The 2026-27 Budget set the cut-off at 7:30pm AEST on 12 May 2026 (Budget night). Three groups exist after that line, each with different treatment. This post walks each group, then covers the carry-forward rules for established-property purchases made after Budget night and the carve-outs for build-to-rent, super funds and widely-held trusts.
Bucket 1 — property held before 7:30pm 12 May 2026
Existing arrangements are grandfathered. If contract date precedes 7:30pm AEST on 12 May 2026, the current negative-gearing rules continue for as long as the investor holds the property (Treasury fact sheet, Negative Gearing and Capital Gains Tax Reform). Rental losses continue to be deductible against other income — wages, business profit, share dividends — in the normal way.
Practical note: the contract date governs, not settlement. A property under contract before Budget night with a 90-day settlement still sits in this bucket.
Bucket 2 — established property bought after Budget night
From 7:30pm AEST on 12 May 2026, investors buying established residential property cannot deduct rental losses against non-property income. The losses do not disappear. They:
- can still be deducted against income from the same residential investment property (rent received from that property);
- can be deducted against rent from other established residential investment properties the investor holds;
- and any excess is carried forward to future years until used.
What changes is the year-one cash-flow benefit. A PAYG earner buying an established rental who was using the loss to reduce their salary tax no longer gets that — the loss sits in the property bucket and waits for property income to absorb it.
Bucket 3 — new builds bought after Budget night
Eligible new builds continue to attract full negative gearing AND the existing 50% CGT discount (Treasury). The government framed this as a supply-side measure: investor capital steered toward new construction rather than the resale market.
The definition of "new build" was not finalised at Budget night and will be set in the enabling legislation. Industry submissions are pushing for "first sale of newly constructed residential premises" — broadly aligned with the new-residential-premises test under Subdivision 40-65 of the GST Act, which already governs GST treatment of property sales. We will update this post once the technical definition is settled.
Carve-outs
Several investor structures are exempted from the new rules entirely (Treasury fact sheet):
- Build-to-rent developments — reflecting the existing build-to-rent tax concession framework introduced in 2024.
- Widely-held trusts — institutional investors and managed funds remain on existing rules.
- Self-managed and APRA-regulated super funds — super property holdings continue as today.
- Private investors supporting Government Housing programs — the National Rental Affordability Scheme successor and similar.
Interaction with the CGT reform
The negative-gearing reform takes effect 1 July 2027 — the same date as the CGT discount replacement. Both apply to existing investors holding property; the grandfathering on negative gearing is more generous (held before Budget night) than the CGT transitional (split at 1 July 2027), so for residential property investors the negative-gearing rules give you longer-running protection but the CGT change still bites on the eventual sale.
What to do
If you already own investment property
Confirm the contract date is documented and stored with your tax records. The grandfathering depends on it. Bank statements showing the deposit, the conveyancer's file, the front page of the executed contract — any of these establishes the 7:30pm 12 May 2026 cut-off.
If you are mid-purchase
If contract was signed before 7:30pm AEST on 12 May 2026, you fall in bucket 1. If signed after, the property type determines bucket 2 vs 3. Talk to your tax agent about cash-flow modelling under bucket 2 if the property is established — the post-tax cost of holding is materially different.
If you are planning to buy
New-build construction (especially apartments and townhouses in growth corridors) becomes more tax-attractive on a like-for-like basis. The carve-out is a deliberate incentive. Established-property purchases are not impossible — they just lose the year-one wage offset. For high-yielding established stock the negative-gearing benefit was small to begin with; for low-yield growth-corridor established property it is meaningful.
If you own through a discretionary trust
Combine this analysis with the 30% minimum trust tax announced the same night. The interaction matters — carrying property losses inside a trust that now pays a minimum 30% at the trustee level is a different calculation to carrying them in your own name.
Sources
- Treasury fact sheet — Negative Gearing and Capital Gains Tax Reform (budget.gov.au)
- Treasurer's 2026-27 Budget speech (ministers.treasury.gov.au)
- Pitcher Partners technical note — Federal Budget 2026-27: Negative gearing