Rentvesting guide
Rentvesting and negative gearing in 2026
The short answer
From 1 July 2027, net rental losses on established homes bought after 7:30pm AEST on 12 May 2026 can't offset salary. They're quarantined and carried forward. New residential dwellings remain eligible for negative gearing, subject to legislation before Parliament. Properties held before Budget night are grandfathered. For rentvestors, new versus established now matters.
Negative gearing has always been part of the rentvesting conversation. The 2026 changes split it in two: established homes bought after Budget night lose it against salary from 1 July 2027, and new residential dwellings keep it, subject to legislation before Parliament. This page explains how it works now, as at 6 November 2026.
It’s general information, not tax advice. A registered tax agent can explain how it applies to you.
How negative gearing works
A rental property earns rent. It also has costs:
- loan interest
- council rates, water, insurance
- property management fees
- repairs
- depreciation on the building and fittings
- borrowing expenses such as LMI, spread over five years
When the deductible costs are more than the rent, the property makes a net rental loss. If that loss can be offset against other income, such as salary, your taxable income falls, and so does your tax.
The tax saved is the loss multiplied by your marginal rate. For 2026-27, the rates are 0%, 15%, 30%, 37% and 45%, with thresholds at $18,200, $45,000, $135,000 and $190,000, plus the 2% Medicare levy. The 15% rate falls to 14% from 1 July 2027 (ATO).
One point that’s easy to miss: negative gearing reduces a loss, it never removes it. Someone on 30% plus Medicare still bears about 68 cents of every dollar of loss.
What the 2026 law says
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed Parliament on 25 June 2026, putting into law changes announced in the 12 May 2026 Budget (ABC News; Pitcher Partners; Baker McKenzie).
Negative gearing
| Situation | Treatment |
|---|---|
| Residential property held before 7:30pm AEST 12 May 2026 | Grandfathered |
| Established dwelling acquired after that time | From 1 July 2027, net rental losses can’t offset salary; quarantined to residential property income and gains, carried forward |
| New residential dwelling acquired after that time | Remains eligible for negative gearing, subject to legislation before Parliament |
Capital gains tax
| Situation | Treatment from 1 July 2027 |
|---|---|
| Most assets | 50% CGT discount replaced by indexation plus a 30% minimum tax |
| New dwellings | Owner can choose the 50% discount instead |
How the CGT changes apply to assets held before the change depends on transitional rules. A registered tax agent can explain them.
What “new residential dwelling” means, and why it’s not settled
The Act that passed in June doesn’t contain the full definition. That’s in the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, before Parliament. The Senate Economics Committee is due to report on 13 November 2026.
The exposure draft covers a dwelling newly built on vacant land. The grey areas, such as off-the-plan purchases, knockdown-rebuilds, substantial renovations and properties that have been lived in briefly, depend on the final wording.
Until it passes, everything about new dwellings is subject to legislation before Parliament. We don’t say any specific property qualifies, and nobody can until the law is settled.
Why this matters for rentvestors
Rentvesting usually means the investment runs at a loss for some years, at least before tax. The tax treatment of that loss changes the after-tax holding cost.
| New residential dwelling (subject to legislation) | Established dwelling bought after 12 May 2026 | |
|---|---|---|
| Loss offsets salary from 1 July 2027 | Yes | No, quarantined and carried forward |
| Depreciation | Generally higher (Division 43 and Division 40) | Generally lower; no Division 40 on previously used plant bought after 9 May 2017 |
| CGT from 1 July 2027 | Choice of 50% discount | Indexation plus 30% minimum tax |
| Holding cost after tax | Reduced by tax effect at marginal rate | Not reduced in the year, for salary earners |
This is why house and land and other new builds have become the focus of most rentvesting discussions in 2026. See new build rentvesting.
Negative gearing on new builds: what to keep in mind
- The price still matters. A tax effect doesn’t make an overpriced property a good investment. Compare against an independent valuation.
- New estates can have competing supply. Many similar homes finishing at once can mean more vacancy and lower rents.
- Builders have to deliver. Construction delays push back the first rent.
- The definition can change. It’s before Parliament.
- Values can fall. National values were 6.7% below the March 2026 peak in October 2026 (Cotality).
How finance interacts
With 100% of the purchase price plus LMI, the whole price is borrowed, so the interest, and therefore the deductible loss, is bigger. LMI is generally a borrowing expense deductible over five years. That makes negative gearing do more of the work, but it also means a bigger loan and more exposure if values fall.
Questions for a registered tax agent
- Would this property be a new residential dwelling under the Bill as drafted?
- What happens if the definition changes before it passes?
- How would losses be treated for me in 2026-27, and from 2027-28?
- How do the CGT options compare for a new dwelling over my likely holding period?
- How do the changes affect a property I already own?
See the changes explained live
For a walk-through of how negative gearing now works for new and established properties, join a free WPF GO webinar with Peter Khoury. General information only, not tax advice.
Frequently asked questions
What is negative gearing?
An investment is negatively geared when its deductible costs, such as interest, rates, fees and depreciation, are more than the income it earns. The result is a net loss for tax purposes. Under the rules that apply to it, that loss may be offset against other income, such as salary, reducing tax at your marginal rate.
Can I still negatively gear a new build?
New residential dwellings remain eligible for negative gearing under the 2026 changes. The legal definition of a new residential dwelling is in the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, which is before Parliament, so it is subject to that legislation. No one can confirm a specific property qualifies until the law passes.
What happens to losses on an established property bought after Budget night?
From 1 July 2027, net rental losses are quarantined. They can be used against residential property income and capital gains, and unused losses are carried forward to later years. They can't reduce tax on salary in the year they occur.
Is my existing investment property affected?
Residential property held before 7:30pm AEST on 12 May 2026 is grandfathered for negative gearing. A registered tax agent can confirm how both the negative gearing and CGT changes apply to a property you already own.
When does the definition of new dwelling become law?
It depends on Parliament. The Senate Economics Committee is due to report on the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 on 13 November 2026. The Bill could be passed, amended or delayed after that. This page will be updated when it changes.