The announced Budget reforms mainly target negative gearing for established residential properties from 1 July 2027. Commercial property, eligible new builds and many existing arrangements are expected to remain unaffected.
NEGATIVE GEARING REFORM – AT A GLANCE
| CATEGORY | STATUS | SUMMARY |
| NEW RESIDENTIAL BUILDS | Unaffected | Eligible new builds are expected to continue receiving negative gearing and depreciation deductions. |
| COMMERCIAL PROPERTY | Unaffected | Commercial and industrial property are outside the current announced reforms. |
| PRE-12 MAY 2026 CONTRACTS | Grandfathered | Properties under contract before 7:30PM AEST on 12 May 2026 are expected to retain existing rules. |
| ESTABLISHED PROPERTY PURCHASED AFTER 1 JULY 2027 | Quarantined | Rental losses may only offset future residential rental income or capital gains. |
IMPORTANT POINTS CLIENTS SHOULD KNOW
- Depreciation deductions under Division 40 and Division 43 are expected to continue.
- ATO substantiation and record keeping requirements still apply.
- Interest deductions still require the borrowing to be used for income-producing purposes.
- Rental losses are expected to be deferred, not lost.
- Unused losses may carry forward against future rental income or capital gains.
- SMSFs and some widely held trusts are currently expected to remain outside the proposed reforms.
SIMPLE PROPERTY FLOW GUIDE
| QUESTION | LIKELY RESULT |
| Is the property commercial? | Likely unaffected. |
| Is it a new residential build? | Negative gearing likely continues. |
| Was contract signed before 12 May 2026? | Expected grandfathering applies. |
| Established property purchased after 1 July 2027? | Losses may be quarantined. |
ATO CROSS-CHECK – WHAT STILL CONTINUES
| ATO AREA | CURRENT POSITION |
| Division 43 Capital Works | Still deductible where eligible. |
| Division 40 Depreciation | Still claimable subject to ATO rules. |
| Repairs vs Improvements | Existing ATO distinction continues. |
| Rental Interest | Still deductible if used for income-producing purpose. |
| Record Keeping | Invoices and substantiation still required. |
CLIENT ACTION CHECKLIST
- Review future investment property purchases before 1 July 2027.
- Review whether new builds may provide better long-term tax outcomes.
- Review ownership structures including trusts and companies.
- Review existing depreciation schedules.
- Review future CGT exposure.
- Seek tax advice before restructuring or signing contracts.
Disclaimer: This fact sheet contains general information only based on announced Budget measures and current ATO guidance. Final legislation and ATO rulings may differ. Clients should seek personalised accounting, tax or legal advice before acting.
