Updated for the 1 July 2027 rules
On top-bracket income, every $1 of rental loss reduces tax by 47 cents (45% + 2% Medicare).
ATO 2026–27 brackets, the 1 July 2027 negative gearing rules, Division 43 & 40 depreciation, 12 May 2026 cut-off check — instant and free.
The negative gearing change (law since June 2026) applies only to established residential properties bought under contracts signed after 7:30pm AEST on 12 May 2026. It starts on 1 July 2027.
All deductible holding costs. Leave blank if not applicable.
A quantity surveyor's schedule typically claims $4,000–$15,000 per year on a new property. Established second-hand residential cannot claim Division 40.
Enter your loan, rent, and expense details, then click Calculate to see your rental loss, tax saving, cash flow, and whether the 1 July 2027 negative gearing change applies.
Announced in the 12 May 2026 federal Budget, the change became law in June 2026. Established residential property bought under a contract signed after 7:30pm AEST 12 May 2026 has its rental losses ring-fenced from 1 July 2027. Properties held or under contract before then keep the current rules. New builds are exempt.
| Scenario | Current Rules (to 30 Jun 2027) | Post-1 Jul 2027 Reform |
|---|---|---|
| Established residential — bought before 12 May 2026 | Losses offset salary & all income | Grandfathered — unchanged for life of holding |
| Established residential — bought after 7:30pm 12 May 2026 | Losses offset salary & all income (transition period) | Ring-fenced — offset only rental income or property CGT |
| New build (any acquisition date) | Losses offset salary & all income | Exempt — losses still offset all income |
| Commercial property | Losses offset salary & all income | Unaffected — reform applies to residential only |
| Super fund / widely-held trust | Existing super rules apply | Exempt — institutional investors excluded |
| Build-to-rent | 15% managed-investment-trust (MIT) withholding concession | Exempt — government supply program |
Depreciation is the largest non-cash deduction available to property investors. A quantity surveyor's schedule typically unlocks $4,000–$15,000 of annual deductions on a new property.
| Deduction Type | Rate / Method | Eligibility | Notes |
|---|---|---|---|
| Div 43 — Building | 2.5% prime cost / yr over 40 yrs | Most residential built after 17 July 1985 | Based on original construction cost (not purchase price). Survives 2017 changes. |
| Div 40 — Plant & Equipment | Diminishing value or prime cost | New build OR new items installed by you | Second-hand plant in established residential not deductible since 1 Jul 2017. |
| Low-value pool | 18.75% year 1 / 37.5% thereafter | Items under $1,000 | Pool together for simplicity |
| Travel to inspect property | Not deductible | Excluded since 1 Jul 2017 | Applies to residential rental — commercial unaffected |
Negative gearing happens when the costs of owning an investment property (loan interest, council rates, insurance, repairs, depreciation, management fees) are more than the rent it earns. The net rental loss can be deducted from your other income, such as salary, which reduces the income tax you pay. For example, a $10,000 net rental loss for a salary earner on the 37% marginal rate cuts their income tax by $3,700. From 1 July 2027, losses on established homes bought after 7:30pm (AEST) on 12 May 2026 can only be used against residential rental income or residential capital gains. If the property is in NSW, compare your rent with the local median.
The change was announced in the 12 May 2026 Budget and became law in June 2026. From 1 July 2027, rental losses on established residential properties bought under contracts signed after 7:30pm (AEST) on 12 May 2026 are ring-fenced: they can only offset rental income from residential property or capital gains on residential property, not salary or other income. Unused losses carry forward with no time limit. Until 30 June 2027 those losses can still offset salary. Eligible new builds can still be negatively geared against any income. Properties held or under contract before 7:30pm on 12 May 2026 keep the current rules until sold.
Yes. Any residential investment property held as at 7:30pm AEST on 12 May 2026 — including properties under contract awaiting settlement at that time — is grandfathered. The current negative gearing rules apply for the entire period you hold the property: losses can be deducted against any income, with no cap and no limit on the number of properties. Grandfathering ends when you sell. The new negative gearing rules apply only to properties bought after that cut-off. This is for negative gearing only: the CGT change from 1 July 2027 applies whenever you bought.
Yes. Eligible new builds are exempt from the negative gearing change: rental losses can still offset salary and other income. On sale, new-build investors can choose either the 50% CGT discount or the new indexation method. The exact definition is set out in rules made under the law. In general, a new build is a residential property that has not previously been occupied or sold as a home — such as off-the-plan apartments, house and land packages, and substantially renovated dwellings.
Yes — two types of depreciation are available. Division 43 capital works depreciation is 2.5% per year of the building's construction cost over 40 years, claimable on most residential properties built after 1987 regardless of who built it. Division 40 plant and equipment depreciation covers items such as carpets, blinds, and appliances — but since 1 July 2017, second-hand plant items in established residential property are not depreciable. Only investors who buy a new build, or who install new items themselves, can claim Division 40. A quantity surveyor's depreciation schedule maximises legitimate claims.
The calculator first works out your net rental position: rent minus all deductible expenses, including loan interest and depreciation. If that is a loss, it reduces your taxable income. The saving is the income tax on your salary alone minus the income tax on your salary less the loss. At the top rate, each $1 of loss saves 45 cents of income tax plus 2 cents of Medicare levy, 47 cents in all; the calculator's figure counts income tax only. Lower-bracket earners save less. From 1 July 2027, losses on established homes bought after 7:30pm (AEST) on 12 May 2026 can't offset salary. For a Sydney property, the rental yield map shows the gross yield for your suburb.