Updated for 12 May 2026 Budget
On top-bracket income, every $1 of rental loss reduces tax by 47 cents (45% + 2% Medicare). See exactly how much your investment property saves you — and whether the 2026 budget reforms hit you.
ATO 2025–26 brackets, 12 May 2026 budget rules, Division 43 & 40 depreciation, grandfathering check — instant, private, free.
The 12 May 2026 budget changes apply only to established residential properties acquired after 7:30pm AEST on that date.
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 12 May 2026 reforms apply.
The 12 May 2026 federal budget announced the most significant change to negative gearing since the 1985 introduction of CGT. Established residential property acquired after 7:30pm AEST 12 May 2026 will have rental losses ring-fenced from 1 July 2027. Pre-budget acquisitions are grandfathered. 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% 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) exceed the rental income it produces. The resulting net rental loss can — under current rules — be deducted against your other income such as salary, reducing the income tax you pay. For example, a $10,000 net rental loss for a salary earner on the 37% marginal rate cuts their tax bill by $3,700. Negative gearing is permitted by the Income Tax Assessment Act 1997 and applies to residential and commercial property.
From 1 July 2027, negative gearing will be limited for established residential properties acquired after 7:30pm AEST on 12 May 2026. Rental losses on those properties will be ring-fenced — they can only offset rental income from other residential properties or future capital gains on residential property, not salary or other income. Excess losses carry forward indefinitely. Eligible new builds remain fully negative-gearable. Properties held before 7:30pm 12 May 2026 are grandfathered and 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 rules apply only to acquisitions made after that cut-off.
Yes. Eligible new builds are fully exempt from both the negative gearing limitation and the CGT discount changes. Investors in new builds can continue to offset rental losses against salary and other income, and elect to use either the 50% CGT discount or the new cost-base indexation method on sale. A new build is generally a residential property that has not previously been occupied or sold as residential premises — including 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 tax saving equals your net rental loss multiplied by your marginal tax rate. The calculator first computes net rental position (rental income minus all deductible expenses including loan interest and depreciation). If negative, the loss reduces your taxable income; the saving is the difference between the income tax you would pay on your full salary and the tax on your salary minus the loss. Top-bracket earners (45% plus 2% Medicare) save up to 47 cents per dollar of loss. Lower-bracket earners save less. From 1 July 2027, post-budget acquisitions cannot offset losses against salary at all.