The negative gearing and Capital Gains Tax (CGT) changes were passed through both houses of Parliament on 25 June 2026. Royal assent was given by the Governor General on 26 June 2026, meaning it is now Law. We now expect to receive draft regulations and guidelines from ASIC and the ATO starting in late July 2026. This article will cover some frequently asked questions that we have received.
What are the key changes and key questions we have received
From 1 July 2027, negative gearing will be restricted to new build residential properties. If you own an existing residential investment property as of 7.30pm Tuesday 12 May 2026, this property or properties will be grandfathered. This means that the current rules will apply until the property is sold.
Negative gearing will now be restricted to new build residential properties. A new build property will include residential properties constructed on vacant land and the redevelopment of an existing dwelling, provided the development increases the housing supply. For example, you demolish an existing residence and replace it with a duplex, multiple townhouses or strata-titled apartments.
The person who does the development will qualify for negative gearing, but once the property is sold, it will no longer qualify for negative gearing.
We were asked whether adding additional bedrooms to an established property or constructing an adjacent granny flat would qualify as a new-build residential property. It will not.
We have been asked whether negative gearing is ending. It is not the case.
These negative gearing changes are limited only to residential property. If you wish to negatively gear other asset classes, such as Australian shares, exchange-traded funds or borrowing to purchase commercial or industrial properties, you can still do so. That’s the good news, and this has generally been overlooked.
Another question we have been asked is whether you can negatively gear your principal place of residence that you already owned before budget night. Under the new changes, nothing is stopping you from moving out and renting your house to tenants from 1 July 2027. The six-year rule can also be used, and it hasn’t changed. To find out more, please click here.
Important to note: only the interest on the outstanding original loan balance can be tax-deductible. Any additional borrowings secured against the property are treated as new loans and will be tax-deductible only if the borrowed funds are used to purchase an income-producing asset.
Self-Managed Superannuation Funds can no longer use borrowed funds to purchase residential property. New Limited Recourse Borrowing Arrangements (LRBAs) can be established for the purchase of shares, exchange-traded funds or managed funds.
Please note that we need to see the actual regulations, given that ‘the devil is always in the details’.
We appreciate that all of these changes create complexity. Please feel free to contact Tom or me if you have any questions you wish to cover.