Negative gearing is changing in 2027. Here is the playbook.

The short version

In the 2026-27 Federal Budget, handed down on 12 May 2026, the Government announced that from 1 July 2027 negative gearing against salary and wages will be limited to new builds.

If you buy an established investment property after budget night, you will no longer be able to deduct rental losses against your regular income once the rules start. If you buy a new build, nothing changes for you: you keep negative gearing and the 50 percent capital gains tax discount. For investors whose strategy relies on negative gearing, the message is simple. New builds are now the path that keeps the strategy intact, and new builds need construction or off the plan finance, which works differently from a normal home loan. That is where getting the finance right matters most.

What actually changed

The changes apply to residential property only. Commercial property and shares are unaffected.

What counts as a new build

This is the part to get right, because the definition is specific and getting it wrong is expensive.

Eligible, keeps negative gearing

• Off the plan apartments and units
• A house built on previously vacant land, including house and land packages
• A knockdown rebuild that creates multiple dwellings, such as a single house replaced by a duplex
• A newly built home occupied for less than 12 months before you buy it

Not eligible, treated as established

• Single house knockdown rebuilds
• Granny flats
• Extensions or renovations to an existing home
• Any established dwelling held 12 months or more before being sold to you

If you are not certain which side of the line your project sits on, ask before you sign. This is exactly the kind of question we sense check together with your accountant, because the answer changes both the tax outcome and the right finance structure.

Why this is bigger in Perth than almost anywhere

The new rules push investors toward new builds, and WA is arguably the best placed market in the country to make a new build investment work:

• The fastest population growth in Australia, around 2.2 percent a year, with roughly 54,000 new residents arriving in Perth annually on the back of the mining and infrastructure economy.
• A severe rental shortage, with vacancy rates extremely tight by historical standards, so new rental stock is absorbed quickly.
• Yields above the eastern capitals, with Perth gross rental yields around 3.6 percent. Higher rent relative to price means more of your loan cost is covered by income from day one.

Why new build finance is different, and why it pays to get it right

A construction or off the plan loan is not a standard home loan. The traps that catch people out:

1. Money is released in stages. Construction loans pay the builder across roughly five to six progress payments: slab, frame, lockup, fit out and completion. You pay interest only on what has been drawn, and the sequencing has to be planned from the start. Our construction loan guide and drawdown calculator cover this in detail.
2. Lender construction policies vary wildly. LVR limits, builder and contract requirements, drawdown speed and how off the plan purchases are valued all differ from one lender to the next. The best rate lender can be the wrong lender if their drawdowns are slow or their builder rules do not fit your project.
3. Off the plan adds timing risk. Long settlement windows and valuation at completion mean the finance needs to be structured for what the market looks like at handover, not just today.
4. Owner builder is harder again. Most lenders are cautious, deposits are larger, and you will typically need a quantity surveyor report and inspections at each stage. We cover it fully on our owner builder finance WA page.

This is the whole reason a specialist matters. Many brokers do not write construction loans regularly. The ones who do can match your project to the lender whose construction policy actually fits, which saves delays, fall throughs and stress between stages.

What to do now

• Already own investment property? You are likely grandfathered, but confirm your status with your accountant before making any changes to the portfolio.
• Were about to buy an established rental? Pause and get advice. After budget night, an established purchase no longer gives you negative gearing against your income, and a new build may suit the strategy far better.
• Considering a house and land package, off the plan or a duplex build? This is the path the new rules favour, and the key is structuring the finance correctly from the start. Our house and land finance guide covers the sequencing, and we have dedicated guides on off the plan finance in Perth and knockdown rebuild duplex finance.

We specialise in new build and construction finance for WA investors: matching the project to the right lender, managing the staged drawdowns, and working alongside your accountant so the structure is right before you commit. If you want the numbers on your own situation, our investment property loan guide covers how lenders assess investors in 2026, and if the deposit is coming from your home rather than savings, our guide to using equity to buy an investment property covers that structure, while using equity to fund a build covers funding the construction itself.

Frequently asked questions

General information only and does not consider your personal circumstances. Negative gearing and tax outcomes depend on your situation: confirm your position with a registered tax agent or accountant, and we will work alongside them on the lending side. Lending criteria, terms and conditions apply.