On 12 May 2026, Canberra gave negative gearing an end date. Not for everyone. If you owned your investment property before budget night, almost nothing changes; if you plan to buy, the rules now steer what you buy, and 1 July 2027 sets the clock.
The take: these negative gearing changes reward investors who move deliberately over the next twelve months, and they punish two groups, panic sellers and buyers who sign contracts without checking which side of the new rules they'll land on. For a typical geared investor, the difference between the considered move and the reflexive one runs to five figures. Deciding what to do before 2027 starts with knowing which of three positions you're in: grandfathered owner, intending buyer, or would-be seller.
All of this lands in a rising-rate market. The cash rate sits at 4.35% after RBA hikes in February, March and May 2026, and the next decision comes on 11 August 2026. Auction clearance rates are running in the low 40s (Cotality, June 2026). Fewer bidders, softer competition, more room to negotiate. An uncomfortable market is usually the best one to prepare in, because the crowd stays home.
What changed on 12 May 2026?
Two things, both now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.
Negative gearing against wages narrows to new builds. Buy an established property after 7:30pm AEST on 12 May 2026 and, from 1 July 2027, its rental losses can no longer be deducted against your salary. The losses aren't destroyed; they're quarantined. They carry forward instead, still deductible against your residential property income, including future rental profits and, ultimately, gains when you sell. In plain cash-flow terms: a $10,000 rental loss that once came back as $3,900 in the tax return of a borrower on a 39% marginal rate now sits on ice until the property starts making money. Buy or build a brand-new dwelling and full negative gearing stays, whenever you purchase. Anything you already held before budget night keeps full negative gearing against your wages.
The 50% CGT discount retires on 1 July 2027. From that date, cost-base indexation plus a 30% minimum tax on gains replaces the old discount. Three protections matter. Gains built up before 1 July 2027 keep the 50% discount under the transition rules, while growth after that date on the same asset moves to indexation plus the 30% minimum, grandfathered or not. Super funds keep their discount. And the family home remains exempt, untouched.
| Your situation | Negative gearing from 1 July 2027 | Capital gains treatment |
|---|---|---|
| Established property owned before 7:30pm AEST 12 May 2026 | Negative gearing fully grandfathered: losses keep offsetting your wages | Gains accrued to 30 June 2027 keep the 50% discount; later growth moves to indexation plus the 30% minimum |
| Established property bought after 12 May 2026 | Losses quarantined: carried forward against property income and gains, not deducted against salary | Same transition: pre-July-2027 gains keep the discount |
| New build, purchased any time | Full negative gearing retained | Same transition rules apply |
| Your own home | Not applicable | Still fully exempt |
Note the shape of that table. Nobody's existing tax position was torn up overnight; the reform works on future purchases and future growth. That design is exactly why the smartest responses are quiet ones, not fire sales.
If the mechanics of gearing itself are new to you, start with our plain-English guide to how negative gearing works, then come back. The rest of this piece is about what to do.
Already own? You're holding a licence they've stopped issuing
Grandfathering is the most under-appreciated line in the whole reform. Own an established rental acquired before budget night and its losses keep offsetting your wages after 1 July 2027, the same way they do today, with no end date attached to that status in the legislation.
The instinct sweeping through investor forums is to sell before the rules bite. For grandfathered owners, the maths mostly runs the other way.
Think the chain through. Post-budget buyers of established homes lose the salary offset, so investor demand for established stock thins. Fewer competing landlords, in a market where national vacancy already sits at 1.6% and rents rose 5.9% over the year to June 2026 (Cotality), tightens the rental side further. Meanwhile your property carries a tax treatment no new buyer of established stock can get. Sell it, and that status dies with the sale. Buy back in later and you're under the new rules like any other post-budget purchaser. A grandfathered property is a licence they've stopped issuing, and it stays yours only while you hold.
A question we hear weekly: does refinancing break grandfathering? Changing your loan doesn't change when you acquired the property. Interest deductibility follows the purpose of the borrowing, though, so any restructure, top-up or equity release should be mapped with your accountant before you sign, not after.
Holding doesn't mean idling, either. The equity in a grandfathered property can still be put to work, and for owner-occupiers with a mortgage and investment ambitions, debt recycling remains one of the cleaner structures when it's set up properly alongside your accountant.
Should you sell before 1 July 2027?
For most investors, no. The fear behind the question is that the 50% CGT discount vanishes for gains you've already made. It doesn't. Under the transition arrangements, growth accrued before 1 July 2027 keeps the discount; the indexation-plus-minimum-tax regime applies to growth after that date. In dollar terms, if $300,000 of your gain built up before the deadline, the discount on that slice is designed to be preserved whether you sell in August 2027 or in 2032. Only the growth that comes afterwards falls under the new regime. How the pre- and post-2027 split gets measured on your specific property, and how contract versus settlement dates interact with the deadline, are questions for your accountant. Ask them early. Those conversations get harder to book as June 2027 approaches.
Now run the second-order logic on panic selling. If thousands of mum and dad investors list before mid-2027 to "beat the deadline", that supply lands in a market already clearing in the low 40s at auction, where Sydney values fell 3.2% over the June quarter as it is (Cotality). More listings into thin demand means softer sale prices. The upshot: the tax a panicked seller feared losing gets lost on the price instead, sometimes several times over. Don't sell into fear.
Selling before the transition can still be rational in narrower cases. You were exiting within a year or two anyway. Your expected growth sits heavily past 2027 and the 30% minimum tax on gains reshapes your numbers. Or the property has underperformed for years and the reform is the prompt you finally needed. Those are modelling questions, not vibes. Our full breakdown of the CGT and negative gearing reforms walks through the mechanics, and your accountant turns them into your numbers. Wity arranges the lending side, not the tax side.
Buying now? New builds carry a double advantage
Intending investors face the sharpest choice, and Canberra has quietly stacked the deck. New builds keep full negative gearing. They're also exempt from APRA's debt-to-income caps, live since 1 February 2026, which limit each lender to writing no more than 20% of new investor loans at six times income or above. One asset class, two carve-outs: Treasury steers the tax treatment toward new stock, and APRA steers the credit toward it too.
Follow that forward. Investor demand funnels into new builds, so competition for off-the-plan, townhouse and house-and-land stock likely rises through 2027, particularly in growth cities. Brisbane's median hit $1.118 million in June 2026 after 17.4% annual growth, and Perth ran hotter still at 23.9% (Cotality). Established stock loses its investor tailwind at the same time. That can mean sharper buying, if your numbers don't rely on the salary offset. A near-neutral or positively geared established property gives up little under the new rules, because carried-forward losses are deferred, not destroyed.
One observation from inside the lending process: credit settings move quietly. We've seen a borrower's capacity drop by $90,000 between two applications six months apart, with nothing changed on their side, purely because assessment benchmarks shifted in between. If your borrowing power was last checked before the DTI caps and the 2026 rate rises, that figure is history. The Wity Borrowing Power Assessment models your capacity across 45+ lenders under today's settings, including which lenders still have DTI headroom for investors and how the new-build exemption moves your ceiling.
Worked example: same investor, two paths
Anika is a 34-year-old Brisbane project manager on $145,000, holding a $135,000 deposit plus costs, weighing two purchases in early spring 2026.
Path A, an established unit in Annerley for $820,000. Settling in October 2026, it runs at roughly a $12,000 annual loss after rent, interest and expenses. She still deducts that loss against her salary for 2026-27. From 1 July 2027 the offset stops: at her 39% marginal rate including the Medicare levy, about $4,680 a year in tax-time cash flow is carried forward instead of refunded, waiting until the property turns a profit or is sold.
Path B, a new townhouse in Everton Park for $835,000. A similar $12,000 annual loss, but the salary deduction continues past July 2027, keeping that $4,680 a year in her pocket. Her construction-adjacent loan also sits outside the DTI cap bucket, so more lenders can take her file.
The gap: around $23,400 in retained cash flow over five years, plus wider lender choice, weighed against Path A's sharper negotiating position in a thinner established market. Neither answer is wrong. Signing a contract without knowing which trade-off you're making is.
Based on typical scenarios. Individual outcomes vary.
On the deposit side, investors get an unusual leg-up through Wity. LMI waivers on investment lending are rare from mainstream lenders, but under specialist lending policies available through Wity, any borrower can go to 85% LVR with no LMI, keeping roughly $10,000 to $13,000 on a loan around Anika's size. If this would be your first purchase, our first investment property guide covers the full sequence, and Wity handles the structuring →.
Negative gearing changed. What should you do before 1 July 2027?
Five moves, in order.
- Confirm your status. Establish whether each property you own was acquired before 7:30pm AEST on 12 May 2026. Grandfathered holdings keep full gearing. Document it, and weigh it before any sale, because the status doesn't transfer and doesn't come back.
- Resist the deadline sell. Pre-July-2027 gains keep the 50% discount under the transition rules. Model a sale against holding with your accountant before a "beat the deadline" listing costs you more in price than it saves in tax.
- Pick your lane for the next purchase. A new build keeps the salary offset and sits outside the DTI caps; an established property may buy better in a thinner market if your cash flow doesn't depend on the offset. Decide on numbers, not headlines.
- Re-test your borrowing power under 2026 settings. Three rate hikes, live DTI caps and APRA's 3% serviceability buffer mean any capacity figure from 2025 is out of date, sometimes badly.
- Use the quiet market. Clearance rates in the low 40s and hesitant buyers make this a negotiating window, and it won't survive the first cutting cycle, whenever the RBA delivers it.
The transition locks in on 1 July 2027 — and the preparation that pays happens in the twelve months before it, not the twelve weeks. Book a strategy session → and we'll map your grandfathering position, your capacity under the new caps, and your buy, hold or sell options across 45+ lenders. Prefer to start smaller? Start the Wity questionnaire → — free, no credit check, two minutes.