In case you missed it, the Federal Government handed down its budget for the coming financial year on Tuesday. 

Of the many, many headlines from the 2026-27 Federal Budget (see the 18 posts on the subject on TDA’s feed!), one has particularly captured our attention: the changes to negative gearing. 

A survey of the TDA audience showed us plenty of you are just as interested in this topic as we are, but more than 13% of respondents said they didn’t understand it. 

So, what is negative gearing, what’s changing, and why does it matter? Let’s unpack. 

Gearing refers to borrowing money from a bank to buy an investment property. (It can also apply to other assets, but is mostly used in housing.)

Negative gearing is when a landlord spends more on an investment property than they make from the rental income. That means the owner makes a loss on the property. 

Under negative gearing, that loss can be deducted from their taxable income, so they pay less tax overall.

For example, Dani owns an investment property. She rents it out for $800 per week, but she pays $1,000 per week in mortgage repayments, rates, and maintenance costs. 

Dani can deduct $200 a week from her annual salary to save on her tax bill.  

On Tuesday, after weeks of rumours and leaks, Treasurer Jim Chalmers formally announced the Government’s changes to negative gearing.

From 1 July next year, negative gearing will only be applicable to homes built on or after Budget night (12 May).

This means investors buying existing homes from now on will not be able to deduct any losses due to rental properties from their salary after 1 July 2027.

Properties bought before the announcement on Tuesday are not impacted.

It’s important to note these changes are not yet legislated, meaning that they still need to pass both houses of Parliament to become law. 

Labor holds a majority in the lower house. In the Senate, it needs the Coalition, the Greens, or a combination of the other minor parties and independents to enact the changes. 

In Tuesday’s Federal Budget, the Government said the current system allows some investors to pay less tax than they would if they never bought their investment property.

It cited data showing almost a third of people who sold negatively-geared properties in 2022-23 paid less tax than if they had never purchased the property.

The Government said the “tax benefit from rental loss deductions exceeds the capital gains tax investors eventually pay on sale," which is often “most valuable” for the richest Australians.

During his Budget speech on Tuesday night, Chalmers noted that: “Since 1999, house prices have risen over 400%, more than twice as fast as average incomes.”

He said the negative gearing reforms, along with other measures including changes to the capital gains tax discount, would help “level the playing field for workers and first home buyers,” and support investment in new housing supply.

Each year, two nights after the Government hands down its annual Budget, the Opposition shares its formal response.

In his Budget Reply speech, Opposition Leader Angus Taylor called the Government’s plan “an attack on every Australian”.

Addressing negative gearing, he said the changes “will hand over housing investment to multinationals and foreign pension funds.”

Taylor said the Coalition will “fight like hell” to block what he called “toxic taxes” from passing Parliament (though, as mentioned above, the Government doesn’t necessarily need their votes). 

He added that if the changes are enacted, the Coalition would repeal them if it wins the next election, due in 2028.

One Nation leader Pauline Hanson also replied to the Budget on Thursday night, saying that changes to negative gearing “will further dampen economic activity, push rents higher and reduce housing supply.”

“As a self-proclaimed scholar of Paul Keating [referencing Chalmers’ PhD thesis on Keating’s prime ministership], the Treasurer might have reflected on what happened in 1985 when these same policies were tried and had to be reversed two years later,” she said. 

In July 1985, when Keating was Treasurer, negative gearing was effectively abolished. However, it was restored two years later due to concerns from lobbyists that the changes were lifting property prices, particularly in Sydney. 

Post-budget, we asked you for your thoughts on the new negative gearing policy.

A little over half of respondents said they support it (52%), while 35% said they did not. 

One reader in support of the change told us it “may encourage some investors to not enter into the established housing market, giving young persons half a chance”.

On the other side, another said “rents will now skyrocket and first home buyers will be competing in the same ‘new build’ market as investors both domestic and international.”

For the remaining 13% of you who said they didn’t understand the negative gearing changes, I hope after reading this newsletter you’ve wrapped your heads around the announcement and some of the reactions to it.

See you next budget!

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