Negative Gearing Australia — How It Works in 2025–26
Plain English guide to negative gearing in Australia. How it works, what you can deduct, the tax benefit, and the legislated 2027 changes to new vs established properties.
Frequently Asked Questions
What is negative gearing in Australia?
Negative gearing occurs when the costs of owning an investment property (interest, rates, depreciation, repairs, etc.) exceed the rental income it earns. The net loss can be deducted against your other income — typically your salary — reducing the tax you pay.
How much tax do you save with negative gearing?
The tax saving depends on your marginal tax rate. For example, if your property makes a $10,000 loss and your marginal rate is 37%, you save $3,700 in tax. Higher income earners get a larger tax benefit because their marginal rate is higher.
Is negative gearing changing in Australia?
Yes — Parliament has legislated changes, but they do not start until 1 July 2027 (the 2027-28 income year) and they do not affect the return you lodge now. From 1 July 2027, if you buy an established residential property after 7:30pm AEST on 12 May 2026 (Budget night), your rental losses can only be offset against other residential property income — rent from other residential properties, or capital gains on residential property — not against your salary, wages or business income. Any unused loss is carried forward to future years. New builds are exempt and keep full negative gearing, and commercial property and shares are unaffected. The definition of a "new build" and some finer details are still being settled, so confirm how the rules apply to you with a registered tax agent before acting.
I already own a rental property — am I affected by the negative gearing changes?
If you owned the property, or had exchanged contracts on it, before 7:30pm AEST on 12 May 2026, you are grandfathered: you keep negative gearing under the current rules — offsetting losses against your salary and other income — for as long as you hold it. The changes only apply to established residential properties bought after that date, and only from 1 July 2027. Grandfathering does not pass to the next owner when you sell, and your main residence is not affected. Because it turns on purchase timing and property type, get advice specific to your situation before acting.
What expenses can you claim on a negatively geared property?
Deductible expenses include loan interest, council rates, water rates, property management fees, insurance, repairs and maintenance, depreciation on the building and fittings, advertising for tenants, and accounting fees related to the property.