How negative gearing works
A property is negatively geared when its costs, including loan interest, running costs and depreciation, are more than the rent. The loss reduces your taxable income, so you pay less tax on your salary.
Example: $550 a week rent (2 weeks vacant) is $27,500 a year. Interest on a $480,000 loan at 6% is $28,800, plus $5,500 other costs and $3,000 depreciation. The tax loss is $9,800. On a $100,000 salary that saves about $3,136 in tax, so the real cost is about $70 a week.
Negative gearing changes from 1 July 2027
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed Parliament on 25 June 2026. From 1 July 2027:
- Established homes bought after 7:30pm on 12 May 2026: rental losses are quarantined. They can only offset income from other residential rentals, or be carried forward against future residential capital gains.
- New builds: can still be negatively geared against your salary.
- Owned before Budget night: grandfathered, so you keep negative gearing until you sell.
- Not affected: shares, commercial property, super funds and widely held trusts.
The same law replaces the 50% CGT discount from 1 July 2027. See the capital gains tax calculator.
Tax saved at different incomes
| Taxable income | Tax saved per year | After-tax cash flow |
|---|---|---|
| $60,000 | $3,283 | −$68/wk |
| $90,000 | $3,136 | −$70/wk |
| $120,000 | $3,136 | −$70/wk |
| $150,000 | $3,822 | −$57/wk |
| $200,000 | $4,606 | −$42/wk |
Same property as the example above: $9,800 tax loss, 2026–27 rates including Medicare levy.
Is negative gearing worth it?
Negative gearing never makes a loss profitable on its own: at a 32% marginal rate, every $1 of loss still costs you 68 cents. It only pays off if the property's capital growth is bigger than the losses you fund over the years. Check the property's rental yield and what you can borrow before buying.
Common questions
Is negative gearing being abolished in Australia?
Not completely. A law passed on 25 June 2026 limits negative gearing from 1 July 2027 for established residential properties bought after 7:30pm on 12 May 2026. New builds can still be negatively geared, and properties owned before Budget night are grandfathered.
What happens to losses on an established home bought after 12 May 2026?
From 1 July 2027 the loss can't reduce tax on your salary. It can only be used against income from other residential rentals, or carried forward to reduce future capital gains on residential property.
How much tax does negative gearing save?
Your rental loss times your marginal tax rate, plus the 2% Medicare levy. On a $9,800 loss with a $100,000 salary, that's about $3,136 a year at 32%.
Is negative gearing worth it?
Only if the property's capital growth outweighs the after-tax loss. You still lose money each year: tax only refunds part of the loss.
Does negative gearing apply to shares?
Yes. The 2026 changes only affect residential property. Shares, commercial property and other investments can still be negatively geared.
General information only, not financial or tax advice. Speak to a registered tax agent or licensed adviser about your situation.