This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.
Key takeaways
- As of March 2026, negative gearing rules have not changed, but Treasury is actively modelling reforms at the Treasurer's request.
- The two specific proposals being modelled are capping negative gearing at two properties per investor and reducing the CGT discount from 50% to 33%.
- Most reform proposals include grandfathering, so properties you already own would likely continue under the current rules.
- Landlords who already know their exact net position on each property will be least affected by any changes.
- Depreciation deductions against rental income are expected to remain available under all realistic reform scenarios.
Every few years, the same question comes back around: will the government change negative gearing? In 2026, it is back again. Think tanks are publishing reports, both parties are positioning themselves, and landlords are left wondering whether the rules they have been relying on are about to shift.
The short answer, as of March 2026, is that the current negative gearing rules remain unchanged. But the conversation is louder and more detailed than it has been in years. If you own rental property, it is worth understanding what could change, what probably will not, and how to make sure you are prepared either way.
If you need a refresher on how negative gearing works in the first place, start with our complete guide to negative gearing.
How Negative Gearing Works Right Now
Under the current rules, if your rental property expenses exceed your rental income, you can deduct that loss against your other income, including your salary. There is no cap on how much you can lose, no limit on how many properties the benefit applies to, and no restriction on whether the property is new or existing.
The deductible expenses include mortgage interest, council rates, insurance, repairs, property management fees, and depreciation. If your Brisbane apartment earns $30,000 a year in rent and your total deductible costs come to $42,000, you have a $12,000 loss that reduces your taxable salary income.
At a marginal tax rate of 37%, that saves you $4,440 in tax. You still lost $12,000 in real cash terms, so the net out-of-pocket cost is closer to $7,560. The strategy relies on capital growth over time making up the difference and then some.
For a full breakdown of which expenses you can deduct, see our guide to rental property tax deductions.
A Brief History of Reform Proposals
Negative gearing has been debated in Australian politics for over 40 years. Understanding the history helps you judge how likely changes actually are.
The 1985 Quarantining Experiment
The Hawke government restricted negative gearing losses in 1985, quarantining them so they could only be offset against rental income, not salary. The policy was reversed in 1987. The common narrative is that rents spiked in Sydney and Perth as a result, though economists still argue about whether negative gearing was the real driver or whether those rental markets were already tightening for other reasons.
What is not disputed is that the reversal made governments cautious about touching the policy for the next three decades.
Labor's 2019 Election Policy
The most detailed modern reform proposal came from federal Labor ahead of the 2019 election. Their plan would have limited negative gearing to newly constructed properties only, effective from a future date. Existing negatively geared properties would have been grandfathered under the old rules.
Labor lost that election, and the policy was widely seen as a contributing factor, particularly in outer suburban and regional seats where property investment is common. The party subsequently stepped away from the proposal.
Think Tank and Academic Proposals
Between 2019 and 2026, a steady stream of reports from the Grattan Institute, the Australia Institute, the Henry Tax Review follow-ups, and various academic economists have argued for some form of reform. The most commonly floated ideas include quarantining losses (the 1985 approach, updated), capping the amount of loss that can be claimed per property or per investor, limiting the benefit to new construction, and reducing or removing the CGT discount for investment properties alongside gearing changes.
None of these have become government policy. But they keep the conversation alive and give future governments ready-made frameworks to work from.
Where Things Stand in 2026
Labor won the May 2025 federal election in a landslide, securing 94 seats -- the highest ever for a single party. Anthony Albanese returned as Prime Minister. Crucially, the majority means Labor does not need Greens or crossbench support to pass legislation, despite Greens leader Adam Bandt pushing hard for negative gearing and CGT reform during the campaign.
Officially, Labor's position remains that negative gearing changes are "not something we are proposing." But behind the scenes, the picture is more concrete than that language suggests.
In late 2024, Treasurer Jim Chalmers confirmed he had personally requested Treasury modelling on two specific reforms:
- Capping negative gearing at two investment properties per investor. Losses from additional properties would be quarantined and could not be offset against salary or wage income.
- Reducing the CGT discount from 50% to 33% for assets held longer than 12 months.
Treasury has been drawing up these models alongside work on trusts and other tax settings. Chalmers has since flagged an "ambitious" 2026 federal budget, with tax changes targeting capital gains and negative gearing among the items under consideration.
CPA Australia has publicly warned against standalone changes to CGT and negative gearing, arguing they should only be considered as part of broader tax reform.
The Coalition has stated it is highly unlikely to support winding back these concessions, maintaining that taxing housing further will not solve the supply shortage.
The honest assessment: no legislation has been introduced yet. But the fact that Treasury is actively modelling specific proposals, and the Treasurer is publicly signalling an ambitious budget, means this is closer to reality than at any point since 2019.
What Changes Could Actually Look Like
If reform does arrive, it will almost certainly be incremental rather than a complete removal of negative gearing. Governments that have studied the issue tend to converge on a few models.
Quarantining Losses to Property Income
This is the most commonly discussed option. Under quarantining, your rental property losses could only be deducted against income from other rental properties, not against your salary. If you have a $10,000 loss on one property and a $6,000 gain on another, you could use the loss to offset the gain. But the remaining $4,000 loss would be carried forward and applied against future property income, not deducted from your pay.
For landlords with a single negatively geared property, this would eliminate the immediate tax benefit entirely. The loss would accumulate as a paper balance that only becomes useful when the property moves into profit or when you sell.
Limiting to New Construction
Under this model, only newly built properties purchased after a set date would be eligible for negative gearing. Existing properties already held before the change date would be grandfathered. This was the structure Labor proposed in 2019.
The policy intent is to redirect investor activity toward new housing supply rather than the purchase of existing homes. For landlords who already own property, grandfathering would mean no immediate change, though it could affect the resale value of older investment properties if future buyers can no longer negatively gear them.
Capping by Number of Properties
This is the model Treasury is currently modelling at Chalmers' request. Rather than capping dollar amounts, it would limit the number of investment properties eligible for negative gearing to two per investor. If you own three or more, losses on properties beyond the cap could only be offset against other rental income, not your salary.
For landlords with one or two properties, this would change nothing. For larger portfolio holders, it would fundamentally alter the tax arithmetic on property three and beyond.
CGT Discount Reduction
Treasury is also modelling a reduction of the CGT discount from 50% to 33% for assets held longer than 12 months. Currently, if you sell an investment property you have held for more than a year, only half the capital gain is taxable. Under the proposed model, two-thirds would be taxable instead. You can model the difference for your own property using the capital gains tax calculator.
The Grattan Institute estimates that reducing the CGT discount alongside negative gearing reform could save the federal budget billions annually while having only a marginal effect on property prices. Whether that estimate holds in practice is contested.
Grandfathering
If changes are introduced, it is widely expected that existing investments would be grandfathered. That means properties you already own would continue under the current rules, and the new restrictions would only apply to properties purchased after the start date. This was the approach Labor took in their 2019 proposal, and it is the structure Treasury is understood to be modelling.
How to Prepare, Regardless of What Happens
You do not need to predict future policy to manage your properties well. The landlords who will be least affected by any changes are the ones who already know their numbers.
Know Your Actual Net Position
Do you know whether each of your properties is making or losing money right now? Not roughly. Exactly. If you cannot answer that question today, you are already at a disadvantage, reform or not.
Enter your rental income, expenses, and loan details below to see where your property sits.
Enter your weekly rent and expenses to see whether your property is negatively or positively geared.
Track Every Deduction Properly
If negative gearing is ever quarantined, losses that cannot be deducted immediately would be carried forward. Those carried-forward losses only have value if you can substantiate them. That means keeping records of every deductible expense, every year, for every property. See our EOFY checklist for what your records should look like.
Understand Your Cash Flow Without the Tax Benefit
Run the numbers on your property as if the tax offset did not exist. If your property costs you $8,000 a year after tax and $14,000 a year before any tax benefit, you need to know both numbers. The first tells you what it costs today. The second tells you what it would cost if the rules changed. The cash flow calculator can help you see both scenarios side by side. If that second number is not sustainable, it is worth thinking about your options now rather than later.
Maximise Depreciation Claims
Depreciation is often underused by self-managing landlords. Under any realistic reform scenario, depreciation deductions against rental income would remain available. If you do not have a depreciation schedule from a quantity surveyor, you are likely leaving thousands of dollars on the table each year. Use the depreciation calculator to estimate what you could be claiming.
Talk to Your Accountant
This is not a decision to make from blog posts alone. Your accountant can model what different reform scenarios would mean for your specific situation, including your marginal tax rate, your loan structure, and your investment timeline. The best time to have that conversation is before any changes are announced, not after.
The Bottom Line
Negative gearing has not changed yet. It may not change in 2026, though Treasury is actively modelling specific proposals and the Treasurer has signalled an ambitious budget. The political and economic conditions that make reform more likely are all present: high housing costs, unmet National Housing Accord targets, and a government with a commanding majority that does not need crossbench support to legislate.
The best thing you can do is make sure you have a clear picture of your property finances today. Know what each property earns, what it costs, and what the tax position looks like with and without the current deductions. That way, if the rules do shift, you can respond from a position of knowledge rather than scrambling to work out the basics.
propkt gives you that picture for every property in your portfolio, updated as you log income and expenses throughout the year. The tax summary shows your net position by property, with all deductible expenses categorised and ready for your accountant. Start tracking for free with your first property.