Housing affordability and supply are at the forefront of the 2026–27 Federal Budget. In a major policy shift, the government is moving to redirect the benefits of negative gearing toward increasing Australia’s housing stock.
- Negative Gearing Restricted to Newly Constructed Dwellings
The government is changing the “why” behind property tax deductions.
– The News: From 1 July 2027, the ability to offset rental losses against your salary and wage income (negative gearing) will be restricted to newly constructed dwellings.
– The Objective: This move is designed to ensure that the tax benefits of negative gearing are directed specifically toward investment that increases the overall housing supply.
– The EMspire Tip: This creates a significant incentive for investors to look at “new builds” rather than existing homes for their next purchase.
- Treatment of Established Residential Property Losses
The rules for established houses (bought after the budget) are becoming more restrictive.
– The News: For established properties purchased from 1 July 2027, losses will no longer be deductible against your salary.
– The Impact: These losses can only be offset against other rental income or capital gains from residential properties. Any “excess” losses must be carried forward to be used against property income in future years.
- Grandfathering for Currently Owned Properties
If you already own an investment property, you can breathe a sigh of relief.
– The News: There will be no restrictions affecting investment properties owned at the time of the Budget (7:30 pm on 12 May 2026).
– The Benefit: These currently owned properties will retain their existing negative gearing benefits until they are sold.
A Heads-Up for Super Funds and Trusts Properties held in widely held trusts and complying superannuation funds (including SMSFs) are broadly exempt from these new negative gearing restrictions. There are also targeted exemptions for “build-to-rent” developments that support government housing programs.
The team at EMspire Advisory are trusted, qualified Chartered Accountants, tax agents, and small business accountants. We work closely with our clients to achieve the best possible outcomes. To find out more, please contact us!
Please note that this information is not specific and is general in nature and cannot be relied on as advice. Please contact us for advice specific to you and your circumstances.