Negative gearing has been part of the Australian property investment playbook for decades. The 2026–27 Federal Budget proposes to change how it works — and if you own an investment property, are mid-purchase, or are thinking about buying one, you’ll want to understand exactly what’s changing and, just as importantly, what isn’t.
A quick refresher: what is negative gearing?
Negative gearing occurs when the costs of owning an investment property — loan interest, rates, maintenance, management fees — are higher than the rent it earns, producing a net rental loss. Under the current rules, you can deduct that loss against your other income, such as your salary, reducing your overall tax bill. It’s this ability to offset losses against wages that has made negatively geared property so popular.
What the Budget proposes
From 1 July 2027, negative gearing for residential property will be limited to new builds. For established (existing) properties bought after 7:30pm on 12 May 2026, investors will only be able to offset rental losses against rental income — not against salary or other personal income. Any excess losses can be carried forward to offset residential property income in future years, but they can no longer reduce the tax on your wages.
In practice, this removes one of the key year-to-year tax benefits of buying an established investment property with borrowed money, for purchases made after Budget night.
The crucial detail: existing investors are grandfathered
If you already own an investment property, this is the line that matters most: properties held at 7:30pm on 12 May 2026 (Budget night) — including those already under contract awaiting settlement — are grandfathered. You can continue to negatively gear them under the current rules until you sell. The changes are not retrospective for existing owners.
This protects investors who made decisions based on the rules as they stood, and it means there is no need to rush to sell simply because of the announcement.
So — should you still buy an investment property?
The honest answer is that it depends entirely on your situation and the type of property. A few principles help frame the decision:
- If you’re considering a new build, negative gearing (and the 50% CGT discount) remains available, so the tax treatment is largely unchanged for eligible new properties.
- If you’re considering an established property bought after Budget night, you should run the numbers without assuming you can offset losses against your salary. The investment needs to stack up more on its own merits — rental yield, location, capital growth prospects — than on the tax deduction.
- If property never made sense purely as a tax play for you, very little changes — a good investment should work on fundamentals, with tax treatment as a secondary consideration.
It’s also worth remembering these measures are proposed and not yet law, and the start date of 1 July 2027 gives prospective investors time to plan.
Bringing lending and advice together
Decisions like this sit right at the intersection of borrowing and financial planning — which is exactly where having both under one roof helps. The right loan structure, a realistic view of cash flow if losses can no longer offset wages, and a clear sense of how the property fits your long-term goals all need to line up.
At SMI Financial Solutions, our financial planning and mortgage broking teams work together to help you decide not just whether you can buy an investment property, but whether you should — under the rules as they’re proposed to become.
Want to know what the 2026–27 Budget means for your situation?
Book a consult call with the SMI Financial Solutions team on 1300 222 484 or at smifinancialsolutions.com.au
Important information
This article is general in nature and has been prepared without taking into account your objectives, financial situation or needs. It does not constitute financial, taxation or legal advice. The Budget measures referred to (including the proposed capital gains tax, negative gearing and discretionary trust changes) were announced in the 2026–27 Federal Budget and, at the time of writing, are proposed and not yet law; details may change before or if they are legislated. Before acting on any information, you should consider its appropriateness having regard to your own circumstances and seek advice from a qualified professional. SMI Financial Solutions Pty Ltd ABN 92 154 155 307 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049, AFSL 236523. Christopher Smith (478941) and SMI Financial Solutions Pty Ltd (418006) are authorised to provide credit services with Connective Broker Services ACN 161 731 111, ACL 384324. Infocus is not liable for any credit services provided by either entity. Your full financial situation will need to be reviewed prior to acceptance of any offer or product.