Another measure in the Act that received Royal Assent on 26 June 2026, and another one commencing 1 July 2027.
From that date, negative gearing deductions for residential properties are limited to new residential dwellings and to properties acquired before the Budget announcement on 12 May 2026.
What that means in practice
Two categories of residential property keep the existing treatment.
Properties you already owned as at 12 May 2026 are grandfathered. If you bought a rental property in 2019, nothing changes for you.
New residential dwellings continue to qualify. This is the policy direction of the whole package: push investment toward adding to housing supply rather than competing for existing stock.
What loses the deduction is a negatively geared established residential property acquired after 12 May 2026. From 1 July 2027, the excess of deductions over rental income will not be deductible against other income in the way it currently is.
The definition question
Much depends on what counts as a new residential dwelling. The Bill originally gave the Minister a determination making power over the requirements for a residential dwelling to fall within that definition, and that power was among those the government removed or limited before passage in response to criticism.
Which means the definition has to do its work in the legislation itself, and the profession's submissions raised the absence of core design elements as a general concern with this package. Expect further guidance.
How this interacts with everything else
This is where it gets complicated, and where getting one piece of advice about one measure is not enough.
Residential property held in a superannuation fund is affected by a completely separate change. From 10 August 2026 a self managed super fund cannot use a new limited recourse borrowing arrangement to acquire real property unless it is business real property. So the geared residential strategy inside super closed a year before the personal negative gearing change takes effect.
The capital gains side is changing at the same time. From 1 July 2027 the 50 per cent discount is replaced by indexation for individuals and trusts, with the discount retained for eligible new residential dwellings and affordable housing.
Put those together and the tax treatment of residential property investment has been substantially rewritten in a single package, across borrowing, holding and disposal, with different commencement dates for each.
What to do
If you own residential property acquired before 12 May 2026, you are grandfathered on the negative gearing side. The CGT change still affects you.
If you are considering an acquisition, the timing, the property type and the structure all now matter in ways they did not eighteen months ago, and the interaction between the measures is where the value of getting it right sits.
If someone is presenting you with a property investment strategy that does not account for all three changes, that is a reason to slow down.
We are registered tax agents. We can explain how these rules apply to a transaction and what the tax consequences are. Whether a property investment suits your circumstances is financial advice and requires a licence, which we do not hold, so for that part we will point you to someone who does.