Yes — negative gearing is still available in Australia in 2026. But if you own an investment property, watch this space: the government is modelling changes that could affect how it works. The government is modelling a two‑property cap and a reduced capital gains tax (CGT) discount ahead of the May 2026 budget. I've laid out the key facts, a short checklist for claiming rental losses, the costs you should budget for and the mistakes investors often make.

Quick reference — key facts at a glance

- Status in 2026: Negative gearing is still allowed under current tax law. No change has been legislated.

- Policy proposals: Treasury modelling includes a two‑property cap on negative gearing and a reduction of the CGT discount from 50% to 33%. These were in active discussion ahead of the May 2026 budget.

- Who might be affected: ATO data for 2022–23 shows about 2.26 million individual property investors and roughly 214,700 people owning three or more investment properties — the group most likely to be hit by a two‑property cap.

- Official sources: Australian Taxation Office (ato.gov.au), myGov (my.gov.au) and Services Australia (servicesaustralia.gov.au) have practical guidance on rental income and claiming deductions.

Prerequisites — what you need before you claim

Before you claim a rental loss, make sure the property is genuinely an investment, you've got the paperwork to prove it, and you know which expenses the ATO will allow as deductions.

Documents to have on hand:

  • Tenancy agreements and rental statements showing gross rent received.
  • Bank statements, loan interest summaries and mortgage statements.
  • Receipts and invoices for repairs, maintenance, council rates, strata fees, insurance and property management fees.
  • Any depreciation schedule (Division 40 and Division 43) prepared by a quantity surveyor, if you plan to claim building and plant depreciation.
  • Records of capital improvements and purchase/sale paperwork for CGT calculations.

Keep your records for at least five years after you lodge the return — that's the period the ATO commonly expects for individual taxpayers.

Step‑by‑step: How to claim negative gearing on your 2026 tax return

Below is a practical, numbered process. Follow each step and make a note of the costs and choices that matter.

Mastheads
  1. Sort your income and expenses.

    Start with gross rental income for the financial year (1 July to 30 June). Then list all deductible expenses for the same period: loan interest, property management fees, council and water rates, insurance, repairs, maintenance, letting fees and land tax where applicable. Deductible interest is the interest portion of your loan repayments — not the principal.

  2. Decide on depreciation.

    If the property has depreciable items or capital works, get a depreciation schedule. A depreciation schedule from a quantity surveyor will usually cost a few hundred dollars, though the final price depends on the property and how detailed the report needs to be. A schedule can add thousands of dollars in annual deductions in early years, so it often pays for itself — but it’s a separate cost to budget for.

  3. Calculate your net rental result.

    Subtract total deductible expenses from gross rent. If expenses exceed rent, you have a rental loss. If expenses exceed rent, you record a rental loss — under current rules you can generally use that loss to reduce other taxable income in the same year.

  4. Choose how to lodge.

    You can lodge your return through myGov's myTax, have a registered tax agent file for you, or use the ATO's online services for agents if one helps prepare the return. Typical tax agent fees for a rental property return vary widely — expect $300–$1,200 depending on complexity and whether you claim depreciation or capital gains.

  5. Enter information correctly on your tax return.

    When lodging, enter rental income under the 'Rental property' section and list your deductions accordingly. If you use a tax agent they'll prepare the schedules and advise on apportionment (for example, part‑private use for a room).

  6. Keep records and respond to ATO queries.

    If the ATO asks for backup, you must supply the receipts, bank statements and depreciation schedules. Keep digital copies and organise folders by financial year.

Costs and fees to expect

Plan for these common and recurring costs:

  • Quantity surveyor / depreciation schedule: AUD 300–900 (one‑off, every few years if you renovate).
  • Tax agent fee for a rental return: AUD 300–1,200 per year.
  • Property management fees: commonly 6–8% of rent plus letting fees (one‑off to source a tenant).
  • Loan interest: your largest ongoing cash cost — interest alone is the part you can usually claim as a deduction.
  • Holding and running costs: council rates, strata, insurance, maintenance — budget realistically for vacancies and repairs.

What about proposed policy changes in 2026?

As of early 2026 the government is modelling two major changes: a cap allowing negative gearing on a maximum of two properties per person, and a reduction of the CGT discount from 50% to 33% for assets held longer than 12 months. Neither change had been legislated ahead of the May 2026 budget, so current law still permits full negative gearing and the 50% CGT discount.

Practical implications if proposals become law:

  • If the proposed two‑property cap becomes law, losses from any third (or further) properties would likely be quarantined — you could only offset them against future rental income from those properties, not against your salary.
  • A smaller CGT discount would increase tax on long‑held investments when sold, altering after‑tax return calculations and potentially changing hold vs sell decisions.

Alternatives and comparisons

Negative gearing is a tax outcome — not an investment strategy in itself. Here are alternatives to relying on gearing:

  • Buy a positively geared property that provides immediate cash flow.
  • Hold property for capital growth without expecting annual tax offsets.
  • Invest in diversified assets such as ETFs or managed funds where leverage and tax treatments differ.

Compare after‑tax returns, not just the presence of a tax deduction. Use ATO calculators and speak to a financial adviser for tailored modelling.

Tips — practical pointers for landlords in 2026

  • Get a depreciation schedule early if the property is new or recently renovated — it often increases deductible amounts in early years.
  • Use separate bank accounts for rental income and expenses to make bookkeeping simple.
  • Don’t rely on negative gearing to make a bad purchase work. Run cashflow scenarios for interest rate rises and vacancies.
  • Check Services Australia and the ATO pages for updates — if rules change after the May 2026 budget they will publish guidance and transitional arrangements.
  • If you own multiple properties, review ownership structures and seek advice now — a change to a two‑property cap could require strategic planning.

Common mistakes to avoid

  • Claiming travel to inspect a residential rental property — travel deductions for residential property were restricted from 2017 and improper claims attract penalties.
  • Failing to apportion private and rental use correctly — for part‑time rental or mixed‑use properties, apportionment errors are common.
  • Not keeping receipts and records for five years after lodging your return.
  • Assuming future tax changes are law — proposals discussed by Treasury may never become legislation. Plan for both current rules and possible reforms.
  • Using negative gearing as the main reason to buy rather than focusing on property fundamentals: location, rent growth, anticipated maintenance and tenant demand.

Related Articles

Negative gearing is still available in Australia in 2026, but it’s a tax result — not a property guarantee. Current law lets investors offset rental losses against other income, and the 50% CGT discount still applies. That said, Treasury modelling ahead of the May 2026 budget flagged a possible two‑property cap and a reduction of the CGT discount to 33% — proposals that could reshape the returns for portfolio investors if passed. Keep clear records, Look at the costs of depreciation schedules and tax agents, and plan for both current rules and the chance of change. For the latest official guidance, check the ATO at ato.gov.au and log in to myGov (my.gov.au) to manage tax affairs online.

This article was created with AI assistance.