Explore the Negative Gearing Changes 2026 and what they could mean for Australian property investors, including potential tax impacts, rental property deductions, investment returns and future property strategies.
General information only. This article explains publicly announced tax measures and is general information, not tax advice. Strawberry Finance is a credit assistance provider and is not a registered tax agent. Your own position depends on your circumstances, and some measures below remain subject to legislation and may change. Please speak with your accountant or a registered tax agent before acting. Correct as at September 2026.
The negative gearing changes 2026 announced in the Federal Budget on 12 May 2026 are the most significant shift to residential property tax settings in decades. In short: negative gearing on established residential property is being restricted for purchases made after 7:30pm AEST on Budget night, with rental losses quarantined from 1 July 2027. Newly built properties are exempt. Investors who already owned a property, or were under contract before that moment, are grandfathered and keep the current rules for as long as they hold the property. For Perth investors – in a market where the median house price reached roughly $938,000 by the end of June 2026 according to REIWA – the negative gearing changes 2026 change the arithmetic on what to buy next, though not necessarily on what you already own.
Negative gearing describes the position where the cost of holding an investment property exceeds the rent it produces. Under the rules that have applied for decades, that net loss could be deducted against your other income, including salary. The negative gearing changes 2026 narrow this. Here is what has been announced, drawn from the Budget papers at budget.gov.au:
The negative gearing established property rules draw a line between two categories of purchase. If a Perth investor buys an established home in, say, Morley or Bassendean after Budget night, and that property runs at a net rental loss, that loss can no longer reduce the tax payable on their salary from 1 July 2027. If the same investor buys a newly constructed home in a growth corridor estate at Alkimos or Wellard, the existing treatment continues to apply. The practical effect is that two properties at a similar price, in similar suburbs, can now produce quite different after-tax outcomes purely because of when and what was built. This does not make established property a poor investment – rental income, capital growth and holding costs still drive the result – but it does mean the after-tax cashflow modelling that many investors have relied on for years needs to be redone rather than assumed. Under the negative gearing established property rules, the question of what you buy has become inseparable from the question of how it is taxed, and that is a conversation for your accountant as much as your broker.
The mechanism at the centre of the reform is rental loss quarantining Australia wide. Quarantining does not delete the loss. It restricts what the loss can be offset against, and carries the remainder forward. Based on the announced design:
A large number of Perth investors will be grandfathered negative gearing investors, and the test is a date rather than a judgement call. If you owned the property, or had entered into a contract, before 7:30pm AEST on 12 May 2026, the current rules continue to apply for as long as you hold it. Given Perth values rose sharply through 2024 and 2025, most investors who bought in that window fall on the protected side of the line. Two situations are worth checking carefully with your accountant. The first is a property bought as a home before Budget night and later converted to a rental – on the announced design this is also grandfathered. The second is a property sold and replaced after Budget night, where the replacement purchase would be assessed under the new rules even though the investor has held property continuously. Grandfathering attaches to the property and its acquisition date, not to the investor, so restructuring decisions made for other reasons can quietly move you out of the protected group. If you are weighing a sale, a transfer between entities, or a refinance that involves changing ownership, confirm the tax consequence before you act rather than after.
The Perth investor tax changes 2027 do not require panic, but they do reward preparation. There is a window between now and 1 July 2027 to understand your position properly. Three things are worth doing. First, establish clearly which of your properties are grandfathered and which are not – this is a documentation exercise your accountant can complete quickly from contract dates. Second, model your portfolio cashflow on the assumption that quarantining applies to affected properties, so you know whether the holding cost remains comfortable without the salary offset. Third, review the loan structure itself. Where a portfolio has been assembled over several years, loans are often cross-collateralised, sitting with a single lender at rates that are no longer competitive, and structured in a way that makes it hard to sell one property without disturbing the others. Fixing that is a lending question rather than a tax question, and it is where a broker adds value. Strawberry Finance works across more than 40 lenders and can restructure a portfolio into standalone loans that leave you free to act on whatever your accountant advises about the Perth investor tax changes 2027.
The restriction applies to established residential properties acquired after 7:30pm AEST on 12 May 2026, with loss quarantining commencing from 1 July 2027. So the acquisition test is already in effect, while the change to how losses are treated begins in the 2027-28 financial year. Properties acquired before that moment on Budget night are grandfathered. For your own position, please confirm with your accountant or a registered tax agent.
On the announced design, no. Properties owned or under contract before 7:30pm AEST on 12 May 2026 are grandfathered and continue under the current negative gearing rules for as long as you hold them. Given how many Perth investors bought during the strong 2024 and 2025 growth period, a large share of local portfolios sit on the protected side of the line. Your accountant can confirm this from your contract date.
Not necessarily. Tax treatment is one input among several, and a property that is well located, well priced and well tenanted can outperform a poorly chosen new build regardless of deduction settings. New builds also carry their own considerations, including build risk, developer premium and how the property values on completion. The right answer depends on your circumstances, which is a conversation for your accountant on the tax side and your broker on the lending side.
SMSFs are treated separately under the announced measures and the position is not identical to personal ownership. Because SMSF borrowing operates under limited recourse borrowing arrangements and a distinct tax framework, we would not want you to rely on a general answer here. If you hold or are considering property in your SMSF, please raise it specifically with your accountant or SMSF specialist. Strawberry Finance can assist with the lending side once your adviser has confirmed the structure.
Lender servicing calculations already assess investment loans on rental income and the APRA interest rate buffer rather than on tax deductions, so borrowing capacity is not directly driven by negative gearing. What can change is your own view of what is comfortable to hold, since the after-tax cost of an affected property may be higher from July 2027. It is worth revisiting your numbers on that basis before committing to a further purchase.
We handle the lending side. That means reviewing whether your existing investment loans are competitively priced, untangling cross-collateralised structures so each property stands alone, and structuring any new purchase so it does not restrict your future options. Director Sahil Saini brings a commerce background alongside his finance broking accreditation, and works alongside your accountant rather than in place of them. Call 0457 133 453 for a free consultation.
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The information in this article is general in nature and does not take into account your objectives, financial situation or needs. It is not tax, legal or financial advice. Strawberry Finance is a credit assistance provider and is not a registered tax agent – for advice about your own tax position, please consult your accountant or a registered tax agent, or refer to ato.gov.au. Measures described may be proposed or subject to legislation and could change. Lending is subject to lender credit criteria, terms, conditions and fees. Correct as at September 2026.
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