From the 2027-28 income year, negative gearing for residential property will generally be limited to qualifying new builds and investments protected by the grandfathering rules. For an established residential property acquired after the cut-off, a rental loss will no longer generally reduce broader income such as salary in the same year.

The loss is not simply erased. The legislation establishes a reform for quarantining and carrying it forward so it can be applied against residential property income, including relevant gains, subject to the operative rules.

The practical change is timing: a tax benefit that may previously have supported annual household cash flow could arrive later, or in a different form.

That is why old calculations should not be reused without review. A property can have the same price, rent and loan while producing a materially different household cash-flow result.

The legislation protects eligible ownership interests acquired before 7:30 pm AEST on 12 May 2026. Where a property is acquired under a contract, the relevant ownership interest is treated as beginning when the contract is entered into.

This means settlement date alone does not determine whether an investment is grandfathered.

Contracts, options, nominations, changes in ownership and other non-standard arrangements can raise additional questions. Eligibility should be confirmed with an appropriate tax professional rather than inferred from the settlement date.

Under the new reform, excess deductions for an affected residential investment generally cannot be used to reduce salary or other unrelated income for that year. Instead, the quarantined amount may be applied within the residential property reform and carried forward if it is not fully used.

That distinction matters because the annual shortfall must still be funded. Interest, insurance, maintenance, council rates, land tax where applicable, property management costs and periods without a tenant continue to affect cash flow regardless of when a tax benefit becomes available.

The legislation establishes how quarantined losses are carried forward and applied. Further supporting detail and specific circumstances should still be checked through current professional advice.

The policy deliberately favours investment that adds to housing supply. The latest exposure draft proposes that a property will generally qualify as new where it genuinely adds to supply and is acquired within 24 months of a certificate of occupancy.

That definition remains proposed. It also does not turn every qualifying property into a suitable investment.

A new build may offer different depreciation, maintenance and tax characteristics. An established property may offer a different location, land component, rental history, purchase price or growth profile. Neither should be selected by label alone.

Tax treatment is one input. Yield, growth potential, ownership costs, location, construction quality and household resilience still determine whether the strategy can stand on its own.

From 1 July 2027, the 50% capital gains tax discount for relevant individuals, trusts and partnerships is replaced by cost-base indexation combined with a 30% minimum tax rate on real capital gains.

Indexation adjusts the cost base for inflation so the reform taxes the real gain rather than the nominal gain. The change is prospective: gains accrued before 1 July 2027 retain the previous treatment, while the new reform applies to gains accruing after that date.

Investors in qualifying new builds may be able to choose between the 50% discount and the new indexation-and-minimum-tax approach. The better outcome will depend on the asset, holding period, inflation, ownership structure and the investor’s circumstances at sale.

Borrowing capacity answers whether a lender may approve the transaction. It does not answer whether the investment will remain comfortable to hold, whether the ownership structure is appropriate, or whether the strategy supports the client’s broader financial position.

These reforms increase the distance between what someone can borrow and what they can sustainably afford to hold.

This is where coordinated advice matters. Ryker can work alongside the client’s mortgage broker and tax professional so the lending decision is tested against the client’s household cash flow and broader strategy, while the broker remains connected to the client journey and future lending needs.

Before proceeding with an investment property, test the assumptions that sit underneath the decision.