The 2027 negative gearing and CGT changes: what's law, and does it affect my rental?
Yes, it is law: the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and the changes start on 1 July 2027. If you held your rental before 7:30pm on 12 May 2026, or it is a qualifying new build, your losses can still reduce your other income. Losses on established homes bought after that time can only be used against residential property income and gains. For gains that build up from 1 July 2027, the 50% CGT discount is replaced by indexation and a 30% minimum tax, except for new builds and affordable housing.
The short version
- From 2027-28 Dan's rental losses stop reducing his salary, but they build up and are used once the unit makes a profit.
- Only the $60,000 that built up after 1 July 2027 falls under the new rules, and the earlier $100,000 still gets the 50% discount.
- The Act includes an example of an owner called Henrietta who carries forward $15,000, then $33,000, and uses it all in the year her rental makes a profit. It is worth a read if you like seeing the rule in action.
Since the Budget in May, the questions haven't stopped. Is it actually law? Does it hit the place we already own? What happens to the losses? And what is this about valuing everything on 1 July 2027?
Here is what the law says, who it applies to, and which parts are still being worked out. It is general information only, and it doesn't touch on whether anyone should buy, keep or sell.
Is it law yet?
Yes. You may have read earlier that these were only announced. That was true until late June 2026.
- The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 is Act No. 49 of 2026. It received Royal Assent on 26 June 2026.
- A companion Act, the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026, sets the rate side of the minimum tax on capital gains.
- The ATO's page on the reform says: “These measures are now law.”
Nothing changes for the 2026-27 year you are in now. The negative gearing limit applies from the 2027-28 income year, and the CGT changes apply to events and gains from 1 July 2027.
Who keeps the old negative gearing rules
The new limit doesn't apply to amounts from these properties:
- Rentals you already held. An ownership interest you last acquired before 7:30pm (ACT legal time, which was AEST) on 12 May 2026. If you bought under a contract, the law counts your interest from the day you entered into the contract, not settlement.
- New builds. A residential dwelling that counts as a new residential dwelling for you. The detailed test is set by the Minister in a separate legislative instrument, aimed at homes that genuinely add to housing supply.
- Some social and affordable housing purposes that the Minister can set by legislative instrument.
Super funds and widely held unit trusts are also outside the rule. For most people with one or two rentals bought before the Budget, the losses work the same way after 1 July 2027 as they do now, for as long as they hold that property.
What happens to losses on affected properties
From 2027-28, if your deductions for affected residential properties are more than the rent they earn, the extra is not deductible against your salary or business income that year. Instead it is a quarantined amount. A profit from your grandfathered or new build rentals in the same year reduces it first. What's left can reduce residential capital gains in the same year, and whatever is left after that carries forward to the next year.
The losses aren't lost. They wait until your affected properties make a profit, or you have a residential capital gain to use them on.
Worked example
Dan's established unit bought in August 2026
Example only. Dan signed a contract for an established unit in Brisbane in August 2026, after the 12 May 2026 cut-off, and it is not a new build. It is his only rental. The figures are rent and total deductions for each year, and are an example only.
| Step | Sum | Result |
|---|---|---|
| 2026-27: rent $25,000, deductions $35,000 | Old rules still apply this year | $10,000 loss can reduce his salary |
| 2027-28: rent $26,000, deductions $36,000 | $26,000 minus $36,000 | $10,000 carried forward |
| 2028-29: rent $27,000, deductions $33,000 | $10,000 + ($33,000 minus $27,000) | $16,000 carried forward |
| 2029-30: rent $30,000, deductions $26,000 | $30,000 minus $26,000 = $4,000 profit, offset by carried losses | $0 taxable rental income, $12,000 still carried |
From 2027-28 Dan's rental losses stop reducing his salary, but they build up and are used once the unit makes a profit.
A residential capital gain in any of these years could also use up the carried amount.
The CGT change, in plain words
For individuals and trusts, including gains that come through a partnership, the 50% CGT discount is replaced for CGT events from 1 July 2027. Instead, for Australian residents, the cost base can be indexed for inflation, which reduces the gain. There is also a 30% minimum tax on certain capital gains for Australian resident individuals, with an exception for people who received certain payments in the year, such as the age pension or Family Tax Benefit.
New residential dwellings and affordable housing keep a discount of at least 50% for gains from 1 July 2027.
For assets you already hold as an Australian resident, the law treats you as selling just before 1 July 2027 and buying back straight away. The gain up to that point is parked until you actually sell, and it can still get the 50% discount. Only the growth after 1 July 2027 is under the new rules.
Worked example
splitting a gain at 1 July 2027
Example only. Mark, an Australian resident, bought an established rental in 2020 with a cost base of $600,000. It is worth $700,000 just before 1 July 2027. He sells it in 2030 for $760,000. Purchase and sale costs are ignored. Example only.
| Step | Sum | Result |
|---|---|---|
| Gain up to 1 July 2027 | $700,000 minus $600,000 | $100,000 |
| After the 50% discount | $100,000 x 50% | $50,000 counted |
| Gain from 1 July 2027 | $760,000 minus $700,000 | $60,000 |
| Treatment of that $60,000 | Cost base indexed for inflation, minimum tax may apply | Depends on inflation and Mark's income |
Only the $60,000 that built up after 1 July 2027 falls under the new rules, and the earlier $100,000 still gets the 50% discount.
The indexation amount isn't known until the inflation figures for those years are, so it isn't calculated here.
The 30 June 2027 value is either the market value just before 1 July 2027, or an amount from an apportioning method the Minister sets. You don't have to make that choice until you lodge the return for the year you sell.
What's settled and what isn't
Settled, because it is in the Act:
- The start dates: 2027-28 income year for negative gearing, 1 July 2027 for CGT.
- The 7:30pm 12 May 2026 cut-off, and that contract date counts.
- Losses on affected properties are quarantined and carried forward, and those quarantined amounts can't also be added to the property's cost base.
- The 50% discount for gains built up before 1 July 2027 on assets you already hold.
- The 30% minimum tax on certain gains, with exceptions.
Still being finalised, or still to check:
- The detailed new build requirements, which the Minister sets by legislative instrument. Check the ATO's page for the current definition before relying on a property counting as new.
- The apportioning method for the 1 July 2027 value, also set by legislative instrument, and the ATO tools for working out indexation and values.
- Inherited properties and transfers between partners. The Act as passed has no special rules for a property that passes to you on someone's death or moves to you after a separation, and we couldn't confirm any later change from an official source at the time of writing. If this applies to you, check with the ATO or a registered tax agent before assuming the old rules carry over.
What to keep on file now
- The signed contract, showing the date you entered into it, plus settlement papers.
- Anything showing whether the property is a new build, such as the builder's contract or occupation certificate.
- Purchase costs, improvement receipts and capital works records, as you already should for CGT.
- From July 2027, evidence of the property's value just before 1 July 2027, if you hold it then.
Everyone's position is different, and these rules interact with main residence, joint ownership and trusts in ways a short article can't cover. For your own situation, check with the ATO or a registered tax agent.
Key numbers
| What | Figure and source |
|---|---|
| Status of the reform | Law ATO |
| Start date | 1 July 2027 ATO |
| Grandfathering at announcement | 7:30pm AEST 12 May 2026 ATO |
| Act number and assent | Act No. 49, 2026, assented 26 June 2026 Federal Register of Legislation |
| Schedule 2 heading | Negative gearing limit Federal Register of Legislation |
| Negative gearing application year | 2027-28 onwards Federal Register of Legislation |
Free official help
- ATO: Reforming negative gearing and capital gains tax
The ATO's summary of the reform and its status. - Treasury Laws Amendment (Tax Reform No. 1) Act 2026
The Act itself on the Federal Register of Legislation, Schedules 1 and 2. - Budget 2026-27 tax explainer: negative gearing and CGT
The Government's plain language explainer from Budget time. - Moneysmart: Buying an investment property
Costs, risks and tax pointers for property investors.
Questions people ask
Is the negative gearing change law or just announced?
It is law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and the ATO says the measures are now law.
We signed the contract before Budget night but settled later. Are we covered?
Under the Act, for a property bought under a contract, your ownership interest counts from when you entered into the contract. A contract entered into before 7:30pm on 12 May 2026 falls on the old rules side.
Do I lose my rental losses under the new rules?
No. For affected properties, losses that can't be used against residential property income or gains in a year are carried forward to later years.
Does the CGT change hit the growth my property already has?
For assets held before 1 July 2027, the gain up to that date can still get the 50% discount when you eventually sell. The new rules apply to growth from 1 July 2027.
Does this change my 2026-27 tax return?
No. The negative gearing limit starts in the 2027-28 income year and the CGT changes apply from 1 July 2027.
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Sources
- Tax reform: Boosting home ownership: Reforming negative gearing and capital gains tax, ATO (last updated 29 June 2026). https://www.ato.gov.au/about-ato/new-legislation/in-detail/individuals/tax-reform-boosting-home-ownership-reforming-negative-gearing-and-capital-gains-tax, accessed 2026-10-16.
- Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Act No. 49 of 2026, text as made. https://www.legislation.gov.au/C2026A00049/asmade/text, accessed 2026-10-16.
- Income Tax Rates Amendment (Tax Reform No. 1) Act 2026, Federal Register of Legislation. https://www.legislation.gov.au/C2026A00050/asmade, accessed 2026-10-16.
- Negative Gearing and Capital Gains Tax Reform, Budget 2026-27 tax explainer. https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf, accessed 2026-10-16.
- Buying an investment property, Moneysmart. https://moneysmart.gov.au/property-investment/buying-an-investment-property, accessed 2026-10-16.
- Other tax considerations, Rental properties guide 2026, ATO. https://www.ato.gov.au/forms-and-instructions/rental-properties-2026/other-tax-considerations, accessed 2026-10-16.