Imagine McDonalds announced they were completely switching up their iconic Big Mac recipe after DECADES of serving up the same well-loved burger.  

Pretty shocking news… even if you’re not a Maccas fan.

Well, that’s kind of how Australians are feeling with the upcoming changes to negative gearing. 

Some people feel like they’re losing a really good thing, others think it's time for a change anyway. 

But no matter where you sit on this spectrum, these changes to negative gearing will probably affect you in some way if you own or rent a home in Australia. 

Quick refresher on negative gearing

Negative gearing is an investment strategy. It describes the situation where the cost of owning an investment property is higher than the income it generates. 

So if you had an investment property that earned $2,000 a month, but it costs you $2,500 a month to own this property, then you would be at a $500 loss every month and this would make you negatively geared. 

If you want a more detailed explanation, you can read up more on negative gearing here. 

You might be wondering - how is being at a loss a good financial strategy?

Prior to the 2026/2027 budget, there were some pretty nifty tax benefits for negatively geared property owners. 

The yearly loss that investors made while owning the property could be offset against their annual assessable income. This means that investment property owners got a bit of a tax discount each year they made a loss on their property. 

On top of this, most investment property owners aim to eventually sell their property at a big enough profit (aka a capital gain) to make up for the losses.

Sounds complicated we know… but negative gearing is actually a very popular strategy for Australian investors. 

In fact, almost half of investment properties in Australia are negative geared.

So what’s changing?

Now here’s the part that some Australians aren’t so happy about. 

After almost 40 years of no changes to negative gearing laws, the 2026/2027 Federal budget has introduced some pretty dramatic tax shake ups. 

Here are the key changes in relation to negative gearing:

• Negative gearing tax offset benefits will NOT apply for EXISTING properties purchased after budget night (ie Tuesday May 12th 2026)
• Negative gearing tax offset benefits WILL still apply for NEWLY BUILT properties purchased after budget night
• All properties with a contract sale date before budget night will not be impacted by these tax changes (i.e. existing investment property owners who are negatively geared will maintain their tax offset benefits)

To make matters even more confusing, these changes won’t officially come into effect until July 2027. 

So if you bought an existing property after budget night and wanted to negatively gear it, you could still technically get tax offsets until July 2027 (when the negative gearing offsets get cut).  

Good luck to all the accountants who’ll have to figure out this messy tax situation! 

Under the new rules, if your investment property runs at a loss, you can only use that loss to offset income from your other properties or the profit you make when you eventually sell. You can't use it to reduce your salary or other income like you can today. If your losses are bigger than your rental income in a given year, you can carry them forward and use them in future years.

Why is the government doing all this?

Australia’s housing supply crisis is the big elephant that follows young Aussies into every sharehouse room. 

With Australia’s population growing faster than housing stock (especially in big cities like Sydney, Melbourne and Brisbane), Australia is projected to have a shortfall of 262,000 new homes by 2029. 

And this is a big reason why Australian property is considered one of the most unaffordable in the world. 

So how do the negative gearing changes help?

The Australian government believes that by removing incentives (like negative gearing), which are designed to benefit investment property owners, investors will be less motivated to buy and hold properties in the future. 

In theory, this means there will be an increase in housing supply for young home buyers instead.  

The problem is, these types of policies could take years to play out in the economy - and in the short term there’s likely going to be more pain than gain for renters. 

The big question - how will these changes impact YOU?

Unless you’re living at home rent-free, you’ll probably fall into one of two camps: property owner or renter. 

Here’s how the negative gearing changes will impact you based on what we know right now. 

Renters 

• If you currently rent, these changes won’t directly impact you. 
• However, economists are expecting an increase in rental prices of 2.4% by 2029-2030, as the housing market adjusts to the negative gearing changes. 
• That means, if you move to a new rental property in the future, the market price for rent could potentially be higher because (in theory) as there will be fewer investment properties on the market. 

Current owner-occupied property owner

• If you own the property you live in, these changes won’t directly impact you. 
• However, with the government’s long term goal of increasing housing supply (by reducing incentives for investors to buy property) chances are your property might not increase in value as quickly as previous years. 

Current investment property owners

• If you currently own an investment property that is negatively geared, these changes won’t directly impact you because they only apply to properties purchased after budget night. 
• However, it might impact how long you consider holding your current investment property since future investment properties might not receive the same benefits. 

Future investment property owners

• If you plan to purchase a newly built property for investment purposes, these changes won’t directly impact you because they are exempt from the new changes. 
• If you plan to purchase an existing property for investment purposes and you are negatively geared, then the yearly loss you make on your investment property will not be eligible for tax offsets under the new legislation.

So, which category do you fall under and what do you think of these new changes?