Negative gearing changes 2027: what they mean for your investment property loan

22 July 2026 · Investment property lending · 7 min read

If you own an investment property, or you're weighing up buying one, you've probably noticed the market shifting under your feet on two fronts at once. Australia's Cotality Home Value Index fell 0.4% month over month in June 2026, marking the steepest monthly decline in three and a half years, as higher borrowing costs weighed on affordability and a tax crackdown on investment properties dampened buyer demand. Among the major capitals, Sydney and Melbourne recorded the largest declines, with home values falling 1.2% and 1.0%, respectively, even though Australian home prices remained 7.3% higher than a year earlier in June. Meanwhile the Reserve Bank has kept its powder dry — at its most recent meeting the Board decided to leave the cash rate target unchanged at 4.35 per cent, a pause following three straight rate rises in 2026, with the next decision due at 2.30 pm, 11 August 2026.

The "tax crackdown" isn't a rumour — it's the negative gearing and capital gains tax reform announced in the Federal Budget. On 12 May 2026, as part of the 2026–27 Federal Budget, the Government announced it would reform negative gearing and capital gains tax (CGT) arrangements, and these measures are now law. For anyone with an existing loan on a rental property, or anyone thinking about taking one out, it's worth understanding exactly what changed and what didn't.

What actually changes, and when

Negative gearing for established residential properties will be abolished from 1 July 2027 for properties purchased after 7:30pm on 12 May 2026. In practice, investors affected by the changes will no longer be able to offset rental losses against salary or other personal income, and instead losses can only be offset against residential rental income or future capital gains from rental properties. New builds are treated differently: eligible new builds will remain exempt, with investors still able to access both negative gearing and the 50% CGT discount.

If you already own an investment property, the transition rules matter more than the headline. Properties held at announcement (7:30pm AEST 12 May 2026) will be exempt from the negative gearing changes, while the CGT reforms will only apply to gains that accrue after 1 July 2027. Properties that are currently held as at 7:30pm on 12 May 2026, including those under contract awaiting settlement, can continue to be negatively geared until they are sold, protecting investors who made decisions based on the current legislation. There are also carve-outs beyond the grandfathering date: properties in widely held trusts and superannuation funds are exempt from these changes, in addition to targeted exemptions for build-to-rent developments and private investors supporting Government Housing programs.

Why this matters for your loan, not just your tax return

None of this changes how a lender calculates your borrowing capacity today — grandfathered properties keep their current tax treatment for as long as you hold them. But it does change the maths on anything you buy new from 1 July 2027 onward. An established rental property bought after that date will generally need to stand on its own cash flow, because losses can no longer be used to reduce your salary income — they carry forward against future rental income or capital gains instead. That's a meaningfully different serviceability picture to run past a broker before you sign a contract, particularly if you were relying on a negative gearing tax refund to help cover repayments.

Illustrative example: Imagine two investors, each looking at a $650,000 established unit in late 2027. Investor A already owns a similar property purchased before Budget night in May 2026, so continues to negatively gear it as before. Investor B is buying fresh in 2028 — because the unit is an established dwelling, not a new build, any rental loss can't offset their salary; it can only be carried forward against rental income or a future capital gain. Investor B might instead consider a new-build apartment or house-and-land package, where negative gearing and the CGT discount remain available. This is a simplified illustration only — every investor's tax and lending position depends on their own circumstances, and a broker or accountant can walk through the real numbers.

Falling values, held rates: a different kind of buying window

The combination of softer capital city prices and a rate hold creates a genuinely different environment to the one investors saw through 2025. Buyers with steady serviceability may find more room to negotiate in Sydney and Melbourne specifically, while the new-build exemption is likely to keep steering investor demand toward off-the-plan and construction lending over established stock. If you're carrying an investment loan taken out before the recent hikes, this is also a sensible moment to check whether your current rate and structure still make sense — our guide to the 2026 fixed-rate cliff covers what to do if a fixed term is expiring soon, and our look at falling home values has more on what softer prices mean more broadly.

Common questions

Does the negative gearing change affect a property I already own?
No. Properties held at 7:30pm on 12 May 2026, including those under contract awaiting settlement, are grandfathered and can continue to be negatively geared for as long as you own them, under the rules announced in the Budget.

Can I still negatively gear a new investment property purchase?
It depends on the property type. Established homes bought after 1 July 2027 generally lose access to offsetting rental losses against salary income, while eligible new builds remain exempt and keep both negative gearing and the CGT discount.

Will this change how much a lender says I can borrow?
Lenders assess serviceability based on actual income and expenses, so a change to tax treatment can affect the after-tax cash flow you're relying on — worth discussing with a broker before you commit to a purchase contract, especially for established property bought after the cut-off.

Is now a good time to refinance an investment loan?
There's no one-size-fits-all answer — it depends on your current rate, loan structure and whether your fixed term is expiring. A broker can review your situation against current lender policies and help you weigh up whether refinancing suits your circumstances.

Our refinance home loan hub has more detail on reviewing an existing investment property loan, and you can get a starting estimate of your borrowing position using our calculators before you speak with a broker.

General information only — not credit advice. Credit assistance is provided by a licensed mortgage broker.