Negative Gearing Tax Reform Is Now Law: What Borrowers Need to Know

Australia's biggest property investor tax overhaul in a generation has cleared Parliament — here's what changes from 1 July 2027 and how to prepare.

After months of intense parliamentary debate, Australia's landmark reforms to negative gearing and capital gains tax (CGT) are now law. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed the House of Representatives on 25 June 2026 by 98 votes to 39, delivering the most sweeping overhaul of property investor tax settings in a generation.

The legislation clears the way for a fundamentally different set of rules from 1 July 2027. For anyone with a mortgage or thinking about property investment, that date is now a hard deadline to plan around.

What the New Law Actually Does

[MPA Australia reports](https://www.mpamag.com/au/news/general/cgt-negative-gearing-changes-clear-final-hurdle/580260) that from 1 July 2027, negative gearing on established properties will only be available on new builds. If you currently claim losses on an existing investment property against your ordinary income, that deduction will no longer be available under the new framework.

The capital gains tax discount is also being overhauled. The current 50% discount for assets held longer than 12 months is being replaced with an inflation-based system, alongside a minimum 30% tax on capital gains. Treasury confirmed that approximately 85% of the estimated $3.6 billion in additional revenue over the forward estimates comes from the negative gearing restrictions, with the remaining 15% from CGT changes. The two measures interact — carry-forward negative gearing deductions can still be applied against future capital gains — which is why the government did not separate the figures in the original budget papers.

A deal struck with the Greens added a prohibition on new self-managed super fund (SMSF) borrowing to purchase residential property. A separate measure in the same package introduces a minimum 30% tax on discretionary trust distributions, projected to raise at least $4.4 billion annually from the 2029–30 financial year. Over a decade, both the trust measure and the combined CGT and negative gearing changes are each projected to raise more than $40 billion.

Prime Minister Albanese said the changes provide certainty ahead of the 1 July 2027 commencement date. The Coalition remained fiercely opposed throughout, and the Council of Small Business Organisations Australia warned the reforms risk doing the opposite of encouraging investment and growth. Chair Matthew Addison said: "Tax reform should encourage ambition, investment, and growth. Our concern is that, as currently drafted, these measures risk doing the opposite."

How Lenders Have Already Adjusted

The serviceability effects were already being felt before the 1 July 2027 start date. Since the new rules took hold for new loan applications from 12 May 2026, major lenders updated their serviceability calculators. Macquarie, NAB, Westpac, ING and Great Southern Bank have each issued updated policies, generally distinguishing between properties acquired before and after 12 May 2026 — adding cross-checking and resubmission work to deals already in progress.

Investor borrowing capacity has fallen by an estimated 8% to 12% on a like-for-like basis, according to brokers managing the transition, with reductions of up to 30% at some lenders depending on how each has implemented the changes. That is a significant shift — an investor who could previously borrow $800,000 may now qualify for substantially less under the same income and deposit profile.

On top of the tax law changes, APRA's debt-to-income limits took effect on 1 February 2026, capping the share of new lending banks can write at six times income or more at 20%, applied separately to investor and owner-occupier loans. Use a [borrowing power calculator](/calculators/borrowing-power) to understand how your personal position has shifted under these combined changes.

Nationally, mortgage stress has continued to climb through this period. As of the three months to May 2026, 29% of mortgage holders — or 1.538 million people — are classified as "at risk," marking the fourth consecutive monthly increase. Of these, 20.4% are classified as "extremely at risk."

How Melbourne Is Bearing the Brunt

Victoria's property market is absorbing the sharpest pressure. Domain's Forecast Report, covering the 12 months to June 2027, points to Melbourne house price falls of up to 8% — the steepest projected decline of any Australian capital. ANZ Research expects Melbourne housing prices to fall 1.7% across 2026, while Cotality data shows values already down 0.6% in April, with top-quartile properties declining for five consecutive months.

Westpac has warned that Victoria faces its deepest household squeeze on record, with consumption per capita forecast to fall a cumulative 3.5% over the five years to FY2028. The bank flagged the November 2026 state election as a further risk to private sector investment decisions.

Victoria's investor lending grew 13% annually over the past year — faster than any other major state — even as the state's own land tax changes, in place since 2024, were already weighing on investor appetite. The national price outlook varies sharply: Sydney is forecast to fall between 3% and 7%, Canberra up to 4%, while Brisbane, Adelaide and Perth are forecast to grow between 3% and 9%.

What Investors Should Do Before July 2027

For borrowers with existing investment properties, the key distinction is when you bought. Properties acquired before 12 May 2026 are being treated differently by lenders than those purchased after that date. Established negative gearing arrangements on existing holdings are not being immediately wound back — but the rules for any new purchases are already different.

For anyone considering a new investment purchase, new builds retain access to negative gearing and are where lenders are most comfortable writing investor loans right now. Compare [investor home loan options](/home-loans/investor) to understand which lenders are positioned well for new construction lending.

If you are wondering whether refinancing or restructuring your current investment loan makes sense before July 2027, a [refinance savings calculator](/calculators/refinance-savings) is a quick first step to see whether switching delivers a meaningful cash-flow improvement while the current rules still apply.

The law is no longer a proposal. Getting clarity on how it affects your specific loan, your lender's policy and your investment strategy now — rather than in 12 months — is the most valuable thing you can do.