Following the 2026–27 Federal Budget (announced 12 May 2026), the Government has proposed significant changes to how negative gearing works — but it hasn’t been abolished.

What’s proposed:
-  From 1 July 2027, negative gearing will generally be limited to new residential properties only.
-  For established properties purchased after 12 May 2026:
-  Losses can no longer offset salary or other income
-  They can only be used against:
            rental income, or
            capital gains from property

The Key Point: Self Managed Superannuation Funds (SMSF):  Are Currently Excluded
Here’s the critical distinction:
- The proposed rules do NOT apply to superannuation funds (including SMSFs)

This means:
- SMSFs can still fully utilise negative gearing within the fund
- Losses can continue to offset other fund income under existing rules

In short: SMSFs have been explicitly carved out (at this stage).

What This Means for Property Investment, if the legislation passes in its current form

Personal ownership:
- Reduced tax effectiveness of negative gearing (especially for established property)
- No offset against PAYG income
- Strategy becomes more cash-flow and growth dependent

SMSF ownership (via LRBA):
- No change to negative gearing treatment (currently proposed)
- Continued access to:
        - 15% tax rate (accumulation phase)
        - 10% effective CGT

Ability to still use borrowing via Limited Recourse Borrowing Arrangements (LRBAs)


Important Caveat
These are proposed changes only - Nothing has been legislated.

The SMSF exemption is not guaranteed long-term — but it is clearly stated in current draft legislation.

Please refer - https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf

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