Right now, negative gearing in Australia works the way it long has: if your investment property runs at a loss, you can generally deduct that loss against your other income. Talk of negative gearing changes flares up regularly, and 2026 is no exception, but as of writing no change to the core rules has taken effect. This piece explains what is actually being proposed, who it would affect, and why any reform would almost certainly be prospective rather than retroactive.
The short version: the policy is contested, the proposals are familiar, and the gap between a thought bubble in a press conference and a change to tax law is enormous. Knowing the difference is what keeps you from making decisions on a rumour.
A quick refresher on what negative gearing does
Negative gearing is not a special scheme so much as a consequence of two ordinary tax rules colliding. You can deduct the costs of earning income, including the interest on a loan used to buy an income-producing asset, and Australia lets you offset a loss from one source against income from another. Put those together and a rental property that costs more to hold than it earns produces a loss that shaves your taxable income.
If you want the full mechanics, including worked numbers, we have a separate explainer on negative gearing explained. The one-line summary is that a deduction returns your marginal tax rate on the loss, not the whole loss, so it softens the hit without erasing it.
The other piece that matters is the capital gains tax discount. When you sell an asset held for more than 12 months, you are generally taxed on only half the gain. That 50 per cent discount is what makes the negative gearing trade worthwhile for many investors: accept yearly losses now, in the hope of a discounted gain later. The two rules are joined at the hip, which is why reform proposals tend to target them together. Our guide to capital gains tax on property covers that side.
Why it is so politically contested
Negative gearing reliably generates more heat than light. Supporters argue it encourages private investment in rental housing, keeps rents lower than they otherwise would be, and lets ordinary people build wealth. Critics argue it disproportionately benefits higher earners, inflates house prices by adding investor demand, and costs the budget revenue.
Both sides have a point, which is why the debate never resolves. The benefit is concentrated among people with the income to absorb a loss and the marginal rate to make the deduction worthwhile, so it reads as a fairness question. Yet any sudden change risks spooking a market that millions of households are exposed to through their own homes, so it reads as a stability question too. Governments of both stripes have looked at it, and most have decided the political cost outweighs the gain.
A proposal is not a law, and a press conference is not the tax code. Plan around the rules in force, not the headlines.
What reform could actually look like
When people say “negative gearing changes,” they usually mean one of a small set of options floated over the years. None of these is current law as of June 2026, and the details shift with each proposal, so treat the list as a map of the debate, not a forecast.
- Grandfathering existing investments. The most common design feature. Anyone who already owns a negatively geared property keeps the current treatment, and the new rules apply only to purchases made after a set date. This is the political release valve that lets a government change the rules without punishing people who bought under the old ones.
- Limiting deductions to new builds. Allow negative gearing only on newly constructed dwellings, on the theory that this channels investment into adding housing supply rather than bidding up existing stock.
- Capping or quarantining losses. Restrict how much rental loss can be offset against other income, or allow losses to be carried forward against future rental income only, rather than deducted against wages today.
- Trimming the CGT discount. Reduce the 50 per cent discount to something smaller. Because the discount is what makes the negative gearing strategy pay off, changing it shifts the whole calculation even if the gearing rules themselves stay put.
Here is how the main proposals compare on who they would hit and what they are trying to achieve.
| Proposal | Existing investors | Main stated goal |
|---|---|---|
| Grandfathering | Generally protected | Change rules without retroactive pain |
| New builds only | Usually protected | Direct money toward new supply |
| Capping or quarantining losses | Could be affected on future losses | Reduce the wage offset and budget cost |
| Trimming the CGT discount | Affected on future sales | Reduce the incentive and raise revenue |
Who any change would actually affect
If a change lands, the people most exposed are those buying after the start date with a strategy that leans on deducting losses against salary. Higher earners feel deduction changes more, because their marginal rate is higher. Anyone counting on the full CGT discount at sale would need to rerun their numbers if that lever moves.
Existing investors are usually the least exposed, thanks to grandfathering. That is not a guarantee, since no government is bound by what previous proposals contained, but it has been the consistent pattern. The group that gets overlooked is prospective first-time investors, who may find the maths less generous than the version their older colleagues describe at a barbecue. If you are weighing your first purchase, run the figures under several scenarios rather than assuming today’s rules are permanent. A good place to start is our walkthrough on how to buy an investment property, and it pays to research investment property numbers carefully before you commit, stress-testing the deal without relying on the tax benefit to make it stack up.
Why change would almost certainly be prospective
The most reassuring thing for current investors is that meaningful tax changes here are nearly always prospective. Retroactively stripping a deduction people relied on when they borrowed hundreds of thousands of dollars would be politically toxic and practically messy. Grandfathering exists to avoid that, so even if the rules tighten, the likely shape is a clean start date with the old treatment preserved for anyone already in.
That said, “almost certainly” is not “definitely,” and the only version of the rules that matters is the one actually legislated. Details change, proposals get watered down or dropped, and what makes the news in June may look nothing like what passes later. For the current law and any genuine updates, the authoritative source is the Australian Taxation Office, not commentary, and a registered tax agent can tell you how it applies to you.
This article is general information only, not personal financial, tax or legal advice. All figures and rules described are current as last checked June 2026 and can change. Confirm anything before you act on it.
The bottom line
As of June 2026, negative gearing and the CGT discount work as they have, and no headline change has taken effect. Reform is proposed periodically, with options ranging from grandfathering and limiting deductions to new builds, through to capping losses or trimming the CGT discount, and any change would most likely apply only to future purchases. Treat proposals as proposals, plan around the rules in force, and check the ATO or a registered tax agent before making a move. The debate will keep going. Your job is to decide on what is law, not on what is loud.