From 1 July 2027, negative gearing on residential property is limited to new builds. The change is already law. Properties held before 7:30pm AEST on 12 May 2026 are exempt and keep their current treatment. Losses that can no longer be offset against salary are quarantined against rental income and carried forward.
Last reviewed 10 September 2026.
What is settled
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 got Royal Assent on 26 June 2026. Schedule 2 is titled "Limit negative gearing for residential property to new builds". The ATO now says plainly that these measures are law.
Start date
1 July 2027.
Acquisition trigger
After 7:30pm AEST, 12 May 2026, which was Budget night.
If you owned it before then
Exempt. Grandfathered, in the ATO's wording.
Losses you can no longer offset
Quarantined to residential rental income, with the excess carried forward.
This financial year
Unchanged. Interest is still deductible as normal.
What nobody can tell you yet
The Act limits the offset to new builds. Treasury's consultation on how to define a new residential dwelling closed on 21 August 2026, and its draft test is a property that genuinely adds to housing supply, acquired within 24 months of a certificate of occupancy. The final definition goes in the primary legislation.
The principle is law. The detail that decides whether a particular property qualifies is not. If someone is telling you today exactly which properties will be exempt, they are ahead of the evidence.
How properties are treated when they transfer after a death or a relationship breakdown is also still an exposure draft rather than law.
Are you affected?
You bought before 7:30pm on 12 May 2026
No change. You are grandfathered. Confirm the acquisition date with your accountant, because that is what the exemption hangs on.
You are buying an established property now
You have until 1 July 2027 before the limits apply. The risk to weigh is what your holding costs look like after that, not before.
You are looking at a new build
New builds are the category the Act carves out, which does make them structurally more attractive from 2027. It is not yet a guarantee that a given property qualifies.
Common questions
Yes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. Schedule 2 limits negative gearing for residential property to new builds. The ATO describes the measures as law. The limits start on 1 July 2027.
1 July 2027. The purchases affected are those made after 7:30pm AEST on 12 May 2026, which was Budget night.
No. Properties held at 7:30pm AEST on 12 May 2026 are exempt. The ATO refers to this as grandfathering. Confirm your exact acquisition date with your accountant, because that date is what the exemption turns on.
The Act limits the offset to new builds, so new builds are the carved-out category. Treasury's consultation on defining a new residential dwelling closed on 21 August 2026. Its draft materials treat a property as new where it genuinely adds to housing supply and was acquired within 24 months of a certificate of occupancy being issued, extended from the 12 months announced in the Budget. That test is still draft, and Treasury has said the final definition and exemptions will be set in the primary legislation, so a specific property cannot be confirmed against it yet.
Yes. The ATO's guidance on rental interest expenses was last updated on 21 May 2026 and is unchanged. Nothing about the current financial year is affected.
It is quarantined against your residential rental income rather than your salary, and any excess carries forward to later years.
Where to next
- What negative gearing is, with a worked example/blog/what-is-negative-gearing-in-australia
- Model what a property would cost you to hold/investment-property-calculator
- New build investment property in Queensland/new-build-investment-property-queensland
- Current investment opportunities/investment-opportunities
General information only. It doesn't take account of your circumstances and it isn't tax, financial or legal advice. Tax treatment depends on your own situation and the law can change. Talk to a registered tax agent before acting. Sources: the ATO, Treasury and the Federal Register of Legislation, checked 5 August 2026.