Negative gearing describes a rental property whose deductible expenses exceed rental income. Current deductibility rules continue, but announced restrictions begin on 1 July 2027 for certain residential property acquired after the 2026 grandfathering time.
What applies now
Interest may be deductible where borrowed money is used to acquire or support an income-producing rental property. The purpose of the borrowing matters—not merely which property secures the loan.
Private redraws and mixed-purpose facilities require ongoing apportionment. Repairs, decline in value and capital works also have different timing rules.
The grandfathering line
Residential properties held before 7:30pm AEST on 12 May 2026 are grandfathered under the announced reform. The exact ownership and transaction facts matter, so investors should retain contracts and acquisition records.
The change is targeted to post-announcement acquisitions rather than retrospectively denying deductions on all existing investment homes.
Established homes from 1 July 2027
For affected established residential property acquired after the grandfathering time, rental losses generally cannot offset salary, wages or non-residential income from 1 July 2027.
Losses may instead offset residential property income, including relevant gains, and can be carried forward. This can materially change annual cash-flow and after-tax projections even though the economic expense remains.
New builds and unfinished details
The announced policy preserves negative-gearing treatment for qualifying new residential dwellings to support new housing supply.
Treasury’s second-stage draft generally links a new dwelling to genuinely added supply and a limited period after an occupancy certificate, but definitions and special cases were still under consultation on 10 August 2026. Do not structure a purchase around draft wording without current tax advice.
Common questions
Is negative gearing abolished in Australia?+
No. Under the announced reform, restrictions from 1 July 2027 target affected established residential properties acquired after the grandfathering time. Grandfathered holdings and qualifying new builds are treated differently.
Can quarantined rental losses be used later?+
The announced framework allows affected losses to offset residential property income and be carried forward, subject to final legislation and individual circumstances.
Does changing lenders remove grandfathering?+
The answer can depend on final rules and the legal ownership or transaction involved. Refinancing and ownership changes should be reviewed with a registered tax adviser.
This guide does not consider your objectives, financial situation or needs. Lending policies, government programs and thresholds can change. Obtain current credit, legal, tax or financial advice as appropriate.