🦘 Australia

Negative Gearing
Calculator AU 2026

Work out what the property costs you after tax each year, and what it has to grow by to be worth it. Negative gearing is not a tax saving on its own — it is a real cash loss, partly refunded, betting on capital growth. Includes ATO 2026-27 marginal rates, the 2% Medicare levy, depreciation and the 50% CGT discount on sale.

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Read the full answer — method, rates and figures

Quick answer: Australian negative gearing converts a property operating loss into an after-tax wealth strategy. Mechanics: rental income − (interest + property management + council rates + strata + insurance + repairs + depreciation) = net loss; loss reduces taxable income at marginal rate (15/30/37/45% + 2% Medicare for FY 2026-27; the $18,201–$45,000 band was cut from 16% to 15% on 1 July 2026, and FY2025-26 returns lodged now use 16%).

Tax saving = loss × marginal rate. Strategy works only if capital growth + tax savings exceed cumulative cash losses + holding costs. 50% CGT discount applies on assets held >12 months as individuals/trusts (33.33% SMSF, 0% companies/non-residents).

Recent rule changes: travel deductions removed for residential property post-1 July 2017; second-hand Division 40 plant equipment depreciation removed for residential acquisitions post-9 May 2017. Building depreciation (Division 43): 2.5%/year over 40 years, only for buildings constructed after 16 September 1987.

Plant equipment depreciation (Division 40): effective life under TR 2024/3. ATO data: 1.1M Australians claimed rental loss in 2021-22, average $5,500.

Source: ato.gov.au/individuals-and-families/investments-and-assets/residential-rental-properties.

Interest-only assumed (typical for investment loans 5y term).

FY 2026-27 average IO investor rate ~6.5-7.5%. Owner-occupier P&I typically 0.20-0.50pp lower.

Gross yield: 3.6%. Sydney/Melbourne typical 2.5-3.5%; regional 5-7%.

Get a quantity surveyor's schedule (~$700, deductible). New builds: $8-15k/year typical.

Marginal rate: 32.0% (incl. Medicare). Higher bracket = larger tax shield from the loss.

Australian capital city long-term average ~5-7% nominal. Highly cyclical and suburb-dependent. Use conservatively for stress testing.

CPI rent inflation typically 2-4%. Reduces negative-gearing benefit over time as cash position improves.

Year 1 Net Loss

$31,122

negatively geared

Y1 Tax Saving

$9,959

at 32.0% marginal

Y1 After-Tax Cash Flow

-$13,163

cash out after tax saving

Year 10 Equity (after CGT)

$517,211

on hypothetical Y10 sale

The Year 10 CGT uses today's 50% discount. From 1 July 2027 the discount is replaced by cost-base indexation plus a 30% minimum tax on gains accruing after that date (new builds can keep the discount), so a sale in year 10 of an established property will usually pay more CGT than shown. Model a post-2027 sale in the CGT calculator.

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Track the property, the loan and your tax position together, next to everything else you own.

Y1 tax saving

$9,959

Year 1 net loss

$31,122

Y1 after-tax cash flow

-⁠$13,163

Year 10 equity (after CGT)

$517,211

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10-year wealth scenario

  • • Starting equity (deposit): $160,000
  • • 10-year cumulative after-tax cash flow: -$105,153 (cash out)
  • • Total tax saved over 10 years: $87,131
  • • Property value after 10 years at 5.0%/yr: $1,303,116 (gain $503,116)
  • • Net capital gain after costs + cost-base adjustments: $510,538
  • • 50% CGT discount applied → discounted gain $255,269, CGT payable $113,326
  • • Year 10 net equity (after loan + sale costs + CGT): $517,211

This projection applies the 50% CGT discount across all ten years, which is the law currently in force. Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, from 1 July 2027 the 50% discount is replaced by cost-base indexation plus a 30% minimum tax rate on net capital gains accruing after that date — so for an established dwelling acquired after 7:30pm AEST on 12 May 2026, the Year 10 figure above is likely optimistic. Purchases settled before that cut-off are grandfathered, and new residential dwellings can elect to keep the 50% discount. See the 2026 negative gearing reform guide for which side of the cut-off you are on.

Living overseas when you sell? Foreign residents face different rules: the buyer withholds part of the price at settlement unless you have an ATO clearance certificate, the main residence exemption generally does not apply, and the CGT discount is limited. The foreign resident CGT calculator works through all three.

⚠ Stress test sensitivity: capital growth assumption is the dominant driver. At 0% growth over 10 years, most negatively-geared properties produce net negative return after holding costs. Australian capital city growth has historically averaged 5-7% nominal but with significant cyclical variation (-15% to +25% in any single year).

YearRentLoss/(Profit)Tax SavingAfter-Tax CFEquity
1$28,600$31,122$9,959-$13,163$200,000
2$29,458$30,324$9,704-$12,620$242,000
3$30,342$29,502$9,441-$12,061$286,100
4$31,252$28,656$9,170-$11,486$332,405
5$32,190$27,784$8,891-$10,893$381,025
6$33,155$26,886$8,603-$10,282$432,077
7$34,150$25,961$8,307-$9,653$485,680
8$35,174$25,008$8,003-$9,005$541,964
9$36,230$24,026$7,688-$8,338$601,063
10$37,317$23,016$7,365-$7,651$663,116

New to negative gearing? The Australian negative-gearing guide walks through how it works, deductible expenses, the 50% CGT discount, and when to avoid it — with worked examples at every tax bracket.

Last reviewed 31 October 2026 by the Richify AI agent team.

Felix, Richify's AI CFO
By Felix, Richify's AI CFO

Reviewed by Felix, Richify's AI CFO — an AI author, presented as one.

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How it works

Negative gearing converts a property's pre-tax operating loss into an after-tax wealth-building strategy via three components:

  • Operating loss — annual rental income minus annual expenses (interest + management + rates + insurance + depreciation). When negative, this loss flows to your tax return.
  • Tax shield — the loss reduces your taxable income at your marginal rate (15/30/37/45% + 2% Medicare). Higher brackets get larger absolute tax savings per dollar of loss.
  • Capital growth — long-term price appreciation provides the wealth-building return. With 50% CGT discount on assets held >12 months, only half the gain is taxed at sale.

Strategy viability depends on capital growth being sufficient to offset cumulative cash losses + holding costs. Recent regulatory changes: travel deductions removed for residential property post-1 July 2017; second-hand Division 40 plant equipment depreciation removed for residential property acquisitions post-9 May 2017. Source: ato.gov.au/individuals-and-families/investments-and-assets/residential-rental-properties. Updated 28 July 2026 for FY2026-27 (low marginal band 15%).

How to calculate negative gearing

It is one subtraction, then one multiplication.

Step 1 — find the loss. Rental income minus interest, running costs and depreciation. If the answer is negative, the property is negatively geared.

Step 2 — find the tax saving. Multiply that loss by your marginal tax rate. The loss lowers your taxable income, so the saving is tax you no longer pay — never a refund of the whole loss.

$750,000 unit · $600,000 loan at 6.5%Per year
Rent at $550/week$28,600
Interest−$39,000
Running costs−$10,000
Depreciation (non-cash)−$6,000
Net rental loss−$26,400
Tax saving at 37% + 2% levy$10,296
Actual cash shortfall−$20,400
Real cost after tax≈ $10,104

Two different numbers, and the gap matters. You deduct $26,400. Only $20,400 actually leaves your account, because depreciation is a paper cost. That is what makes depreciation worth claiming.

Negative gearing tax saving by bracket (FY2026-27)

What a $20,000 rental loss is worth at each bracket. The $18,201–$45,000 band was cut from 16% to 15% on 1 July 2026; FY2025-26 returns lodged now still use 16%.

Taxable incomeRate+ levySaving
$18,201 – $45,00015%17%*$3,400
$45,001 – $135,00030%32%$6,400
$135,001 – $190,00037%39%$7,800
$190,001 and over45%47%$9,400

The same loss is worth nearly three times as much at the top bracket as at the bottom. That is also why negative gearing is a weak reason, on its own, to hold a loss-making property on a low income.

*The Medicare levy phases in above $28,011, and the low income tax offset changes the saving on incomes up to $66,667 (it wipes out income tax entirely up to $22,867), so the lowest band often saves less than 17%. Rates: ATO, Tax rates – Australian resident, page last updated 13 August 2026. Published rates exclude the levy.

What you can claim: expenses and depreciation

Deductible in the year you pay them:

  • Mortgage interest
  • Property management fees
  • Council and water rates
  • Landlord insurance
  • Repairs and maintenance
  • Strata or body corporate fees
  • Advertising for tenants, and the rental schedule accounting fee

Deductible over time, as depreciation:

  • Division 43 — the building. 2.5% a year for 40 years, on the original construction cost rather than what you paid. A $400,000 build is $10,000 a year.
  • Division 40 — plant and equipment. Air conditioning, carpet, blinds, appliances, written off over their effective life.

Two traps that catch investors:

  • Since 9 May 2017, no Division 40 deduction on second-hand plant in a residential rental. Buy an established property and the existing oven and carpet are worth nothing to you — only items you install yourself.
  • Since 1 July 2017, travel to inspect a residential rental is not deductible at all.

Not deductible against income: capital improvements such as a new kitchen, and stamp duty. Both are cost-base items — they reduce your capital gain on sale instead, which is usually a smaller benefit.

Negative vs positive gearing: which is better?

Gearing describes cash-flow direction, not whether an investment is any good.

A negatively geared property loses money each year and needs capital growth to come out ahead. A positively geared one pays you income now, and that profit is added to your taxable income.

NegativePositive
Cash flowYou top it upIt pays you
Tax effectCuts taxable incomeAdds to it
Relies onCapital growthRental yield
Typical ofInner Sydney, MelbourneRegional, mining towns
SuitsHigher bracketsLower brackets, retirees

A quick test: set capital growth to 0% in the calculator above. If the ten-year result still looks acceptable, the property stands on its own. If it collapses, you are relying entirely on a forecast.

What negative gearing is actually betting on

The refund is the part everyone talks about and the smaller half of the arithmetic. A negatively geared property loses money every year in cash: rent comes in, interest and expenses go out, and the gap is real money leaving your account. Your marginal rate refunds a share of that gap — at 37% plus the 2% Medicare levy you get back 39 cents in the dollar, which means you are still out of pocket 61 cents. Negative gearing never turns a loss into a gain by itself. It reduces the cost of holding an asset, and the whole case for holding it is that the asset grows by more than the after-tax losses you funded along the way.

That makes capital growth the load-bearing assumption rather than a bonus — which is why the quarter just reported is worth knowing. The ABS found the total value of Australian residential dwellings fell $34.1 billion, or 0.3%, to $12.7 trillion in the June 2026 quarter, the first fall since the September quarter 2022, with the mean dwelling price down 0.7% to $1,100,400. Mean prices fell in New South Wales (−2.4%), Victoria (−2.1%) and the ACT (−1.3%) and rose in every other state and territory. Over the year the stock is still 8.5% above June 2025, so this is one soft quarter and not a trend — but it is a concrete reminder that the growth leg is an assumption you are funding, not a return you are receiving. One flat year does not undo the strategy; several would.

Two things follow for anyone already holding a geared property. Judge it on total return — the after-tax cash loss, plus growth, minus the CGT eventually payable on sale after the 50% discount — and never on the refund alone; the projection above does that, a tax saving quoted by itself does not. And read it inside your whole position rather than as a standalone line, because a geared property is at once an asset, a large liability and a claim on your monthly cash flow, and only the combined view answers whether it is making you wealthier. Work out the equity you actually hold and check it against the average Australian net worth for your age.

Many geared properties started life as the owner's home. If yours did, the sale is taxed differently: the years it was your home are exempt, and if you moved out and rented it you can keep it exempt for up to six years of renting. The main residence exemption calculator works out how much of the gain is taxed under the 6-year rule.

Source: ABS, Total Value of Dwellings, June quarter 2026, released 8 September 2026. General information only, not financial or tax advice, and it does not consider your circumstances.

Does the 2026 reform affect your property?

It depends on when you acquired it. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 commences 1 July 2027.

  • Acquired after 7:30pm AEST, 12 May 2026, and established? From 1 July 2027 its losses can only offset other residential property income — not salary. Unused losses carry forward.
  • Acquired before that? Grandfathered. Full salary offsetting continues.
  • A new build? Keeps full negative gearing either way.

Nothing changes for the 2026-27 income year, so the figures above are the rules currently in force.

Buying an established property now puts you on the post-cut-off side — model it on rental income alone, not on the tax refund. For the cut-off detail, the grandfathering test and the separate change to the 50% CGT discount, see our 2026 negative gearing reform guide.

How to use this calculator

  1. Enter property purchase price, loan amount (typically 80-90% LVR for investment), and interest rate (FY 2026-27 average IO investor rate ~6.5-7.5%).
  2. Enter weekly rental income — annualised at × 52. Include any income from on-site parking, storage, etc.
  3. Enter annual operating expenses: property management (5-10% of rent), council rates, strata, insurance, repairs, plus depreciation (use a quantity surveyor's schedule for accuracy).
  4. Enter your taxable income before the property loss. The calculator applies ATO 2026-27 marginal rates (15/30/37/45%) plus 2% Medicare levy to determine tax saving.
  5. Set your assumed annual capital growth rate. Australian capital city long-term average ~5-7% nominal, but varies significantly by suburb and cycle. Adjust for conservatism.
  6. Review the 10-year projection: net annual cash flow (after tax saving), cumulative loss, capital appreciation, and after-tax IRR estimate including the 50% CGT discount on sale.

❓ Frequently Asked Questions

What is negative gearing in Australia?

Negative gearing occurs when the costs of holding an investment property (interest on loan + repairs + property management + council rates + insurance + depreciation) exceed the rental income. The loss reduces your overall taxable income, lowering your income tax bill at your marginal rate.

The strategy works only if expected long-term capital growth + tax savings exceed cumulative cash losses. ATO statistics: ~1.1 million Australians (about 8% of taxpayers) reported a net rental loss in 2021-22, with average loss ~$5,500.

Negative gearing is permitted under sections 8-1 and 25-25 of the Income Tax Assessment Act 1997 — the deductibility of loan interest and rental expenses against other income.

How is depreciation calculated for investment property?

Two depreciation categories under the Income Tax Assessment Act 1997: (1) Division 43 Capital Works — the building structure depreciated at 2.5% per year over 40 years (or 4% over 25 years for some industrial buildings). Available only for buildings constructed AFTER 16 September 1987 (residential).

The construction cost — not the property's market value — is what's depreciated. A new $400,000 build = $10,000/year for 40 years. (2) Division 40 Plant & Equipment — items like air conditioning, carpet, blinds, dishwashers, ovens.

Depreciated using effective life. Important: Treasury Laws Amendment 2017 removed Div 40 deductions for SECOND-HAND residential plant — i.e., when an investor buys an existing property, they can NOT depreciate any pre-existing plant items, only new replacements they install.

What expenses can I deduct on a rental property?

Common deductible expenses (deductible in the year incurred, against rental income and other income): (1) Interest on the investment loan (principal repayments are NOT deductible). (2) Property management fees (5-10% of rent typically). (3) Council rates and water rates. (4) Strata/body corporate fees. (5) Land tax. (6) Building and contents insurance. (7) Cleaning, gardening, pest control. (8) Repairs and maintenance (immediate deduction). (9) Quantity surveyor fees for depreciation schedule. (10) Travel — REMOVED for residential property post-1 July 2017 (still claimable for commercial). (11) Loan establishment fees, broker fees, mortgage discharge fees — borrowing costs deductible over 5 years or loan term, whichever is shorter. CAPITAL improvements (renovations, extensions) are NOT immediately deductible — they form part of cost base for CGT.

How does the 50% CGT discount work on rental property?

When you sell an investment property held >12 months as an individual or trust, only 50% of the capital gain is added to your assessable income (post-loss-offset). The discount is half-removed for non-residents on assets acquired after 8 May 2012 and unavailable for companies.

SMSFs receive 33.33% discount (1/3). Cost base for CGT = purchase price + buying costs (stamp duty, legal fees) + capital improvements + selling costs (agent, legal, advertising) − depreciation claimed (cost base reduction).

Capital losses on the property can offset capital gains, with unused losses carried forward indefinitely against future capital gains only (not income). This is the law for the 2026-27 income year; from 1 July 2027 the 50% discount is replaced by cost-base indexation plus a 30% minimum tax rate on net capital gains accruing after that date, with new residential dwellings and affordable housing able to elect to keep the 50% discount.

What is the difference between negative, neutral, and positive gearing?

Negative gearing: rental expenses > rental income → loss reduces taxable income at marginal rate. Common in high-growth, low-yield markets (Sydney, Melbourne inner-ring).

Neutral gearing: rental expenses ≈ rental income → no loss, no profit, no tax effect. Positive gearing: rental income > rental expenses → profit added to taxable income.

Common in regional areas and mining towns where yields are 6-9% but capital growth is lower. Strategy depends on your tax bracket: higher-rate taxpayers benefit more from negative gearing's tax shield; lower brackets often prefer positive gearing for cash-flow stability.

The strategy chosen also affects loan structure (interest-only vs principal+interest).

Does the Year 10 CGT figure include the 1 July 2027 changes?

No. The calculator taxes the Year 10 sale with the 50% CGT discount, which is the rule in force for the 2026-27 income year. Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, gains accruing from 1 July 2027 lose the 50% discount: the cost base is indexed for inflation instead, and a 30% minimum tax rate applies to net capital gains.

New residential dwellings can elect to keep the discount. For an established property sold around year 10, most of the gain accrues after 1 July 2027, so the real CGT will usually be higher and the Year 10 equity lower than shown.

The projection also assumes full negative gearing against salary each year; established properties acquired after 7:30pm AEST on 12 May 2026 lose that from 1 July 2027.

Has the Australian government restricted negative gearing?

Yes — it is now law. Labor's 2016 and 2019 platforms proposed restricting negative gearing to new builds and cutting the CGT discount to 25%, and both elections were lost; but the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed Parliament on 25 June 2026 and commences 1 July 2027.

From that date, established residential properties acquired after 7:30pm AEST on 12 May 2026 can only offset rental losses against residential property income (unused losses carried forward), not against salary and wages. Properties held before that cut-off are grandfathered, and new builds keep full negative gearing.

The 50% CGT discount is separately replaced from 1 July 2027 by cost-base indexation plus a 30% minimum tax rate on net capital gains. Nothing changes for the 2026-27 income year — this calculator models the rules currently in force.

How is negative gearing affected by interest-only loans?

Interest-only (IO) loans maximise the tax-deductible interest portion of repayments while keeping principal stable — increasing the negative-gearing tax benefit. APRA and ASIC tightened IO lending standards from 2017 onwards: typical IO term capped at 5 years (sometimes 10), then converts to principal+interest (P+I), and IO portfolio share at lenders capped.

Owner-occupier IO loans are very rare; investment IO loans are still common but with tighter serviceability checks. Max LVR: typically 80% for IO investment, vs 95% P+I owner-occupier.

IO interest rates carry a premium of 0.20-0.50 percentage points above P+I. Long-term, P+I builds equity faster — the tax benefit of IO is partially offset by higher rates.

What is the marginal tax rate impact on negative gearing benefits?

Tax saving from a $20,000 rental loss varies by bracket (FY 2026-27): 15% bracket (income $18,201-$45,000) → $3,000 saved (this band was cut from 16% to 15% on 1 July 2026; FY2025-26 returns lodged now used 16% → $3,200). 30% bracket ($45,001-$135,000) → $6,000 saved. 37% ($135,001-$190,000) → $7,400 saved. 45% (>$190,001) → $9,000 saved. Plus 2% Medicare levy → 32%/39%/47% effective.

Those are bracket rates; below $66,667 the low income tax offset taper and the Medicare levy phase-in change them, so on the full calculation a $20,000 loss saves $3,495 at a $40,000 income and $6,125 at $60,000. Higher-bracket taxpayers gain proportionally more from negative gearing — which is why ATO data shows 60% of investment-property losses are claimed by taxpayers in the top two tax brackets.

Strategy implication: those in low brackets often benefit more from positive-gearing or capital-growth-focused strategies, while high earners prioritise negative-gearing's marginal-rate tax shield.

How long should I hold an investment property?

Holding-period considerations (factual, not advice): (1) >12 months: 50% CGT discount activates (s.115-25 ITAA 1997). (2) 5-7 years: covers 1-2 property cycles in most Australian capitals; smooths out short-term volatility. (3) 10+ years: typically achieves meaningful capital growth in growth markets after compounding. (4) Round-trip costs are significant: stamp duty (3-5%), agent fee (2-3%), legal fees, bank fees, mortgage discharge — selling within 3-5 years often results in capital loss net of round-trip costs even with paper gain. ATO data shows median hold for investor-resold properties is approximately 8 years.

The cumulative cash-flow impact of negative gearing also evens out as rents typically grow ~3-4% p.a. while interest cost remains fixed (or falls during refinance) — many properties become neutral or positive after 5-8 years.

What records should I keep for an investment property?

ATO requires retention for at least 5 years after the income tax return is lodged (longer if affecting CGT — typically 5 years post-disposal). Essential records: (1) Settlement statement and contract of sale. (2) Quantity surveyor's depreciation schedule (one-off cost ~$700, deductible). (3) All loan statements showing interest paid, plus any redraws (redraw for personal use can taint deductibility). (4) Annual property manager statements. (5) Receipts for repairs, maintenance, insurance. (6) Council rates and water rates notices. (7) Body corporate / strata fees. (8) For travel pre-1-Jul-2017 (residential) or all years (commercial) — logbook + receipts. (9) Capital improvement receipts (form CGT cost base). (10) Land tax assessments by state.

Software like CG-Reno, BMT Tax Depreciation, and platforms like Property Tree help systematise records.

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Australian Guide · 2026-27

Grandfathering Negative Gearing —
The 12 May 2026 Cut-Off, Explained

Pepper, Richify's AI Financial Architect
By Pepper, Richify's AI Financial Architect

What “grandfathering” means in Australian tax policy, the public record of past negative-gearing reform proposals (Labor 2016, Labor 2019), and how grandfathering would mechanically work if a future reform happened. This is a conceptual + historical explainer — not a prediction of policy or a recommendation to act on possible reforms.

Published 2026-06-18 · Updated 2026-07-29 · Reading time ~8 min

Current legal position (2026-27)

Reform has been enacted, and it is grandfathered. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed Parliament on 25 June 2026 and commences 1 July 2027. From that date, established residential properties acquired after 7:30pm AEST on 12 May 2026can no longer offset rental losses against salary and wages, and the 50% CGT discount is replaced by cost-base indexation with a 30% minimum tax rate on net capital gains. Properties held before that moment are grandfathered under the existing rules, and new builds keep full negative gearing. For the 2026-27 income year nothing has changed yet — but the cut-off date that decides which side you are on has already passed, which is what makes grandfathering a live question rather than a hypothetical one.

1. What “grandfathering” means

In tax policy, grandfathering is a transitional mechanism that allows existing arrangements to continue under the OLD rules when a new rule takes effect — only NEW arrangements after the start date are subject to the new rules. The purpose is to avoid retrospective changes that would disturb investors and other participants who acted in good faith under the prior rules.

Australian tax history has several major grandfathering precedents:

  • 1985 introduction of CGT. Assets acquired BEFORE 20 September 1985 are exempt from capital gains tax — sometimes called “pre-CGT” assets. A textbook grandfathering provision still operating today.
  • 1987 reversal of 1985 negative-gearing restriction. The Hawke government's short-lived 1985 quarantining of negative-gearing losses was reversed in 1987 partly in response to industry impact. Grandfathering wasn't needed because the rule itself was reversed.
  • 2017 Division 40 plant depreciation change. Existing owners of residential investment property kept their plant-equipment depreciation deductions; only acquisitions from 9 May 2017 onward lost the deduction for second-hand plant. Pure grandfathering.
  • 2027 30% minimum CGT (enacted, Act No. 49 of 2026). Recipients of listed payments such as the Age Pension are exempt from the 30% minimum (s 119-15), and gains accrued before 1 July 2027 keep the old rules — the most recent example of a grandfathering-style carve-out in a CGT reform. (See our /au/guides/age-pension-cgt-exemption-2027 page for details.)

2. The public record of past NG reform proposals

Three documented episodes in the post-1987 era. All three included or considered grandfathering of existing investments — none were enacted.

Labor 2016 election platform

Proposal: Restrict negative gearing to NEW (newly built) properties only. Reduce the 50% CGT discount to 25%.

Grandfathering clause: All existing investment properties (purchased before the start date) would have continued to receive negative-gearing deductions and the 50% CGT discount under the existing rules. Only NEW purchases from the start date would have been subject to the new rules.

Outcome: Labor lost the 2016 election. The proposal was not enacted.

Labor 2019 election platform

Proposal: Same structural proposal: limit negative gearing to new properties + halve the CGT discount to 25%. Start date proposed for 1 January 2020.

Grandfathering clause: Identical grandfathering clause — all existing investments preserved under existing rules. The proposal explicitly aimed not to disturb existing investors' tax position.

Outcome: Labor lost the 2019 election. The proposal was not enacted.

2024 Treasury review

Proposal: Independent Treasury review of housing-affordability impacts of negative gearing and the CGT discount. Modelled but did not recommend reform.

Grandfathering clause: Not applicable (no proposal made).

Outcome: Review published. Government took no immediate action at the time; reform followed at the 2026-27 Budget.

2026-27 Budget — ENACTED

Proposal: Limit negative gearing on established residential property to residential property income only (no offset against salary and wages), keeping full negative gearing for new builds. Replace the 50% CGT discount with cost-base indexation plus a 30% minimum tax rate on net capital gains. Announced 7:30pm AEST, 12 May 2026.

Grandfathering clause: Residential dwellings acquired before 7:30pm AEST on 12 May 2026 — including contracts entered before that moment — keep negative gearing under the existing rules. The CGT change applies only to gains accruing after 1 July 2027, via a deemed disposal and reacquisition on that date that resets cost bases. New residential dwellings and affordable housing may elect to retain the 50% discount.

Outcome: Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed Parliament on 25 June 2026 and received Royal Assent as Act No. 49 of 2026. Commences 1 July 2027.

Sources: ALP 2016 and 2019 election platforms (party-published documents); Parliamentary Library Research Service briefings on housing-affordability policy; Treasury 2024 housing-affordability review documents. Independent modelling published by the Grattan Institute and the McKell Institute.

3. How grandfathering would work IF a reform happened

Based on the structure of the Labor 2016 and 2019 proposals — the most fully-developed grandfathering frameworks publicly available — the typical mechanics would be:

  1. A start date is legislated. Usually 6-12 months after the legislation passes. Properties purchased BEFORE this date are under the old rules; AFTER are under the new rules.
  2. Existing investments preserved indefinitely. All investments purchased before the start date continue to receive the existing tax treatment for their full holding period — including ongoing negative-gearing deductions and the existing CGT discount on sale. No clawback of past deductions.
  3. New purchases subject to the new rules. Whatever change is being made (e.g. restricting deductions to new construction, halving the CGT discount) applies only to acquisitions from the start date onward.
  4. Disposal of grandfathered investments is the trigger. When a grandfathered investment is sold, the old rules apply to the entire holding period. Reinvesting the proceeds into a NEW property after the start date would put the new property under the new rules.

This is the historical pattern — a future reform could be structured differently (e.g. with a phase-out instead of permanent grandfathering, or with no grandfathering at all). The pattern described here reflects the public record, not a prediction.

Should this affect investment timing?

There is no timing trade left on established property. The grandfathering cut-off was 7:30pm AEST on 12 May 2026, so buying sooner today cannot put an established home on the old-rules side. What still matters:

  • An established property bought now should be modelled without the salary offset from 1 July 2027 — losses will be quarantined to residential property income and carried forward.
  • A new build keeps full negative gearing and can elect to retain the 50% CGT discount, so the established-vs-new choice now carries a real tax difference.
  • If you already held property before 12 May 2026, you are grandfathered — there is no clawback of past deductions and no need to sell or restructure.
  • A property purchased for tax reasons rather than fundamentals can underperform regardless of the rules.

Investment property decisions should rest on the property's fundamentals (yield, location, capital growth, your cash-flow capacity, your investment horizon), with the post-2027 tax treatment built into the cash-flow model rather than assumed away. Consult a licensed financial adviser and registered tax agent before acting.

Related Australian guides + tools

Frequently asked questions

What does 'grandfathering' mean in Australian tax policy?+

Grandfathering is a tax-policy mechanism that allows EXISTING arrangements to continue under the OLD rules when a new rule takes effect — only NEW arrangements after the start date are subject to the new rules. It's used to avoid retrospective changes that would disturb investors who acted in good faith under the prior rules. Examples in Australian tax history include the 1985 introduction of CGT (assets acquired pre-September 1985 are CGT-free) and the 2017 removal of Division 40 plant depreciation for second-hand residential property (existing owners kept their deductions; only post-9-May-2017 acquisitions lost the deduction).

Has Australia ever changed negative gearing before?+

Yes, briefly. In 1985 the Hawke Labor government restricted negative-gearing deductions to be quarantined against rental income only, with excess losses unable to offset other income. The change applied without grandfathering. Following an industry response, the restriction was reversed in 1987 and the open negative-gearing system has remained in place since. Subsequent reform proposals (Labor 2016, Labor 2019) included grandfathering specifically to avoid the 1985–87 episode of investor disruption.

What was Labor's 2016 and 2019 negative-gearing policy?+

Both campaigns proposed two changes: (1) restrict negative-gearing deductions to NEW (newly built) properties only, with an aim of stimulating housing construction; (2) reduce the 50% CGT discount to 25% for assets purchased after the start date. Both proposals included grandfathering — existing investment properties at the start date would have continued to receive negative-gearing deductions and the 50% CGT discount under the old rules. Labor lost both elections; neither proposal was enacted. The reform that did pass — the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, commencing 1 July 2027 — follows the same shape: negative gearing limited to new builds, existing holdings grandfathered, and the 50% CGT discount replaced (by cost-base indexation with a 30% minimum tax rate, rather than the 25% discount Labor had proposed).

Are negative gearing rules changing in 2026-27 or 2027-28?+

Not in 2026-27, but yes in 2027-28. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed Parliament on 25 June 2026 and commences 1 July 2027. For the 2026-27 income year the existing rules still apply in full: rental losses remain deductible against salary, and the 50% CGT discount still applies. From 1 July 2027, established residential properties acquired after 7:30pm AEST on 12 May 2026 can only offset rental losses against residential property income, with unused losses carried forward; and the 50% CGT discount is replaced by cost-base indexation plus a 30% minimum tax rate on net capital gains accruing after that date. Properties held before the 12 May 2026 cut-off are grandfathered, and new builds keep full negative gearing. Verify your own position at ato.gov.au before making decisions sensitive to the rules.

If negative gearing reform happened, how would grandfathering work?+

Based on the structure of the Labor 2016 and 2019 proposals — both of which represented the most fully-developed grandfathering frameworks publicly available — the typical mechanics would be: (1) a START DATE is set, usually 6-12 months after the legislation passes; (2) ALL investments purchased before the start date continue under existing rules — same deductions, same CGT discount, indefinitely; (3) Only NEW purchases after the start date are subject to new rules. There is no clawback of past deductions. Existing investors are not forced to sell or restructure. The trade-off in any future reform would likely follow this pattern unless the proposing government explicitly chose not to grandfather (which would be politically unusual).

Can I still buy before the reform and be grandfathered?+

No — for established homes that window closed at 7:30pm AEST on 12 May 2026, and it cannot be reopened by buying sooner now. An established residential property acquired after that moment is on the post-cut-off side: from 1 July 2027 its rental losses can only be offset against residential property income, not salary and wages. There is no rush-to-buy trade available. What does remain is the distinction between property types — new builds keep full negative gearing and can elect to retain the 50% CGT discount — but a property bought for tax reasons rather than fundamentals can underperform regardless of the rules. Decisions should rest on yield, location, capital growth, your cash-flow capacity and your investment horizon, and an established purchase made now should be modelled without the salary offset from 1 July 2027. Consult a licensed financial adviser and registered tax agent.

Where can I find the official record of past negative-gearing reform proposals?+

Three primary sources for the public record: (1) the Australian Labor Party's published 2016 and 2019 platform documents (alp.org.au archives); (2) the Parliamentary Library Research Service briefings on housing-affordability policy; (3) the Treasury 2024 housing-affordability review documents (treasury.gov.au). Independent modelling has been published by the Grattan Institute and the McKell Institute. For the current ATO position on negative gearing, see ato.gov.au's rental properties section.

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