The May budget dropped the biggest change to property investing in a generation, and most of the coverage made it more confusing than it needed to be.
Here's the plain version.
What changed
If you buy an established residential property after 7.30pm on 12 May 2026, you lose negative gearing from 1 July 2027. The measures have passed and the ATO has confirmed they're now law.
That means rental losses on that property can no longer be deducted against your salary. Losses can only offset other residential rental income, or capital gains when you sell. They carry forward, but they stop helping your annual cash flow.
Who's not affected
If you already owned an investment property before budget night, nothing changes for you. Existing holdings are fully grandfathered, including properties under contract at the time. That grandfathering is also quietly reshaping how much stock reaches the market.
And new builds are exempt entirely. Buy a brand new dwelling that adds to supply and you keep negative gearing under the old rules.
What it means in dollars
CBA's economists estimated that losing negative gearing on an established purchase is roughly equivalent to a 90 to 155 basis point rise in your investor mortgage rate, in immediate cash flow terms.
That's not a rounding error. That's a fundamentally different holding cost on the exact same property, depending on when you bought it and whether it's new or established.
The second order effects matter more
Two things flow from this that buyers should think about.
First, investor demand for established homes has already softened, which is part of why Sydney and Melbourne values are falling. Less competition from investors at open homes is a genuine advantage for owner occupiers right now.
Second, grandfathered investors now have a strong reason to never sell. Selling means their next purchase loses the tax treatment their current one has. Expect fewer established investment properties hitting the market over time, which tightens supply down the track.
What you should not do
Do not buy a new build purely because the tax treatment is better. A well selected established property that outgrows a poorly selected new one still wins after tax. The asset comes first, the tax treatment second.
This is general information, not tax advice. Talk to your accountant about your situation before acting.
If you're weighing established versus new, or trying to work out where the opportunity actually sits in your target market, that's a strategy conversation worth having with someone local. Converta matches you with a vetted buyer's agent who specialises in your market. Free, no obligation, first call within 24 hours.
Sources: ATO, 2026-27 Federal Budget, CBA Economics.