Negative gearing is changing. Your depreciation entitlement isn’t.

If you’re buying an established residential investment property, the rules you’re buying under have changed. The tax depreciation on that property hasn’t, every dollar of decline in value is still deductible when compared to the tax landscape prior to the changes. What’s changed is how and when you get to use those deductions. For a lot of investors, that shift makes capturing depreciation more important, not less.

What actually changed

As part of the 2026–27 Federal Budget, the Government moved to limit negative gearing on established residential property to new builds. These measures are now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.

From 1 July 2027, if you acquire an established residential property after 7:30pm AEST on 12 May 2026, any net rental loss, including the portion driven by depreciation, can no longer be offset against your salary or other non-rental residential property income. Instead, those losses can only be offset against residential rental income or capital gains from rental property.

Critically, the losses aren’t lost. Any excess is quarantined and carried forward to offset residential property income in future years.

Why banking your deductions matters now more than ever

Some residential investments start negatively geared. Over time, as the loan reduces and rent rises, the property moves toward a positively geared position. Under the new rules, the net losses you accumulate in the early years, depreciation included, are carried forward and available to offset that future rental income when it arrives.

That works best if the losses are captured and sitting on your previous tax returns. A tax depreciation schedule is how you make sure every dollar of decline in value is claimed and forms part of those carried-forward losses, rather than being left on the table.

Two points worth knowing:

• The carried-forward losses can be offset against residential rental income from any of your properties. If you hold more than one, a loss on one can offset income from another.
• New builds are exempt. If the property is an eligible new build, negative gearing against your broader income continues to apply.

If you bought before Budget night, nothing changes

Properties held before 7:30pm AEST on 12 May 2026, including those already under contract awaiting settlement, are grandfathered under the existing rules. No quarantining, no change to how your losses are applied.

The bottom line

A tax depreciation schedule still captures every dollar of decline in value on your property. What’s changed is when that deduction delivers its benefit. For post–budget night established purchases, that makes disciplined, accurate depreciation reporting more valuable, not less.

Talk to GQS before you buy a residential investment property, or before you lodge your next return, to make sure your depreciation is captured and working for you under the new rules.