Picture a PAYG professional who has been looking at a house and land package in a growth corridor, and whose accountant has just mentioned a change to negative gearing. The first question is usually simple: does this property still get the treatment I have been planning around? The answer now depends on a definition that is still being finalised.
What the change does
The legislation that carries the change passed Parliament on 25 June 2026, according to one practitioner summary. From 1 July 2027, negative gearing on residential property is limited to new builds. For established homes, negative gearing on homes bought after 7.30pm on 12 May 2026 can no longer be offset against salary or other personal income from 1 July 2027. Those losses can still be carried forward and offset against rental income, or against a future capital gain on a rental property, but not against wages.
New builds keep more of the existing settings. Newly constructed residences remain eligible for negative gearing and for the existing 50 per cent CGT discount. Under the Budget design, access to negative gearing will still be available, with an option to apply either the 50% CGT discount or the concurrently announced indexation and minimum 30% tax upon sale.
What counts as a new build
The detail sits in Treasury's draft materials. A property will generally be considered 'new' where it genuinely adds to housing supply, provided the property was acquired within 24 months of a certificate of occupancy being issued. That window is longer than the 12 months in the Budget, and it gives builders time to sell stock on hand. Following consultation on these materials, the final definition and exemptions will be included in primary legislation.
Some cases are clear. Any residential construction on previously vacant land qualifies. On the other side, a granny flat built adjacent to an established property that is not eligible for negative gearing is excluded. Other cases need the final wording. A knock-down rebuild, a granny flat, and a second-hand new build can all look "new" without actually qualifying. The draft question is whether the rebuild adds to housing supply, or replaces like with like. The definition of a 'new residential dwelling' and the apportioning method are still in draft at the time of writing, so the edges of the test are not settled.
When it suits and when it doesn't
A new build suits a buyer who wants a brand new home, often on vacant land, and whose plan already allows for the tax treatment that applies to new construction. It also suits buyers who want to understand the rules before signing, because the purchase date and the certificate of occupancy date both matter.
It does not suit a buyer who is hoping to buy an established home after 12 May 2026 and rely on offsetting rental losses against salary from 1 July 2027. Tax treatment is not a reason to buy on its own. A negatively geared property still needs cash to cover the shortfall each year, and the rental income side needs a realistic view. An independent rental appraisal and a vacancy allowance are the usual ways to test that income before the numbers are relied on.
Where SMSFs fit
SMSFs sit under a separate set of rules. From 10 August 2026, SMSFs can no longer enter into new LRBAs to acquire residential property. Existing SMSF borrowing arrangements are grandfathered and can continue under the existing rules. SMSFs can still buy residential property outright with fund cash, as the ban only applies to borrowing. Commercial property borrowing through an LRBA is not affected by these changes.
The negative gearing limits also do not reach super funds. Because superannuation funds are carved out of both the negative gearing and CGT discount changes, an SMSF that already owns, or purchases with cash, an established residential property can continue to negatively gear it. That carve-out matters less for a new residential purchase, because the fund cannot borrow directly to buy one. Some trustees discuss an investment through an unrelated unit trust, where the borrowing sits in the trust rather than the fund. Whether a trust is related is a question for an SMSF specialist accountant or lawyer. Any loan in that structure would come through a broker who specialises in these arrangements, not from Elite Wealth Creators.
Worked example
This example is illustrative only and uses assumed numbers. Two buyers each have a net rental loss of $14,000 in the 2027-28 income year. Buyer A bought an established home after 12 May 2026, so the $14,000 cannot reduce salary. It carries forward against rental income or a residential capital gain. Buyer B bought a new build, so the loss can still reduce salary.
The tax difference depends on each person's marginal tax rate, other income, and whether a future capital gain arises. Those are questions for a tax adviser working from the buyer's own figures. The example does not predict rent, growth, or returns.
What to do next
- Ask your accountant to map each property you are considering against the draft new build tests, including the purchase date and the certificate of occupancy date.
- If an SMSF is part of the picture, speak with an SMSF specialist accountant or lawyer about the fund's investment strategy, whether any trust would be related, and whether a cash purchase fits.
- Speak with a broker who specialises in investment or SMSF lending about finance options. Elite Wealth Creators refers loans to its broker network and takes no commission on any loan.
If you want to talk through how these rules could apply to your own situation, book a free call.
General information only, not personal financial advice. Speak with a licensed adviser before acting.