05/06/2026
One of our owners asked if the new budget will impact their investment. Under the changes announced on 12 May 2026, negative gearing will be restricted for established properties bought after 7:30pm that night.
However, properties purchased before this time are fully grandfathered, meaning existing owners keep the current rules for as long as they hold the property. I found this article from Westpac explains negative gearing very well: https://www.realestate.com.au/advice/negative-gearing-explained/
Negative gearing occurs when the costs of owning an investment property (loan interest, maintenance, property management, etc.) exceed the rental income. The property runs at a paper loss. In Australia, that loss can be deducted from the investor's taxable income.
Benefits:
- Tax deductions reduce overall tax payable
- Potential for capital growth over time
- Cash flow is predictable (investor knows the monthly shortfall)
- Can be used as a portfolio-building strategy
Risks:
- Investor relies on capital growth. If prices stagnate or fall, the property remains a loss-making asset.
- Investor is out of pocket each year (the shortfall must be covered from other income)
- Tax benefit depends on the investor's marginal tax rate. If income drops, the benefit shrinks.
- Rising interest rates increase the size of the annual loss
- Lower income earners see limited benefit relative to the risk
- Too many negatively geared properties may affect borrowing capacity
After comparing negative gearing vs positive gearing - what would you prefer?😀🏠
With more than 4,000 Google searches per month, understanding negative gearing is a key pain point for investors. This guide breaks it down in ways everyone can understand.
