If you have spent any time reading the budget coverage this week, you could be forgiven for thinking negative gearing has been abolished. It has not. What has changed is more targeted than the headlines suggest – and there are several situations where negative gearing continues to work exactly as it always has.
Here is the clear version.
First – what actually changed
From 1 July 2027, investors who buy an established residential property will no longer be able to use rental losses to offset their salary or other non-property income. That is the change. It is significant, but it is also specific. It does not apply to everything, and it does not apply to everyone.
Where negative gearing is still fully available
Existing investment properties
If you owned or had a contract on an investment property before 7:30pm on 12 May 2026, nothing changes. Your negative gearing deductions are fully intact, against any income, for as long as you hold that property. This covers the vast majority of existing Australian property investors.
New builds
Negative gearing remains fully available on newly constructed residential properties purchased from 1 July 2027. Off-the-plan purchases, vacant land builds, and knock-down rebuilds that add a new dwelling all qualify. If you are an investor who wants to continue using rental losses against your salary income, new builds are the path forward.
Commercial property
The changes apply only to residential property. Commercial property – offices, retail, industrial, warehouses – is completely unaffected. Losses from commercial investments continue to offset any income, exactly as before.
Shares and other investments
Negative gearing has always applied to more than just property. If you borrow to invest in shares, ETFs, or managed funds and those investments generate a loss, that loss still offsets your other income. The budget did not touch this. For investors exploring debt recycling strategies using the share market, this is worth understanding.
The detail the headlines missed
Here is something that has not been widely reported, and it matters for investors who already hold multiple properties.
Under the new rules, losses from a newly purchased established property cannot offset your salary – but they can offset income from other residential property investments. This means that if you hold an existing investment property that is now positively geared and generating taxable rental income, a new established property running at a loss could offset that rental income directly.
In practical terms: the rental income from your existing portfolio is not automatically pushed onto your personal tax bill if you are holding other residential properties at a loss. The losses are quarantined to the residential property pool – but that pool includes your positively geared properties as well.
Whether this works in your specific situation depends on how your portfolio is structured, what each property earns, and how the ATO ultimately applies these rules in practice. This is not a strategy to attempt without advice. But it is a detail worth knowing about.
The losses do not disappear either. Any losses that cannot be used in a given year carry forward and can be applied against future rental income or capital gains from residential property, including when the property eventually becomes positively geared. The tax benefit is deferred, not lost.
– Richard Leal – Director of LINK Wealth
What this actually means
Negative gearing has been restructured, not abolished. For existing investors it is unchanged. For new investors it depends heavily on what you buy and how your overall portfolio is positioned. For investors in commercial property or shares, nothing has changed at all.
The investors who will be most affected are those who were planning to build a portfolio of established residential properties and use the losses against a salary. That strategy needs to be rethought. But there are still multiple paths to tax-efficient property investment – they just look different than they did a week ago.
Getting this right matters more than it used to
The details here are genuinely complex. Which properties qualify, how losses flow between them, what carry-forward rules apply in your situation, and whether a new build or an alternative strategy makes more sense for you – these are not questions with a single answer.
At LINK, our team across LINK Advisors, LINK Books, LINK Advance, and LINK Wealth work together to make sense of exactly these questions for property investors at every stage. Because the right answer depends entirely on your situation, not the general headlines.
Advice is not what wealthy people use to stay wealthy. It is how smart people become wealthy in the first place
This article is general in nature and does not constitute financial, tax, or legal advice. Your personal circumstances will determine which strategies are appropriate for you. Please consult a qualified adviser before making any investment or structural decisions.