Is Negative Gearing Still Worth It? What the 2026 Budget Means for Property Investors

At TP Finance, we're hearing the same question from clients almost every week right now:

"Is negative gearing still worth it — and what does this mean for my borrowing power?"

It's a fair question. The 2026 Federal Budget delivered the most significant change to property investment tax settings in a generation. Here's what's actually changed, what it means in practice, and how we're helping clients invest confidently in this new environment.

What's actually changed — and what hasn't

Negative gearing hasn't been abolished. But it has been significantly restricted for established properties.

From 1 July 2027, the rules differ depending on when and what you buy:

New builds (new houses, townhouses, units, off-the-plan, build-to-rent, and properties that add to housing supply) — negative gearing remains fully intact. Losses can still be offset against your salary and other income, exactly as before.

Established properties purchased after 7:30pm AEST on 12 May 2026

negative gearing losses are now quarantined. You can still claim them, but only against other residential rental income or capital gains from residential investment property. You cannot use those losses to reduce your salary or wages income. Any excess losses can be carried forward indefinitely to offset future rental income or capital gains when you sell.

Existing investors — fully grandfathered. If you held a property, or had exchanged contracts, before the Budget cut-off, nothing changes until you sell.

One important detail worth understanding: for established properties bought after the cut-off, the deduction isn't gone — it's deferred. That's a meaningful distinction when modelling your long-term position.

The CGT change — don't overlook this

The negative gearing restriction doesn't operate in isolation. The Budget also replaced the 50% capital gains tax discount with cost base indexation and a 30% minimum tax rate on net capital gains, effective from 1 July 2027.

These two reforms work in tandem. The negative gearing change affects your annual cash flow position. The CGT change affects your exit strategy. Anyone modelling a new investment property needs to run the numbers on both.

The real pressure point: holding costs and serviceability

Even for investors acquiring new builds — where negative gearing is fully preserved — the environment has tightened considerably. Clients are facing a combination of higher interest rates, higher insurance premiums, increased strata and maintenance costs, and higher land tax thresholds in some states.

But the biggest shift in 2026 isn't tax policy. It's serviceability.

Lenders are assessing borrowers against higher living expense benchmarks, higher buffers, stricter treatment of short-term rental income, and lower rental shading factors. For many clients, the central question isn't "Should I negatively gear?" It's "Can I actually borrow enough to make the strategy work?"

This is where getting your structure right — before you start shopping — makes a real difference.

Why new builds have become the default investment play

For investors who want to preserve tax efficiency, new builds now carry a structural advantage that didn't exist six months ago. They offer full interest deductibility, full depreciation, generally lower maintenance obligations, higher energy ratings that appeal to quality tenants, and better rental demand in growth corridors.

That said, new builds carry their own risks — valuation shortfalls at completion, higher body corporate costs, and oversupply exposure in some markets. The case for new stock is stronger than before, but it isn't automatic. The right answer still depends on your tax position, cash flow model, and the specific market you're buying into.

Established properties aren't dead — but the strategy has changed. Without the immediate tax offset against salary income, they need to stand on their own as yield plays, with value-add potential or strong capital growth fundamentals to justify the holding cost.

Practical steps for investors in 2026

If you're considering an investment property this year, the checklist looks like this:

Confirm whether the property qualifies for full negative gearing, or whether losses will be quarantined. Run a cash flow model at today's rates, not yesterday's, and stress-test repayments at +3%. Factor in the CGT changes when modelling your exit. Check your borrowing power before you start shortlisting properties — lenders are moving slowly and applying stricter criteria than ever. Get pre-approval early.

At TP Finance, we're helping clients work through exactly this process — structuring their finance so they can invest with clarity and confidence, even as the rules shift around them.

The bottom line

Negative gearing isn't gone — but it's no longer the foundation of the strategy. In 2026, the winning formula is:

Strong borrowing power + smart property selection + disciplined cash flow planning.

Get those three right, and the tax benefits become the bonus. Build your strategy around the tax benefits alone, and you're exposed.

If you'd like to understand how these changes affect your specific position, we're happy to work through the numbers with you.