Negative Gearing and CGT Changes from 1 July 2027: What Property Investors Need to Know
Do you own a rental property, or are you thinking of buying another? Australian tax law has just changed two things that affect you directly: negative gearing and CGT (capital gains tax). The ATO confirms the changes are now law, and the good news is that if you already owned a rental property before the announcement, your negative gearing is largely unaffected.
Quick summary
Rental properties you owned before 12 May 2026: negative gearing stays the same.
From 1 July 2027, established properties bought later no longer let you use rental losses to reduce your salary tax. New builds still do.
From 1 July 2027, the tax on selling property (CGT) is calculated differently, but only on the extra gain from that date onwards.
These changes do not affect the 2025-26 tax return you may be preparing now.
What is negative gearing?
You buy a property to rent out. During the year, the rent you collect is less than your total costs (loan interest, repairs, management fees and so on). The shortfall is a loss.
Today, you can use that loss to reduce your other income, such as salary. Your taxable income drops, so you pay less tax. That is negative gearing.
How does the new law change negative gearing?
From 1 July 2027, only new builds keep the ability to offset losses against salary. For established (already built) properties, the result depends on when you bought:
You owned the rental before 12 May 2026 (7:30pm AEST, when the government announced the changes): you keep negative gearing until you sell.
You buy an established home after the announcement but before 1 July 2027: you can still offset losses against salary until the new law starts. From 1 July 2027, losses on that home no longer offset salary.
You buy an established home from 1 July 2027: losses cannot offset your salary from day one.
You buy a new build (for example an off-the-plan apartment): you still can offset losses against salary as before.
Do rental losses disappear?
No. When losses can no longer offset salary, they are still kept. You use them against income from your other residential properties, and carry any excess forward to later years. If you own several rentals, a loss on one can offset the rent from another. How this applies to your situation is best confirmed with your tax agent.
What types of property does this cover?
Residential property only. Commercial property and shares are unchanged for negative gearing.
What is a new build and why does it keep the benefit?
The government wants to encourage more homes to be built, so it keeps the benefit for properties that add to housing supply. In simple terms:
Counts as a new build: an off-the-plan apartment, a home built on vacant land, or a demolished home replaced by more dwellings.
Does not count: an older home that just gets an extension, or a granny flat added beside an existing home.
New build investors keep negative gearing and can also choose between the old and new CGT methods when they sell. People who buy the property from them later do not get either benefit. Detailed conditions may be refined further, so check with your tax agent before signing a contract.
How does CGT change when you sell?
CGT is the tax on the profit when you sell a property.
The old way: if you held the property for over 12 months, you were taxed on only half of your profit.
The new way (from 1 July 2027): the half-off discount goes, replaced by two things:
Removing the gain caused by inflation. Inflation makes money worth less, so a rise in value that only matches inflation is not a "real" profit. Only the real profit is taxed. If your property only rose in line with inflation, there is almost no taxable profit.
A 30% minimum tax on that real profit. There are some exceptions, for example for people receiving means-tested income support such as the Age Pension. Ask your tax agent whether you qualify.
The new method applies to both property and shares, but only when you sell, and only to the extra gain after 1 July 2027.
What about property I already own?
You do not lose the 50% discount on the earlier gain. Gain up to 30 June 2027 keeps the half-off discount. Only the gain from 1 July 2027 uses the new method. When you sell, you will need the property's value on 1 July 2027 to split the two parts. The ATO will provide guidance and tools, so keep your purchase records in good order.
Results will vary with how much your property grows: some people will pay less tax than before, others more. The government's detailed worked examples are in its Budget 2026-27 explainer.
What stays the same?
Your main residence (the home you live in) remains exempt from CGT.
What should SMSF owners know?
If you have a self-managed super fund (SMSF), there is a separate change you need to know about, and it has been in effect since 10 August 2026, not from 1 July 2027.
When an SMSF borrows to buy property through a limited recourse borrowing arrangement (LRBA) entered into on or after 10 August 2026, the property must be "business real property", meaning land and buildings used wholly in a business. A typical residential rental generally will not qualify. LRBAs are not banned outright.
According to the ATO, the following are unaffected: LRBAs entered into before 10 August 2026, refinancing of those loans, and property contracts exchanged before 10 August 2026 (even if settlement happens later). If your fund is thinking of borrowing to buy property, speak with your tax agent or an SMSF specialist before signing.
Common myths about negative gearing and CGT
"My current rental will lose negative gearing."
Not true. Properties you held at the announcement are unchanged.
"I must sell before 1 July 2027."
Not required. The new CGT method only applies to extra gains after that date. Any decision to sell should reflect your overall financial plan, not tax alone.
"My main home will face CGT."
Not true. It remains exempt.
"SMSFs are unaffected."
Not true. SMSFs are not subject to the rental loss limits above, but have a separate borrowing rule from 10 August 2026.
What should you do now?
Work out which situation in "How does the new law change negative gearing?" matches each of your properties (based on purchase date).
Keep complete purchase, cost and settlement records.
Before buying or selling, ask for the result to be modelled under both the old and new rules.
If you are considering a new build, check the "new build" conditions carefully before signing.
Speak with your tax agent about how you own your properties and when to sell. GDA can help through accounting services in Perth.
Frequently asked questions about negative gearing and CGT
I bought an investment property in 2024. Will I lose negative gearing?
No. You owned it before the announcement, so you keep negative gearing until you sell. Only the extra gain from 1 July 2027 uses the new CGT method.
What if I buy an established home before 1 July 2027?
You can still offset losses against salary until the new law starts. From 1 July 2027, losses on that home no longer offset salary, but offset other residential property income and carry forward.
Will my rental losses disappear?
No. Excess losses are kept and carried forward to offset residential property income in later years.
Can an SMSF still borrow to buy an investment property?
For loans entered into on or after 10 August 2026, the property must be "business real property", so a typical residential rental generally will not qualify. Loans entered into before that date are not affected.
Does this affect the tax return I'm lodging now?
No. The negative gearing and CGT changes apply from 1 July 2027.
Need property tax advice in Perth?
Everyone's purchase dates, ownership structure and selling plans differ, so the best step is to speak with someone who knows tax. The team at Gordon QC Du & Associates, a tax and accounting practice in Mirrabooka, Perth, can help you see where each property fits.
Disclaimer: This post contains general information only and does not constitute specific tax or financial advice. Please consult a registered tax agent regarding your specific circumstances.
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