The Australian investment property market has long relied on the favourable tax implications of negative gearing. In light of the highly publicised 2026 Federal Budget announcement, it appears that this investment property strategy requires investors to reconsider their approach to new investments. Far from bringing an end to property investment, we think it is a real opportunity to reconsider investment approaches, and the right time to speak with an investment property buyers agent about building a property investment portfolio that works under new rules.
If you are looking to purchase an investment property, the proposed negative gearing changes bring new investment strategies for new builds, and may change your long-term plans for an established investment property. At Liviti, an investment property buyers agent works with investors at every stage of building a property portfolio, and the question we’re getting most often right now is: what does this mean for me?
What negative gearing changes were announced in the 2026 Budget?
It’s first important to understand exactly what negative gearing is before being alarmed that it is changing. Put simply, negative gearing is when the costs of holding an investment property (think mortgage interest, maintenance, strata fees and insurance) exceed the rental income. Under the existing tax system, many investors can deduct this rental loss against other taxable income, such as salary or wages, reducing their overall tax payable.
The changes announced in the 2026 Federal Budget focus on the purchase of established properties, meaning existing dwellings as opposed to newly constructed housing. Under the proposed reforms, investors who purchase established residential properties after Budget night may no longer be able to offset rental losses against salary or other personal income from 1 July 2027. It’s worth noting that the proposed reforms are not expected to apply until 1 July 2027, and final details may depend on legislation. Additionally, investment properties purchased prior to the budget announcement will likely be unaffected, with a grandfathering clause expected.
It is important to remember that investing in new builds still allows negative gearing to be claimed against other income. When we consider the housing shortage in many Australian cities, it is evident that incentives to invest in new housing projects will also benefit renters, with tax support redirected toward new housing supply rather than purchases of established residential property. Incorporating news of the negative gearing changes is essential to any long term property investment strategy, and an investment property buyers agent can help you understand your options.
How could the 2026 Budget affect your property investment strategy?
The proposed 2026 Budget changes may affect property investment strategies by reducing the extent to which investors can rely on tax offsets. The after-tax income or cost of holding an investment property becomes more important because it dictates the investment’s financial sustainability.
If losses incurred from holding an investment property cannot be deducted under the budget’s negative gearing changes, investors must look for alternative investment property strategies or shore up existing income streams and tame costs.
Some strategies an investment property buyers agent may recommend after the proposed negative gearing changes include:
Property Selection
With the continuation of the negative gearing policy for new builds, investors should carefully compare new and established builds. New tax implications mean that a new build may be more achievable and profitable.
Off-Loading Underperforming Investments
With cash flow more important under the proposed negative gearing changes, investors should evaluate their current investment portfolios and optimise their properties if any are consistently loss-making and consider whether a positively geared property may support their cash flow better.
Updated Growth Assumptions
With short-term losses now expected to be absorbed directly by the investor for established properties, it is crucial to calculate the long-term capital growth of the investment to see whether it is worth accepting weak rental returns. Some property market conditions may also shift as other investors respond to the budget reforms, so growth assumptions should be tested carefully rather than taken for granted.
Personalised Investment Property Strategy
The right decision when investing in property will become more determined by personal circumstances. Factors such as personal income, borrowing capacity, and risk tolerance are more important than ever given the changed tax implications. Speaking with a buyers agent for investment property can be beneficial in understanding the unique circumstances of each property and investor.
The negative gearing reforms do not mean investors should avoid property investing altogether. They simply mean the numbers need to work more clearly, without relying too heavily on the previously granted tax benefits.
Should investors rethink cash flow and tax planning under the new tax rules?
Yes, investors should rethink their cash flow and tax planning because changes to negative gearing can alter the real cost of an investment property. The way we evaluate a property’s financial suitability under the current tax rules will look different after 1 July 2027, so the property investment strategy should change as well.
Cash flow is the money left over or the shortfall, after rental income is compared against the costs of holding an investment property.
Some investment property expenses include:
- Loan interest
- Property management fees
- Repairs and maintenance
- Insurance
- Strata or body corporate fees
- Council rates
- Water rates
- Land tax
- Vacancy periods
- Depreciation assumptions
Investors want income now, not just capital in 20 years. Following the proposed negative gearing changes, the costs incurred through investment are as important as ever, equally so is the rental income. A revised strategy should stress-test the property’s performance under different scenarios, such as the removal of tax benefits.
The proposed changes are expected to preserve existing negative gearing arrangements for properties held before Budget night. It’s always worth reviewing your property investment strategy regularly with an investment property buyers agent, with expert consideration given to changing interest rates, insurance, rent, and council rates.
What does negative gearing reform mean for new builds vs established properties?
The negative gearing reform will only impact established builds, removing the ability to deduct investment losses from total taxable income. New builds will remain untouched and therefore may offer more favourable tax implications. This does not mean that new builds are a better long term property investment strategy across the board, you should still consider your own financial goals, risk tolerance and financial capacity.
New builds may suit some investors because they can offer lower early maintenance costs, continued access to negative gearing and more affordable entry points in some areas. As always, due diligence is required to account for untested rental demand, suburb oversupply, and developer build quality.
Established properties offer a wealth of opportunities and potential, with the ability to be renovated to increase value, to enter tightly held markets, and to have more predictable rental histories. Established dwellings have long been seen as a powerhouse of property investment for wealth creation, but they are also more susceptible to higher maintenance costs and may lose negative gearing benefits in the future. An investment buyers agent can help you compare both objectively.
Choosing between a new build and an established property should not be based purely on tax treatment but should also factor in a multitude of market research and personal factors, such as financial goals, risk tolerance, and existing income and borrowing capacity. A strong investment property strategy, guided by a property investment expert, considers the full picture: the property’s purchase price, potential rental income, ongoing costs, and capital growth potential.
How can investors adjust their investment property strategy before the changes take effect?
If you are looking to purchase an investment property in the future, it is useful to review all of the numbers before making the purchase rather than relying on current tax implications.
Adapting your strategy for the new negative gearing rules can be done with the help of a buyers agent for investment property at Liviti.
Steps to Buying an Investment Property After Budget Changes
- Re-Run The Numbers
You should model the property’s costs and returns before tax and after tax, including best-case, expected and conservative scenarios based on the proposed tax changes to be enforced 1 July 2027.
- Compare New Builds and Established Properties
New builds may offer tax advantages with preserved negative gearing benefits, whilst established properties may offer other potential benefits such as a more desirable location, higher land value or renovation potential. If you’re unsure which suits you, a buyers agent investment property specialist can help you compare both options on equal footing.
- Check Cash Flow Resilience
You should consider whether you are financially (and mentally) comfortable with an investment property if losses cannot be deducted from total taxable income, or if other stresses arise, such as interest rate rises or a period of vacancy.
- Avoid Rushing
Just because the proposed changes are coming doesn’t mean you should rush into a purchase. A rushed decision may cost you more than the short-term impacts of removing negative gearing. Whatever your strategy, a level head is always your most valuable asset.
- Speak to a Professional
The proposed tax changes are ongoing, and new information is sure to change the current plan. Speaking with an investment property buyers agent or a tax accountant can provide you with useful information and the confidence to help you make your next investment.
How to Start a Property Portfolio After the 2026 Budget
If you’re wondering how to start a property portfolio, the rule hasn’t changed: buy something that works on the numbers, not on the tax return. The 2026 changes actually make this clearer. A property that only stacks up because of a tax offset was always a risk. A buyers agent for investment property can help you understand how the property performs before tax, after tax, and under conservative return assumptions before you commit to a purchase.
The best response to the 2026 Budget is neither panic-buying property nor avoiding property altogether. It is about building a clearer, more numbers-led property investment portfolio with a buyers agent who knows how to find the right property for you. Book a free consultation with Liviti today.
