Negative Gearing and the New Federal Budget

Negative gearing is a tax arrangement that allows property investors to deduct rental property losses from their other taxable income. For decades, it has been a popular strategy among Australian investors because it can reduce their tax bill while they wait for the property’s value to increase.

In the 2026–27 Federal Budget, the Australian Government announced major changes to negative gearing as part of a broader housing affordability package. Under the proposed reforms, negative gearing will be limited to newly built homes from 1 July 2027. Existing investment properties held before the budget changes will continue under the current rules through grandfathering arrangements.

The government argues that these changes will help first-home buyers by reducing competition from investors in the established housing market and encouraging investment in new housing supply. The reforms are designed to direct more capital into building additional homes rather than bidding up the price of existing properties.

Supporters believe the policy will improve housing affordability over time and make the tax system fairer. Critics, however, warn that fewer investors could reduce the supply of rental properties and place upward pressure on rents in some areas.

The budget also includes changes to capital gains tax concessions, which work alongside negative gearing. Together, these measures represent one of the most significant property tax reforms in recent years and are expected to shape Australia’s housing market for years to come.

Author

Anitta Rodrigues