Negative gearing in 2026: the post-election state of play

After a decade of political volatility on negative gearing, the 2025 federal election produced a clear outcome: the existing framework stays. Investors who bought expecting reform should reassess, and new investors can plan against a stable tax policy at least until the next election cycle.

What negative gearing is, precisely

If rental income is less than the combined interest expense + depreciation + property expenses, the loss is deductible against your other income (salary, business, other investment). On a high-marginal-tax-rate earner, this loss reclaim is worth 37-47% of the loss amount in reduced tax.

The typical 2026 negative gearing profile

$650,000 property at 4.2% gross yield:

Rent: $27,300/year
Interest (90% LVR at 6.0%): ~$35,100/year
Property expenses (rates, insurance, management, maintenance): ~$5,500/year
Depreciation (new property): $8,000-$12,000/year
Total expenses: $48,600-$52,600/year
Loss: $21,300-$25,300/year

For a high-income investor at 37% + 2% Medicare = 39% effective rate:

Tax offset from loss: $8,300-$9,900/year

What changed politically, what didn’t

The 2025 election debate canvassed limiting negative gearing to new property only, or capping total claimable losses per investor. Neither passed. The policy framework is:

Negative gearing remains available for both new and established property
No annual cap on losses
CGT discount of 50% remains for properties held 12+ months
Depreciation on second-hand plant and equipment remains excluded (2017 rule still stands)

The softer shift: APRA serviceability

While direct tax policy didn’t change, APRA’s serviceability rules have tightened the real-world economics. A 3% buffer on current rates means new investors need meaningful surplus serviceability to qualify for loans. Negative gearing mathematics is only useful if you can obtain the loan in the first place.

For 2026 investors

The decision framework remains:

Yield matters more than negative gearing. A property yielding 5.5% vs 3.5% makes a bigger difference over 10 years than the tax benefit of a loss claim.
Depreciation matters disproportionately on new property. Quantity surveyor reports on new builds produce $10k-$20k/year of deductible depreciation for the first 5-10 years. This is where new-build economics often beat established for investors.
Location trumps tax. A negatively geared investment in a declining suburb still loses money after tax relief. A positively geared investment in an appreciating suburb makes money. Tax is a secondary factor.
CGT discount compounds with long holds. If you hold for 5+ years and sell for a capital gain, the 50% discount converts a 37% marginal rate on the gain to effectively 18.5%. This is the real long-term investor benefit.

When negative gearing is the wrong structure

Your income is below $90k - marginal rate of 32.5% or less; loss offset is worth less
You’re self-employed with irregular income - losses need to match a stable tax liability
You’re planning to retire in 5-10 years - negative gearing benefit vanishes once your income drops

For these profiles, consider positively geared properties, SMSF strategies, or direct share investment instead.