Negative Gearing Changes 2026: Protect your Investment Loan Strategy

The negative gearing changes delivered in the 2026 budget came into effect as law on 26 June 2026. Given the buzz and conflicting opinions, it’s only natural to wonder about the impacts for you as an investor and whether the negative gearing benefits have disappeared altogether. The good news is there is a silver lining for existing investors and for new investors, there are ways to ensure your future investment loan strategies are optimised for tax purposes.

Since 1997, the experts at The Practice have been assisting clients with negative gearing property strategies in the ever-evolving tax landscape. The 2026 changes, although drastic, have already been analysed and assessed by our experts. To help you get up to speed with the changes and the impacts, we’ve put together this article on how you can proactively protect your investment loan strategies.

How does negative gearing work?

If you’re wondering what’s negative gearing, here’s negative gearing explained. As a property investor, you’re most likely aware that you can claim tax deductions for any losses incurred on your property.

With negative gearing, you can use the deductions to reduce your taxable income. This means, when you make a loss on your property, your annual income decreases, which then reduces your overall tax payable. If you’ve made tax payments throughout the year but your tax liability is less than what you’ve already paid, the ATO will then owe you a refund for overpayment of tax.

What actually changed on Budget night

The negative gearing changes announced on Budget night apply to any property purchased after 7.30pm AEST on 12 May 2026. The silver lining is that established rules are grandfathered. This means, if you’re an investor with an existing property at 7:30pm AEST on 12 May 2026, the new changes to negative gearing will not affect you. The grandfather exemption also applies to properties under contract at the time of the announcement but awaiting settlement.

So, what are the changes? In summary, negative gearing is no longer available to offset any losses from your property to reduce your overall tax liability.

For property investors, the change means you can now only use losses incurred on your property to reduce your tax liability on the rental income of the property. You can also carry forward any losses from one year to next and offset future rental profit or capital gains on sale.

Other exemptions to the negative gearing changes include new builds, build-to-rent, government-housing programs, widely held trusts and superannuation funds (including SMSFs). If you’re an investor with any of these opportunities, you can still take advantage of negative gearing.

There is also another important change that has come into effect — capital gains tax (CGT) on the sale of an investment property. Usually at sale, you get a 50% CGT discount so you only pay tax on 50% of the profit. Now, this discount has been replaced by cost-base indexation plus a 30% minimum tax on gains and will apply to any gains accruing after 1 July 2027.

The exemption to this rule is new builds, in which case you have a choice between using the 50% CGT discount or opting to apply the new arrangements on sale.

How the CGT changes interact with negative gearing

In addition to the negative gearing changes, the Government has enacted capital gains tax reforms. Before the change, investors who chose to sell their property were able to claim a 50% CGT discount on any profit made. For instance, if the profit you made was $100,000, you would only be required to pay tax on $50,000.

The Government has now replaced that discount with cost-base indexation and a minimum 30% tax on any gains made from the sale. This may sound like your tax liability will increase greatly on any sale but it may not necessarily be the case. This is because the gains will be calculated on the profit that is made from the sale price and the indexed original price. So, if you bought a property for $300,000 but with CPI adjustment, the price would now be $400,000, you would pay 30% tax on the difference between the new sale price and $400,000.

Given the complexities of the CGT change, if you’re thinking of an exit strategy, it’s crucial to consider both CGT and negative gearing changes in parallel. They both can significantly change your tax liability when executing an investment strategy.

How will negative gearing and CGT changes impact investors

When these changes happen, it can be confusing to understand whether you’re affected and, if you are, which parts apply to you. We’ve broken down both the negative gearing and CGT changes so you can see how they impact your situation.

The hidden impact everyone misses — your borrowing capacity

Negative gearing provided advantages for serviceability when it came to borrowing capacity. Many lenders would use negative gearing to boost up borrowing capacity. But now, for those that were relying on negative gearing, you may find your serviceability for a property investment loan drops.

Our lenders at The Practice are well aware of this impact and rest assured, they can help navigate the new negative gearing changes and provide options to achieve your objectives.

Impact on investment loan strategies

The question on the minds of investors is where to from here? You may have concerns about your investment loan strategy now that negative gearing benefits have been altered. We’ve provided a little checklist below to give you a head start.

Review your loan structure

Choosing a principal and interest repayment structure may escalate the risk of losing benefits. Principal and interest reduce your interest over time, meaning your claims against any property income will become minimal in the long run. Switching to an interest-only loan structure may help maximise your deductions against property income.

Offset accounts and cashflow management

If you haven’t already, it may be worth exploring the option of an offset account. Opting for an offset account lowers the interest you pay, which helps your overall cashflow. It also reduces your deductible interest so it’s important to remember the balance between cash-in-hand and the size of your deduction.

Financing a qualifying new build

Given negative gearing will still be applicable to new builds, you may consider looking into construction/progress-draw loans. You may find your surplus funds in your offset account may assist in securing this new investment. Chat to our lending experts and find a loan structure that works for your situation.

Avoid the deadline trap

These are early days and it’s important to remember panic buying or selling may not be wise. With any new laws, the complete practical implications are not always apparent at the first instance. If the impacts of the changes are on your mind, it’s best to first seek advice from an expert so you can make an informed decision on your future investment strategies. Our lending specialists at The Practice can help unpack the changes based on your situation and provide valuable insights.

Let’s talk about your investment loan strategy

At the end of the day, every investment strategy is unique and what works for you is not going to work for someone else. The new 2026 laws on negative gearing and CGT don’t necessarily have to impact you adversely. By taking a good look at the numbers, you may discover some interesting opportunities. Our experts at The Practice are here to help make your next move with confidence. Get in touch today. 

Frequently asked questions

Is negative gearing being abolished?

No. The concept of how negative gearing is applied in Australia is changing. For any property bought after 7:30pm AEST on 12 May 2026, you will no longer be able to offset your entire income against property losses. However, you will still be able to offset your losses against the property income. There are also exemptions. In particular, new builds will still be able to utilise negative gearing for entire income and so will any properties purchased before 7:30pm AEST on 12 May 2026. 

Can I still claim losses on an established property bought now?

No, for any established property bought after 7:30pm AEST on 12 May 2026, you will not be able to take advantage of negative gearing.

What happens to carried-forward losses?

With the negative gearing changes, any carried-forward losses can be used to offset rental income from the next year. This way, you don’t lose the option to deduct losses against income if you were not able to make use of that benefit in any one year.

How much could my borrowing capacity drop?

Your borrowing capacity can change significantly without negative gearing. The exact change will depend on a range of factors. The lending experts at The Practice will be able to help navigate that for you. Book a call today.

What counts as a new build?

Under the new 2026 laws, for a new build to be eligible for the exemption, it must be one of the following:

• An off-the-plan apartment  
• A duplex constructed after a knock-down of a single dwelling 
• Any new residential construction on vacant land
• A newly built property occupied for less than 12 months upon sale

This article provides general information only and does not constitute personal financial advice. It does not consider your individual objectives, financial situation or needs. You should seek professional advice before making any financial decisions.