandfathered stock. If you purchased before 12 May 2026, your position is protected — but seek professional tax advice before any restructuring, disposal or transfer of the property, given the unresolved joint-ownership question.

For those now considering [investment property finance](/home-loans/investor), the approval process has become significantly more intensive. Multiple lenders have added resubmission steps to verify the date of purchase, the type of property, and whether negative gearing applies under their updated policy.

The geographic picture matters too. Victoria's investor lending grew 13% annually over the past year — the fastest of any major state — even as the state's own land tax settings, in place since 2024, were already weighing on investor appetite ahead of the federal changes. Melbourne is now forecast to record house price falls of up to 8% over the twelve months to June 2027, the steepest decline tipped for any capital. ANZ Research expects Melbourne housing prices to fall 1.7% across 2026, with Cotality data showing values already down a further 0.6% in April. Top-quartile properties in Melbourne have declined for five consecutive months.

In contrast, Brisbane, Adelaide and Perth are forecast to record price growth of between 3% and 9% over the same period.

Mortgage stress remains elevated nationally. As of the three months to May, 29% of mortgage holders — 1.538 million people — are classified as "at risk," the fourth consecutive monthly increase.

If your current loan structure was built around negative gearing assumptions that no longer apply, now is the time to review it. Check where you stand on [borrowing power](/calculators/borrowing-power) given the revised serviceability settings across lenders, or review your existing loan against today's [investor home loan rates](/home-loans/investor). A broker who understands how each lender has implemented the new rules can make a significant difference to what you can borrow and on what terms.