Negative gearing after the 2026–27 Budget: what actually changed on 12 May 2026

What the 12 May 2026 announcement actually did

Under the new rules, rental losses can only be deducted against other income — such as salary — for new builds, and only for properties purchased or contracted from 12 May 2026 onward. For established properties bought after that date, rental losses are quarantined rather than denied: they are carried forward against future rental profits or against the eventual capital gain on sale, but they no longer reduce the tax you pay on your salary each year.

Properties owned or contracted before 12 May 2026 are grandfathered. The old negative gearing rules keep applying to them, unchanged.

The three property classes: grandfathered, new build, established post-budget

Every residential investment property in Australia now falls into one of three classes, and the class drives the tax modelling.

• —Grandfathered — owned or contracted before 12 May 2026. The old negative gearing rules continue to apply, and grandfathered holdings also keep the old capital gains tax rules when the CGT changes arrive.
• —New build — purchased or contracted from 12 May 2026 onward. Rental losses remain deductible against other income, and new builds retain concessional CGT treatment under the changes taking effect from 1 July 2027.
• —Established post-budget — an established property bought after 12 May 2026. Full negative gearing still applies through the 2026–27 transition year; from 1 July 2027 the rental losses are quarantined: carried forward against future rental profits or the eventual capital gain, not offset against salary.

What quarantining means in practice for an established purchase

Quarantining does not destroy the deduction, and it does not begin on Budget night — it takes effect from 1 July 2027. An established property bought after 12 May 2026 still deducts its rental losses against salary in the normal way through the 2026–27 transition year; from 1 July 2027 those losses are instead quarantined. Once quarantined, a loss accumulates on a ledger — applied later, once the property turns a rental profit, or against the capital gain when the property is eventually sold.

The cashflow effect is the part that matters at the kitchen table. Under the old rules, an annual rental loss reduced the tax payable on your salary, which softened the holding cost year by year. Under quarantining, the full shortfall between rent and outgoings has to be carried without that annual tax relief — the benefit arrives only when the ledger is finally used. Same loss, very different timing, and timing is most of what a cashflow projection is.

Why the purchase or contract date matters as much as the property

The dividing line is 12 May 2026, and it applies to when a property was purchased or contracted — not to the property's age alone. An established house contracted before that date is grandfathered and keeps full deductibility; the identical house contracted after it carries quarantined losses. The asset did not change; its tax character was fixed by the date on the contract.

This is why a property analysis run in 2026 has to ask two questions, not one: what is the property, and when was the deal struck. A new build contracted after the Budget keeps salary deductibility. An established property contracted after the Budget does not. A property contracted before the Budget keeps the old rules regardless. Three answers, three different after-tax pictures — and from 1 July 2027 the classes diverge again, when the flat 50% CGT discount is replaced by indexation-based treatment with an effective minimum of 30%.

How Plintha models the three classes

Plintha classifies every property it analyses as grandfathered, new build, or established post-budget, and the classification changes the tax modelling that follows — including whether rental losses flow against other income or accumulate in quarantine. Depreciation is modelled with awareness of the building's physical age across Division 40 plant and equipment and Division 43 capital works, and every analysis includes a stress test covering a rise in interest rates, extended vacancy, and an interest-only period expiring into principal-and-interest repayments.

Each figure in the report carries its provenance — computed, [ESTIMATE] with the assumption shown, or [ASSUMED] with an overridable default — so the tax treatment being applied is visible rather than buried. The free tier includes one analysis per month, no card required.

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