Does the announced negative gearing change touch a rental I already own?

Not if you contracted to buy it before 7:30pm AEST on 12 May 2026 — the announcement grandfathers those properties, and eligible new builds are exempt whatever the date. The contract date is what matters, so a property contracted on the day itself depends on the time the contract was made.

Is the principal part of a loan repayment included in a rental loss?

No. Only the interest on the loan is a rental cost; the part of each repayment that pays the balance down is not deductible. The interest usually appears as its own monthly charge on the loan account, and that charge — not the repayment from your everyday account — is the figure a rental loss is built from.

Deductions · AU

Negative gearing

A rental whose deductible costs are more than its rent.

A rental property is negatively geared when its deductible costs — mostly the interest on the loan — are more than the rent it earns, so it makes a net rental loss. In Australia that loss can currently reduce your other income, such as salary. The 2026–27 Budget announced limits on this for some established properties from 1 July 2027.

As announced, and not yet law: for an established residential property contracted after 7:30pm AEST on 12 May 2026, a net rental loss from 1 July 2027 could only be used against rental income and gains from residential property, with the rest carried forward to later years. Properties contracted before the cut-off are grandfathered, and eligible new builds are exempt. The contract date — not the settlement date — is what decides which side a property is on.

Worked example

Rent of $24,000 against $26,000 of loan interest and $5,000 of rates, strata and insurance is $31,000 of costs and a $7,000 net rental loss. Under the current rules that $7,000 comes off your taxable income; at a 30% marginal rate it is worth $2,100 — which means the property still cost you $4,900 after tax.

Common mistake

Counting the whole loan repayment as the cost. Only the interest is deductible; the part of a repayment that pays the loan down is not a rental cost at all, so a loss worked out from repayments is overstated from the start.

See it in AI2Fin: Properties — costs split by use →

Grounded in ATO — Tax reform: negative gearing and capital gains tax guidance. Figures last checked 24 September 2026. General information, not tax advice.

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