Proposed Negative Gearing Changes 2027
Proposed Capital Gains Tax (CGT) Changes from 1 July 2027:
A Guide for Property Investors
The Australian Government has announced proposed reforms to Australia’s negative gearing rules that could significantly affect future property investors and the housing market.
Under the proposal, negative gearing tax deductions would be restricted to newly built residential properties from 1 July 2027. Existing investment properties acquired before the announcement date are expected to be protected under grandfathering provisions and continue to receive the current tax treatment.
For current and future investors, understanding these proposed changes is essential when planning property purchases, financing arrangements, and long-term wealth-building strategies.
What Is Negative Gearing?
Negative gearing occurs when the expenses associated with owning an investment property exceed the rental income generated by that property.
Common deductible expenses include:
- Interest on investment loans
- Council and water rates
- Property management fees
- Building and landlord insurance
- Repairs and maintenance
- Strata fees
- Depreciation on eligible assets
When total expenses are greater than rental income, the resulting loss can generally be claimed as a tax deduction against other income, such as salary and wages.
Example of Negative Gearing
Sarah earns a salary of $100,000 per year.
She owns an investment property that generates:
Item | Amount |
Rental Income | $28,000 |
Interest & Expenses | $38,000 |
Net Rental Loss | $10,000 |
Under the current rules, Sarah may be able to deduct the $10,000 rental loss from her salary income, reducing her taxable income to $90,000.
This tax deduction helps offset some of the costs associated with holding the investment property.
What Is Changing from 1 July 2027?
Under the proposed reforms:
- Negative gearing deductions would generally only be available for newly built residential properties.
- Investors purchasing established residential properties after the commencement date may no longer be able to claim rental losses against their other income.
- Existing investment properties purchased before the announcement date are expected to retain their current negative gearing benefits.
The Government has stated that the objective is to encourage investment in new housing construction and increase housing supply across Australia.
What Happens to Existing Investment Properties?
One of the most important features of the proposal is the expected grandfathering provisions.
This means that investors who already own investment properties before the announcement date would generally continue to access the current negative gearing rules.
Example
John purchased an investment property in 2025.
The property generates a rental loss of $12,000 per year.
If the proposed changes proceed as announced, John would generally continue claiming the $12,000 loss against his taxable income, even after 1 July 2027.
The reforms are designed to affect future investment decisions rather than retrospectively changing existing arrangements.
What About Properties Purchased Before 1 July 2027?
Investors who purchase investment properties before the commencement date are also expected to retain access to the current negative gearing rules.
Example
Emma purchases an established investment property in 2026.
The property is negatively geared and generates annual rental losses.
Provided the property qualifies under the transitional arrangements, Emma would generally continue to receive negative gearing deductions after 1 July 2027 because the investment was acquired before the new rules commence.
This grandfathering approach provides certainty for existing investors and those who purchase before the proposed changes take effect.
Who Will Be Most Affected?
Future Property Investors
Individuals purchasing investment properties after 1 July 2027 may need to focus on newly built properties if they wish to access negative gearing benefits.
Investors Buying Established Properties
Purchasers of existing residential properties may no longer receive the tax advantages currently associated with negative gearing.
Property Developers and Builders
The proposal may increase demand for new housing developments as investors seek properties that qualify for tax deductions.
First Home Buyers
The Government believes reducing investor demand for established homes may improve affordability and increase opportunities for owner-occupiers.
Why Is the Government Proposing These Changes?
According to the Government, the reforms aim to:
- Encourage construction of new housing
- Increase housing supply
- Improve affordability for first home buyers
- Direct tax incentives towards creating additional housing stock
- Support Australia's long-term housing objectives
The Government argues that tax incentives should focus on increasing supply rather than competing for existing housing stock.
Potential Benefits of the Changes
Supporters of the reforms suggest they may:
- Increase new housing construction
- Create additional rental properties
- Improve housing affordability
- Support the building and construction industry
- Direct investment toward expanding housing supply
Potential Concerns for Investors
Some property industry groups have expressed concerns that the reforms could:
- Reduce investor participation in established housing markets
- Lower the attractiveness of property investment
- Reduce rental supply in some locations
- Increase rents due to reduced investor activity
- Create uncertainty in the property market
The actual impact will depend on economic conditions, housing supply, interest rates, and the final legislation.
What Should Property Investors Do Now?
At this stage, the proposed negative gearing reforms have not yet become law.
Property investors should continue making decisions based on their financial circumstances and investment objectives rather than speculation.
Before purchasing, selling, or restructuring investment properties, it is advisable to seek professional tax and financial advice.
How Premier Tax & Bookkeeping Can Help
Property investment remains one of Australia’s most popular wealth-building strategies, but tax rules can be complex and subject to change.
At Premier Tax & Bookkeeping, our experienced tax professionals can help you:
- Understand proposed negative gearing reforms
- Assess the impact on your property portfolio
- Review investment structures
- Maximise legitimate tax deductions
- Calculate cash flow and tax outcomes
- Develop tax-effective investment strategies
- Stay compliant with ATO requirements
Whether you own one investment property or a large portfolio, we can provide tailored advice to help you navigate changing tax laws with confidence.
Speak With Our Property Tax Specialists
If you’re considering purchasing an investment property or want to understand how the proposed negative gearing changes may affect your future plans, contact Premier Tax & Bookkeeping today.
Our experienced team can help you make informed decisions and maximise your long-term financial outcomes.
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