Negative Gearing Changes Are Now Law: What Property Investors Keep, Lose and Must Decide

The negative gearing reforms announced in the 12 May 2026 Federal Budget have passed Parliament. They are law. If you own an investment property — or you're weighing up buying one in Brisbane's market — the rules that apply to you now depend entirely on three things: when you bought, what you bought, and what you do before 1 July 2027.

Here's the position, without the headlines.

The core change

From 1 July 2027, net rental losses on established residential properties acquired after 7:30pm AEST on 12 May 2026 can no longer be deducted against your salary, business or other income. Those losses are "quarantined" — they can only offset income or capital gains from residential property, and any excess carries forward to future years.

In plain terms: the classic strategy of a high-income earner using a loss-making rental to cut their tax bill is finished for newly purchased established homes.

Who is NOT affected

This is where most of the panic is misplaced. You keep full negative gearing under the old rules if:

• You already owned the property at 7:30pm on 12 May 2026 — grandfathered until you sell it. This includes properties that were under contract but not yet settled at that time.

• You buy an eligible new build — new residential dwellings retain both negative gearing and access to the 50% CGT discount.

• The property is held in a super fund or widely held trust, is a build-to-rent development, or supports government affordable housing programs.

• It's commercial property — offices, warehouses, retail — or any other asset class like shares. The changes are residential-only.

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The transition window everyone should understand

If you bought an established property after 12 May 2026 (or buy one now), you can still negatively gear it until 30 June 2027. From 1 July 2027, the quarantine kicks in. So a purchase settling this spring gets roughly one financial year of the old treatment, then switches. Your cash flow modelling needs to reflect the after-tax holding cost jumping in FY2027-28 — for many geared properties that's thousands of dollars a year of lost deduction against salary.

What it means for Brisbane investors in practice

• Established vs new build is now a tax decision, not just a lifestyle one. A new build keeps negative gearing and a choice of CGT treatments; an established house doesn't. Expect the "new build" definition to be contested at the margins — subdivisions, knock-down rebuilds and substantial renovations will raise genuine eligibility questions. Get advice before assuming a property qualifies.

• Grandfathered properties just became more valuable to hold. Selling a pre-May-2026 property and re-buying resets you into the new regime. The break-even maths on "sell and upgrade" strategies has changed.

• Loss quarantining isn't loss denial. Quarantined losses carry forward and can offset future rental income or residential capital gains — you eventually get the deduction, just later and in a narrower bucket. Positively geared and near-neutral properties are barely affected.

• Commercial property and shares are untouched, which will pull some investor demand sideways. Whether that suits your situation depends on your whole position, not the tax rule alone.

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These changes travel with the CGT reforms

The same legislation replaces the 50% CGT discount with cost-base indexation and a 30% minimum tax on capital gains from 1 July 2027. For property investors the two reforms interact — the decision to hold, sell before July 2027, or restructure needs to be modelled with both rule sets together. We've covered the CGT changes in a separate guide.

What to do now

If you own investment property or are planning a purchase, the questions to work through before 30 June 2027 are: Is my property grandfathered, and what is that grandfathering worth? Does my next purchase need to be a new build to stack up? What does my after-tax cash flow look like under quarantining? And does the CGT changeover date affect my sell/hold timing?

Niloc & Co works with property investors across Brisbane on exactly this modelling. Book a property tax strategy session online or see our tax planning services. Call 0455 355 967.

Frequently asked questions

Is negative gearing abolished?

No. It's restricted. Properties owned before 7:30pm on 12 May 2026 are grandfathered until sold, new builds remain fully eligible, and commercial property is unaffected. The restriction applies to established residential properties purchased after Budget night, with losses quarantined from 1 July 2027.

I bought an established unit in June 2026. Can I still negatively gear it?

Yes, until 30 June 2027. From 1 July 2027 your net rental losses are quarantined — deductible only against residential property income or gains, with unused amounts carried forward.

Do the changes affect my home?

No. Your main residence was never negatively geared, and the main residence CGT exemption is unchanged by the accompanying CGT reforms.

This article is general information only and does not take into account your circumstances. It is not tax, legal or financial advice. Speak to a registered tax agent before acting.