Negative gearing in 2026: what changed and what it means for your numbers

"Negative gearing" is one of the most-argued and least-understood phrases in Australian property. You don't opt into it. It isn't a loophole. It's a tax-accounting outcome that falls out of how rental losses interact with the rest of your taxable income, and the slogans on both sides usually skip that part.

The mechanism, in one paragraph

If your investment property earns less in rent than it costs to own (interest, council rates, strata, insurance, maintenance, depreciation), you've made a loss. Under current Australian tax law, that loss is deductible against your other income such as salary, business earnings, and dividends. A high-marginal-rate earner with a $15,000 rental loss reduces their taxable income by $15,000. At the 45% bracket that's a $6,750 tax saving. That's all "negative gearing" means: a loss-making rental offsetting tax on other income.

Why it matters, and why it doesn't

It matters because it changes the after-tax return on a leveraged property. A property that's slightly cash-flow negative pre-tax can become roughly neutral once the deduction lands. For higher earners, that tilts the buy-vs-don't-buy decision.

It also matters less than the slogans suggest. You still need the cash to fund the loss every year, because the tax deduction is a refund and not a free property. The whole approach only pays off if the property eventually appreciates enough to recover the accumulated losses, which means the real bet is on capital growth rather than the deduction itself. And when you sell, capital gains tax claws back part of the benefit. The 50% CGT discount on assets held over twelve months is the other half of the same conversation, not a separate topic.

The policy debate

Negative gearing has been a recurring federal election topic for decades, and the arguments are well-rehearsed. Reform advocates argue the deduction disproportionately benefits high-income earners, encourages leveraged speculation on existing housing stock, and contributes to upward pressure on prices in supply-constrained markets. Opponents counter that rental losses are a normal feature of how income tax treats other businesses, and that restricting the deduction could reduce private rental supply and push rents higher in cities with thin investor pipelines.

Past proposals have included limiting the deduction to new builds only ("quarantining" existing-property losses), capping the dollar value of the deduction, and grandfathering existing portfolios. As of writing, the federal settings remain broadly as they have been for some years. Losses on rental property are deductible against other income, and the 50% CGT discount applies to assets held over twelve months. Anyone modelling a ten-year hold should run their numbers under both the current rules and a tighter scenario, because betting a seven-figure leveraged position on a single tax setting is the kind of thing people regret in hindsight.

Stress-testing your numbers

The honest way to evaluate a leveraged property is to model the cash flow with and without the tax benefit. If the property only works with the deduction, you're relying on a policy setting outside your control. If it works without it, the deduction is upside.

Three calculators on Burbfinder make this concrete. Start with the rental yield calculator to get a net yield using realistic outgoings. If the gap between gross and net is news to you, the understanding rental yield article walks through why that matters.

From there, the mortgage calculator gives you the annual interest cost, which is the largest deductible expense for most investors and the line item that moves most when rates shift. Finally, the capital gains tax calculator lets you sketch a plausible exit. The 50% CGT discount on assets held over twelve months changes the after-tax sale proceeds materially, and ignoring it makes any hold-period model look worse than it really is.

What this means for your math

Take a $750,000 unit on an 80% loan ($600,000) at 6.2%. Interest runs $37,200 a year. Rent at $580 a week brings in $30,160. Outgoings (strata, rates, insurance, management, vacancy, maintenance) come to roughly $11,000. Pre-tax loss is $30,160 minus $37,200 minus $11,000, which is −$18,040. At a 37% marginal rate, the tax refund is about $6,675. The owner is funding a real cash drain of roughly $11,365 per year out of salary.

The bet: capital growth over the hold period exceeds the cumulative after-tax cash drain. At 4% p.a. growth on $750k, that's $30,000 of paper gain in year one, comfortably more than the cash drain. At 1% growth, it isn't. The deduction tightens the band of growth scenarios that work. It doesn't change which scenarios work.

Negative gearing is a real benefit. It's also a second-order one. The first-order question is whether the property is worth owning at all on yield, location, condition, supply pipeline, and likely growth. If the underlying property is good, the deduction is icing. If the property only pencils because of the deduction, that's a fragile thesis to underwrite a seven-figure leveraged position with.