Most of what has been written about the negative gearing changes since May has been about whether they are a good idea.
For anyone who already owns a rental property, that is not the useful question. The useful question is narrower and has a definite answer: which side of 7:30pm AEST on 12 May 2026 does your property sit on?
Everything else follows from that.
What actually changed
The core measure is law. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 was introduced on 28 May 2026 and the central provisions passed in June.
From the 2027-28 income year, a loss on an established residential investment property is no longer deductible against your salary, your business income or your dividends. It can be deducted against other residential property income, including a capital gain on residential property, and anything left over is carried forward to future years.
The loss is not lost. It is quarantined. For a client with one rental and a salary, that is close to the same thing for as long as the portfolio stays at one property — the deduction sits and waits instead of reducing this year's tax.
The cut-off, and what sits outside it
Properties held at 7:30pm AEST on 12 May 2026 are not affected. This is the line that decides most people's position, and it is the date of acquisition that matters, not the date the tenant moved in or the loan settled.
Also outside the restriction:
New builds. A newly built dwelling keeps full negative gearing. The exposure draft defines one as a dwelling acquired within 24 months of its occupancy certificate — see the caution below, because that definition is not law yet.
Build-to-rent, social and affordable housing. Kept deliberately, to steer investment towards new supply.
Commercial property, shares, widely held trusts and superannuation funds. The measure is about residential property held directly by individuals and similar entities. A commercial warehouse is untouched. So is a geared share portfolio.
The part that is not law yet
This is where care is needed, and where most commentary is loose.
A second tranche of legislation is still an exposure draft. Consultation closed on 21 August 2026. It has not passed.
That second tranche is the one that deals with the situations families actually run into:
- Preserving negative gearing eligibility, or new-build status, where a dwelling is inherited or transferred as a result of a relationship breakdown - Capital gains treatment for testamentary trusts and deceased estates - Part-year residency, for someone who arrives or leaves partway through a year - The formal definition of a new residential dwelling
If you are planning around a property passing to a spouse on death, or being transferred in a separation, you are planning around a rule that has been drafted and consulted on but not enacted. That is a real distinction. A concession that has been announced is not a concession you can rely on in a return.
It is also the most likely thing to change between the draft and the Act.
What this means in practice
If you owned the property before that evening in May 2026, nothing changes for you on this measure. Keep the acquisition evidence somewhere you can find it in five years.
If you bought after it, model the loss as quarantined from 2027-28, not as a deduction against salary. For a highly geared purchase this can move the whole case for holding it.
If you are considering a purchase now, the new-build treatment is worth understanding properly before you assume it applies. The 24-month test is in a draft.
If a property is likely to pass to family, this is worth a conversation before anything is signed, not after. The carve-outs are drafted, not enacted, and the sequence of events can matter.
What we would look at with you
The question is rarely "is negative gearing good". It is whether a particular property still earns its place once the deduction is deferred rather than immediate — which depends on your marginal rate, how long you expect to hold it, what other property income you have to absorb the loss, and what else the money could be doing.
That is arithmetic, and it is worth doing before 1 July 2027 rather than after.
Rules stated here are current as at September 2026. The core measure is in the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, passed in June 2026; the death, relationship-breakdown, estate and residency provisions were an exposure draft with consultation closing 21 August 2026 and are not law at the date of writing. See the ATO's guidance on the negative gearing and CGT reforms and Treasury's Budget 2026-27 materials. General information only — confirm the current position before acting.