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“Is it still worth buying an investment property” is a different question from the one asked a year ago, and the reason is a date rather than a market. The negative gearing and capital gains changes announced in May 2026 commence on 1 July 2027.
They are law and they have not started. Properties held at the announcement are exempt from the negative gearing restriction, and a property bought today is not. That single fact changes the arithmetic more than the cash rate does.
Two things change on the same date, and together they are why “is it still worth buying an investment property” is a live question.
First, negative gearing is restricted to new builds. On an established dwelling the excess of residential deductions over residential income is no longer deductible against your other income.
It is not lost, though, and this is the part most commentary gets wrong. The excess becomes a quarantined amount that is carried forward and can be applied against residential capital gains later.
So the change is better described as a deferral than a denial. What it removes is the cash flow benefit now, which is exactly the benefit most investors were relying on.
Second, the capital gains treatment changes for gains accruing after 1 July 2027. Cost base indexation with a minimum tax rate of thirty per cent replaces the automatic fifty per cent discount.
With one significant exception. The Act keeps a fifty per cent discount available for a new residential dwelling, and for affordable housing, which an eligible owner can elect instead.
Both were announced on 12 May 2026 and are law, applying from the 2027-28 income year. Weighing up “is it still worth buying an investment property” without accounting for them means working from the old rules.
One caution on the new build side: the Act does not define a new residential dwelling itself. It requires the Minister to determine the requirements by legislative instrument, and that detail was still to come at the time of writing.
So anyone being told a particular project qualifies should ask on what basis. This is tax rather than credit, and your accountant should confirm how all of it applies to your position. See how negative gearing works for the mechanism being changed.
For most people “is it still worth buying an investment property” turns on one date. Properties held at 7.30pm on 12 May 2026 are exempt from the negative gearing restriction, and everything bought after that sits outside the exemption.
| When you bought | Negative gearing from 1 July 2027 | What it means for you |
|---|---|---|
| Last acquired before 7.30pm, 12 May 2026 | Exempt from the restriction | The existing treatment continues for that dwelling |
| Bought after that, established dwelling | The restriction applies from the 2027-28 income year | The excess is quarantined and carried forward rather than lost, so price the cash flow effect rather than the whole deduction |
| Bought after that, new build | Negative gearing remains available, and a fifty per cent capital gains discount stays electable | That the project meets the definition, which a ministerial instrument is still to set |
| Any of the above, on capital gains | Gains accruing to 30 June 2027 keep the old treatment and are deferred | Owning the asset before 1 July 2027 is what secures that split |
Capital gains works by when the gain accrues rather than when you bought. For an eligible owner the Act treats the asset as sold just before 1 July 2027 and reacquired just after, so the gain to that point is deferred under the old treatment.
None of that is advice about your own tax position, and it is the part worth taking to your accountant before you commit.
“Is it still worth buying an investment property” also has to be answered against a borrowing environment that has already moved. The cash rate sits at 4.85 per cent after four rises during 2026, and lending rates sit above it.
Investor assessments are tighter than owner-occupier ones in any case. Rental income is shaded rather than counted in full, and the serviceability buffer applies on top of the actual rate. Some lenders also apply their own restrictions on high-ratio investment lending.
So the shortfall between rent and repayments is wider than it was, and from 1 July 2027 the tax offset against that shortfall narrows for established stock.
So “is it still worth buying an investment property” depends heavily on whether you can carry the holding cost without the cash flow benefit you may have been counting on.
New builds keep two advantages after 1 July 2027, not one. Negative gearing remains available on them, and the Act also keeps a fifty per cent capital gains discount electable for a new residential dwelling.
That second point is left out of most summaries, and it is the larger of the two over a long hold. It is also why new stock is being looked at by investors who never considered it.
That is not automatically the better purchase. New stock often carries a price premium, and depreciation benefits that partly offset it are themselves a tax question rather than a certainty.
Off-the-plan adds its own risks: settlement risk if values move, a valuation at completion rather than at contract, and a finance approval that has to still hold when the building is finished.
And the definition is not settled. What counts as a new residential dwelling is to be set by a ministerial legislative instrument, so the boundary around knock-down rebuilds and substantial renovations is not yet fixed.
The comparison is price, yield and the tax position together, on real numbers. See the Sydney investment finance guide.
Anyone asking “is it still worth buying an investment property” is usually comparing it against something, and three alternatives come up most.
Paying down the home loan instead. The return there is equal to your own loan rate, which sits above the cash rate rather than at it, and that is a higher bar than it was while rates were falling.
Holding what you already own. Dwellings last acquired before the May 2026 announcement keep the existing negative gearing treatment, which is a factor your accountant can put a figure to.
Or superannuation, which since 10 August 2026 can no longer borrow to buy residential property, though a fund can still acquire eligible business real property or buy outright.
Each of those is a different question from the lending one, and two of them are tax and superannuation questions rather than credit. See SMSF lending and equity release.
Three questions settle “is it still worth buying an investment property” more reliably than any forecast.
The first is resilience, and it decides “is it still worth buying an investment property” more often than tax does.
Could you carry the holding cost if the property sat vacant for two months and rates rose again from here? That is the resilience test, and it does not depend on the tax treatment at all.
The second is the tax position. Does “is it still worth buying an investment property” survive being tested on the 2027-28 rules rather than today’s? A purchase that only stacks up under the old treatment is worth a longer conversation with your accountant.
And the third is time. Are you holding long enough that the capital gains change and any further price movement have room to play out? Three yes answers and “is it still worth buying an investment property” stops being a forecast question.
We will show you what the lending side supports, and say so plainly when it is less than you hoped. See investment lending or call +61 447 959 546.
It depends on whether the purchase works under the rules applying from the 2027-28 income year rather than today’s. Negative gearing is restricted to new builds from then, and dwellings last acquired before 7.30pm on 12 May 2026 are exempt while a purchase made now is not.
On an established dwelling the excess is quarantined and carried forward rather than lost, so what changes is the cash flow rather than the deduction itself.
1 July 2027. They were announced on 12 May 2026 and are law, but they have not commenced, which is why a good deal of commentary describes them as already in effect.
The capital gains change starts on the same date and applies to gains accruing after it, rather than to the whole gain on a property you already hold.
If you last acquired it before 7.30pm on 12 May 2026, it is exempt from the negative gearing restriction and the existing treatment continues.
The capital gains change works differently: for an eligible owner the asset is treated as sold just before 1 July 2027 and reacquired just after, so the gain to that point is deferred under the old treatment and only the later portion falls under the new rules.
Your accountant should confirm both.
Yes, and new builds also keep a fifty per cent capital gains discount as an election, which most summaries omit. Whether a new build is the better purchase is a separate question.
New stock often carries a price premium, off-the-plan brings settlement and valuation risks, and what counts as a new residential dwelling is to be set by a ministerial instrument that was still to come at the time of writing.
The shortfall between rent and repayments is wider than it was, with the cash rate at 4.60 per cent after four rises during 2026, and investor assessments shade rental income and apply a buffer above the actual rate.
From 1 July 2027 the tax offset against that shortfall also narrows for established dwellings, so both sides move the same way.
Partly, and it depends which change you mean. The negative gearing exemption attaches to dwellings last acquired before 7.30pm on 12 May 2026, which has passed, so buying an established dwelling today does not escape that restriction.
On capital gains it is different: owning the asset before 1 July 2027 means the gain accrued to that date keeps the old treatment and is deferred, with only the later portion under the new rules. Your accountant should put figures to that for your own position.
The commencement dates and grandfathering rules for both changes are published by the ATO. None of this is tax advice, and your accountant should confirm how it applies to your own position.
Paritosh Wadhwani | Director and Principal Broker, APW Finance
Member of the Finance Brokers Association of Australia (FBAA). Arranging residential, commercial and specialist lending for Sydney clients across a panel of more than 50 lenders.
APW Finance Pty Ltd, 304/20a Lexington Drive, Bella Vista NSW 2153. Email: info@apwfinance.com. Phone: +61 447 959 546.
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This guide is general information only. It does not take into account your objectives, financial situation or needs, and it is not financial or credit advice. Lending criteria, interest rates, duty thresholds and government schemes change, and every application is subject to lender approval.
Consider whether this information suits your circumstances and seek independent advice before acting. Figures quoted are current at the date below and should be confirmed before you rely on them. Last reviewed: October 2026.
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