From 1 July 2027, new and established residential property are taxed differently. If you plan to recycle into property, that difference changes how losses are claimed, how gains are taxed and how fast the strategy moves.
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The 2026-27 Federal Budget, delivered on 12 May 2026, changed how residential investment property is taxed. The changes became law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received assent on 26 June 2026, and they apply from 1 July 2027.
For property, the outcome turns on two things: when you bought, and whether the property is new or established. Our homepage sets out debt recycling and the 2026 Budget in brief, including who is exempt.
The cut-off is 7:30pm Australian Eastern Standard Time (AEST) on 12 May 2026. A property under contract before then counts as held.
| When Bought | Established Property | New Build |
|---|---|---|
| Before the cut-off | Unchanged until sold | Unchanged |
| After the cut-off, to 30 June 2027 | Losses offset other income until 30 June 2027, then residential property income only | Losses offset other income |
| On or after 1 July 2027 | Losses offset residential property income only, with the excess carried forward | Losses offset other income |
Shares, exchange traded funds (ETFs) and commercial property are outside the negative gearing change.
Debt recycling runs as a cycle. A split against your home funds the investment, the interest may be deductible, and the income and any tax refund go back onto the home loan. Negative gearing is a different idea, covered in our comparison of debt recycling vs negative gearing.
With an established property bought after the cut-off, interest on the loans used to buy it counts among that property's deductions. From 1 July 2027, if those deductions exceed the rent, the excess cannot reduce tax on your salary. It is carried forward against future residential property income or residential capital gains.
The deduction is delayed, not lost. A delayed deduction means no refund to redirect that year, so the home loan comes down more slowly. A property whose rent covers its costs is less affected, because there is no excess to carry forward.
A property earns $26,000 in rent in 2027-28. Interest on the deposit split and the property loan is $34,000, and other costs are $6,000. The figures are assumed for illustration only.
| New Build | Established, Bought After the Cut-Off | |
|---|---|---|
| Net loss for the year | $14,000 | $14,000 |
| Can reduce tax on salary in 2027-28 | Yes | No |
| Unused loss | None | Carried forward against future residential property income or gains |
Our page on debt recycling with an investment property shows how the deposit split and property loan are set up.
From 1 July 2027, the 50% capital gains tax (CGT) discount for individuals, trusts and partnerships is replaced with indexation of the cost base for inflation, plus a 30% minimum tax on real gains. Gains that accrued before 1 July 2027 keep the 50% discount.
How that could affect a future sale is a question for your financial adviser.
A new build must genuinely add to housing supply, such as a dwelling on vacant land or a knock-down rebuild that increases the number of dwellings. A renovation, or a rebuild that replaces one home with one home, does not qualify.
The Act leaves the detailed requirements to be set by the Minister. In August 2026, Treasury consulted on draft rules under which a property is generally new if it adds to supply and is bought within 24 months of a certificate of occupancy being issued. Confirm the final rules with your accountant before you sign.
Some new builds are bought off the plan or built in stages, and lenders assess these purchases differently from an established home. Ask how valuation and settlement timing would work before you commit.
Interest on a split used to buy shares or ETFs remains deductible against your other income, subject to the usual rules. The CGT change applies to shares as it does to property.
Our page on debt recycling with shares and ETFs explains how a share-based structure is set up.
The right asset depends on your goals, cash flow and time frame. Questions to settle with your advisers:
We arrange the lending and keep each split's purpose clean. Your financial adviser recommends the asset and your accountant confirms the tax treatment, as Kingfisher does not give tax or investment advice.
New and established property are now taxed differently, and that difference flows through to debt recycling. A new build keeps losses usable against your income, while an established property bought after Budget night delays them and slows the loop. Shares sit outside the negative gearing change. Settle the asset with your adviser and the tax detail with your accountant before the lending is arranged.
We arrange the lending for either route and keep each split's purpose clean from the first drawdown.
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Written and updated byAlex GeeDirector & Mortgage Broker, Kingfisher Finance Group
Reviewed byJessica MaraisMortgage & Finance Broker, Kingfisher Finance GroupYes, if you bought it after 7:30pm AEST on 12 May 2026. From 1 July 2027, losses on it can only be offset against residential property income, with any excess carried forward.
Only until 30 June 2027. From 1 July 2027, a net loss can no longer reduce tax on your salary or other non-residential income.
A dwelling that genuinely adds to housing supply, such as one built on vacant land. The detailed definition was still being finalised after Treasury consultation in August 2026.
It can still be a deduction, but it forms part of that property's deductions. From 1 July 2027, any excess over residential property income is carried forward rather than claimed against your salary.
No. Shares and ETFs are outside the negative gearing change, although the CGT changes from 1 July 2027 apply to them.
The core changes are law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. Further detail, including the final new build definition, was still being settled after consultation in August 2026.
Debt recycling through property, answered: equity, usable equity calculations, redraw vs offset, negative gearing, costs, refinancing and what to prepare.
Read more → GUIDEAlready own a rental and a home loan? Which debt to attack first, why non-deductible usually wins and the 2026 changes that flip the order.
Read more → SERVICEDebt recycling for property investors: reduce home loan debt while funding your next investment property. Loan structure, worked example, risks, FAQs.
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