How does negative gearing work?

How negative gearing works in practice

Suppose you buy a $600,000 investment property in Adelaide. You borrow $480,000 at a typical investment loan rate, costing you around $29,760 per year in interest alone. Add council rates, insurance, property management and maintenance, and your total costs might be $40,000 per year. If the property earns $28,000 per year in rent, you have a $12,000 annual loss. Illustrative only, not a quote or an offer of credit.

That $12,000 is $1,000 a month you fund from your own income. Before approving the loan, a lender checks that your salary covers your living costs, your other debts and this shortfall with room to spare. Your accountant can tell you how the loss is treated for tax. Either way you are out of pocket each year, and the strategy assumes the property will grow in value over time to more than compensate.

2026 Budget changes: negative gearing reform from 1 July 2027

The May 2026 Federal Budget announced significant changes to negative gearing and capital gains tax, and both have since been legislated. From 1 July 2027, the rules change for established (existing) investment properties bought after Budget night (12 May 2026). The ATO has published the detail, and your accountant can tell you how it applies to you.

Negative gearing on newly built properties is not affected. The government's intention is to redirect investment toward new housing supply. Investors who already own established properties are grandfathered under the legislation.

The CGT discount is also being reformed from 1 July 2027. This affects what you keep when you sell an investment property, so ask your accountant about it before any hold-or-sell decision.

These are substantial changes. If you are considering purchasing an investment property, the timing of your purchase relative to 1 July 2027 matters. Lendology recommends speaking with your accountant about how these changes affect your individual position, and we can help structure your lending accordingly.

Loan structuring for investment properties

How you structure your investment loan matters for your cash flow and for your records. Lendology works with investors to set up a loan structure that keeps each purpose in its own account while maintaining flexibility. This includes decisions about interest-only vs principal and interest, offset account placement, and keeping investment and personal borrowing separate.

Mixing personal and investment borrowing in one account is hard to undo. Your Lendology broker will ensure your loan is structured correctly from day one, and recommend you speak with a qualified accountant about the tax implications specific to your situation.

Frequently asked questions

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