In this edition of It Depends, private client partner Scott Hay-Bartlem breaks down the proposed changes to negative gearing announced in the 2026 federal Budget.
From 1 July 2027, negative gearing will only apply to new residential dwellings. Properties purchased before 12 May 2026 will be exempt from these changes while still owned, but this exemption will end if ownership changes.
The legislation remains before the Senate, and key details – such as the definition of ‘new residential’ – are yet to be finalised.
Negative gearing is a complex area that depends on your individual situation. If you have any questions, please contact our team.
Video transcript
Welcome to this edition of It Depends where I talk about the proposed changes to negative gearing that were announced in the 2026 federal Budget.
What is the deal with the 2026 federal Budget?
So, the Federal Government handed down the federal Budget on 12 May 2026.
There’s a lot in this budget, and in this It Depends I’m going to talk about the proposed changes to negative gearing.
Where are the new rules at?
As I record this in early June 2026, we’ve got the proposed changes to CGT and negative gearing they’re before parliament. They’ve been passed by the House of Representatives. They’re currently sitting in the Senate.
It is in the, I’m going to have to read this though, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026. It’s not through the Senate yet. There’s still quite a way to go. We still haven’t seen the rules for discretionary trusts. So, this It Depends for negative gearing is based on that Bill.
What has been proposed?
From July 2027, negative gearing residential dwellings will only be available for new residential. Anything for an existing residential property will be able to be only offset against other income or capital gains from residential dwellings.
What is a ‘residential dwelling’?
So, ‘residential dwelling’ is defined in the legislation by referring to things it’s not. So, it carves out things like hotels, boarding houses, those types of things. Everything else will be a residential dwelling.
‘New residential’ though is not defined in the legislation and that will be introduced by regulation.
What is exempt?
So, there’s a couple of exemptions already in the draft legislation. So, it has to be only for residential. So, if it’s not a residential dwelling as defined, these new rules aren’t going to apply.
Then there’s the grandfathering rules. So, if you already own the property at 12 May 2026, that property will remain exempt from the rules while you own it. Change of ownership, all bets are off. And there’s the new residential dwelling concept, which we need more information on to know how that will apply.
How will I be affected by these changes?
So, this is the it depends. So, we still have a way to go with the legislation. We know about the exceptions. It’s important to be on top of how this legislation is going through. We still have some time though before the rules will start on 1 July 2027.
We will be putting out some more information about this in some podcasts. There’ll be some more It Depends and we’ll run some sessions on it. If you’ve got a question in the meantime, please contact a member of our team. Thanks for watching this edition of It Depends.
