Is Negative Gearing Being Removed in Australia? The 2026-2027 Answer

The question "is negative gearing being removed in Australia?" has been one of the most searched property investment queries since the 2025 federal election campaign. The short answer: negative gearing has not been abolished. It has been restricted for new residential investment property purchases from a specific budget cutoff date. For existing investors and grandfathered properties, nothing has changed. This article gives you the definitive 2026-2027 answer — exactly what changed, what did not, and what it means for you.

Negative gearing — the ability to deduct rental property losses against your assessable income — still exists in Australia in 2026-2027. It has not been abolished, repealed, or removed. What the 2026 federal budget did was quarantine negative gearing losses for new residential investment property purchases made after a specific cutoff date. This is a significant but targeted change — not the wholesale abolition that was debated in previous elections.

If you own investment property purchased before the 2026 budget cutoff: nothing has changed for you. Your negative gearing operates exactly as it always has, and it will continue to do so for as long as you hold that property.

For residential investment properties where contracts were exchanged after the 2026 budget cutoff date, rental losses are quarantined. This means:

Under the old rules (and still for grandfathered properties):
If your property generates a $25,000 annual rental loss, that $25,000 immediately offsets your salary income — reducing your taxable income and generating a tax refund in the same financial year.

Under the new rules (post-cutoff new purchases):
The $25,000 rental loss cannot immediately offset your salary income. Instead, it is quarantined — it accumulates and can only be applied against:
Future positive rental income from the same property (when rents rise above costs as the property matures), or
The capital gain when the property is eventually sold.

The losses are NOT lost. They are deferred. Every dollar of quarantined loss will eventually reduce your taxable income — either through future rental profits or reduced CGT on exit. The timing of the tax benefit changes, not the total lifetime benefit.

Grandfathered properties: Every residential investment property purchased before the cutoff date retains the full, immediate negative gearing offset against salary — permanently and indefinitely. There is no sunset clause, no phase-out, and no future review date that removes grandfathered status. If you bought before the cutoff, your negative gearing works as it always has.

Commercial property: The quarantining applies to residential investment property. Commercial property investors are not affected by the residential negative gearing changes.

SMSF properties: The quarantining rules apply to individual taxpayers. Property held inside an SMSF is governed by superannuation tax rules — 15% on rental income in accumulation, 0% in pension phase — not the personal income tax framework that created the quarantine. SMSF property is unaffected.

The ability to claim losses at all: The losses still exist and are still claimable — just not immediately against salary for new post-cutoff purchases. The fundamental principle of deducting property investment costs against property investment income remains intact.

This question is impossible to answer with certainty — it depends on future government policy. What history shows is that every time wholesale abolition of negative gearing has been proposed in Australia, it has faced significant political resistance and has not been legislated. The 2019 Labor policy to abolish negative gearing for new purchases was a key factor in that election result. The 2026 budget chose a middle path — quarantining rather than abolishing — which reflects the political sensitivity of the issue.

The more important observation for investors: the 2026 change quarantines losses for new purchases but fully grandfathers existing holdings. If the government wanted to remove negative gearing entirely, they would need to deal with the political and economic consequences of removing it from properties already purchased in reliance on it — which is a significantly higher political hurdle than applying changes only to new purchases going forward.

For current investors: your best protection against future policy changes is to hold grandfathered properties and structure new purchases in ways that do not depend entirely on the immediate negative gearing benefit — for example, through an SMSF.

For grandfathered properties: unambiguously yes, exactly as before.

For new post-cutoff residential purchases: it depends on your income level and cash flow capacity. The quarantine changes the cash flow profile of the investment — you lose the immediate monthly tax benefit (the PAYG Withholding Variation that returns the negative gearing benefit throughout the year) but retain the total lifetime tax benefit of the losses. The investment case does not disappear — it changes shape. A high-income investor with strong cash flow who is buying a growth market property for a 15-20 year hold can still build significant wealth from a post-cutoff property. A lower-income investor relying on the immediate monthly tax refund to make the holding costs affordable needs to reassess the cash flow position carefully.

For a detailed analysis by investor scenario: negative gearing in 2026: is it still worth it? For the full changes guide: negative gearing changes 2026: what the budget actually means.

No. Negative gearing has not been scrapped. It has been quarantined for new residential investment property purchases made after the 2026 budget cutoff date. Existing properties are fully grandfathered and continue to receive the immediate salary offset benefit.

The 2026 federal budget quarantined negative gearing losses for new residential investment property purchases. This is different from removing negative gearing — the losses are deferred, not eliminated. Previous Labor policies proposed abolishing negative gearing for new purchases entirely; the 2026 change takes a different approach of quarantining rather than abolishing.

No. If you purchased your investment property before the 2026 budget cutoff date, your negative gearing is fully grandfathered. Nothing changes for you. You continue to receive the immediate salary offset on rental losses for as long as you hold the property.

Quarantined losses accumulated during ownership are applied against the capital gain when you sell the property. This reduces the taxable capital gain at exit. The losses are not lost — they are deferred to the point of sale. If the property has no capital gain at sale (unlikely for a long-held growth market property), unused losses can be carried forward and applied against other capital gains in future years.

There are no legislated changes to negative gearing scheduled for FY2027 beyond what was introduced in the 2026 budget. The quarantine rules for post-cutoff properties are now law. Further changes would require new legislation. For the most current information, the ATO guidance is at ato.gov.au/negative-gearing.

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Disclaimer: General information only, not financial or tax advice. Tax laws change and the information above reflects the position as at June 2026. Always verify current rules with the ATO or a qualified tax adviser. Australian Retirement Office does not hold an AFSL.

Related: Negative Gearing: Complete Guide | Is Negative Gearing Still Worth It? | Negative Gearing Changes 2026 | Investment Property Tax: Complete Guide | Property Investment: Complete Guide