Negative Gearing 2026: How Your Borrowing Capacity Just Changed and Which Banks Have Already Moved
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- Three big shifts in three weeks: negative gearing reform, banks changing serviceability calculations, and borrowing capacity falling — all before the legislation has passed Parliament.
- The borrowing-capacity hit: for a typical investor on the 37% tax bracket, the practical reduction is around 10–15%. At higher tax brackets or with multiple properties, it can exceed 20%.
- Banks already moved: NAB, Macquarie, Great Southern Bank and ANZ have updated investor serviceability. CBA and Westpac have not yet announced at time of writing.
- What still works: properties owned before 12 May 2026 are fully grandfathered. New builds keep full negative gearing. Refinances on grandfathered properties retain the benefit.
- The cost of getting this wrong: a pre-approval based on the old rules can fall over at settlement. Investors with portfolios are particularly exposed.
If you own one or more investment properties — or you were planning to buy one — the past three weeks have rewritten the rules. The Budget on 12 May 2026 changed the tax treatment of negative gearing on established properties. That part has been front-page news. What has been covered less, and matters more for borrowing right now, is what the banks have done since.
Several major lenders have already changed how they assess investor serviceability, well before the legislation has passed Parliament. That means borrowing capacity for established investment properties is lower today than it was on Budget night, even though the tax change itself doesn't take effect until 1 July 2027. This guide explains exactly what changed, which banks have moved, how much borrowing capacity has dropped, and — most importantly — what to do about it.
- What actually changed in the 2026 Budget?
- Which banks have changed their lending rules?
- How much has borrowing capacity actually dropped?
- Why are banks moving before the law has passed?
- Who does this actually affect right now?
- What about properties I already own?
- Do new builds escape the changes?
- What should investors do this week?
- Glossary of key terms
- Frequently asked questions
What actually changed in the 2026 Budget?
From 1 July 2027, negative gearing on residential property will only apply to new builds. For established properties purchased after 7:30pm AEST on 12 May 2026, rental losses can no longer be deducted against your salary — they're quarantined and carried forward against future rental income or capital gains.
The Budget package announced on 12 May 2026 contains the most significant change to property investment taxation in decades. The headline measures:
- Negative gearing on established properties is being removed. If you buy an existing residential property after 7:30pm on 12 May 2026, you can no longer use rental losses to reduce the tax you pay on your salary or other income. The losses are carried forward and can only offset future rental income or capital gains.
- New builds remain fully negatively geared. The policy intent is to channel investment into new housing supply.
- The 50% CGT discount is being replaced with CPI indexation (so only the real gain is taxed) plus a 30% minimum tax on that real gain. New builds keep the existing 50% discount.
- Existing investments are grandfathered. Anything you owned on or before 12 May 2026 continues exactly as before, until you sell.
The legislation hadn't passed at time of writing. Labor needs Greens support in the Senate to get the bill through. The Coalition has indicated it will vote against. The Greens are pushing for tougher terms but appear unlikely to block the bill outright. The major lenders aren't waiting for Parliament — and that's where it gets interesting.
Which banks have changed their lending rules?
NAB, Macquarie Bank, Great Southern Bank and ANZ have already updated investor serviceability calculations. CBA and Westpac had not yet announced changes at time of writing. The moves remove negative gearing tax benefits from the borrowing-capacity calculation for new purchases of established properties.
Here's where each major lender sits, as reported in mortgage industry coverage at 28 May 2026:
The pattern across the lenders that have moved is consistent. If the contract of sale was executed on or before 7:30pm AEST on 12 May 2026, negative gearing continues to count in the lender's serviceability calculation. For contracts executed after that date, negative gearing is only included in the calculation if the property qualifies as a new build under the lender's criteria.
ANZ's announcement is the sharpest example of how fast this is moving. Their broker correspondence (reported 27 May 2026) set a hard deadline: any in-flight application not unconditionally approved by close of business Thursday 28 May 2026 would be re-assessed under the new rules. Applications already unconditionally approved are unaffected. Refinances on grandfathered properties, top-ups directed at qualifying property improvements, and eligible new builds retain negative gearing in serviceability.
How much has borrowing capacity actually dropped?
Industry estimates put the practical reduction at 10–15% for a typical investor on the 37% tax bracket with one negatively geared property. At higher tax brackets, with multiple properties, or with larger rental losses, reductions can exceed 20% and translate to hundreds of thousands of dollars off the borrowing ceiling.
The size of the hit comes from how lenders model investor serviceability. Banks don't just look at salary; they add the projected tax refund from negative gearing into your assessed income, then stress-test the loan repayments at around 8.5–9.0% regardless of your actual rate. Strip the tax refund out of the income side, and the assessed income falls — which means the maximum loan they can responsibly approve falls too.
The effect compounds with two things: your marginal tax bracket (a higher bracket means a bigger refund, so a bigger loss when it's removed) and the number of negatively geared properties you hold (each one was contributing to assessed income before, each one stops now). For investors on the 47% bracket with multiple established properties, the cumulative impact can be material — and the figure that hits your borrowing ceiling can run to several hundred thousand dollars.
The practical reality: the same investor with the same salary, the same deposit and the same rental income can find that what banks were willing to lend them in early May 2026 is now meaningfully lower — at every lender that has updated. This is what's reshaping the market right now, even before the tax change itself takes effect.
Why are banks moving before the law has passed?
Lenders are citing responsible lending obligations under the National Consumer Credit Protection Act. If the Budget passes — which the industry largely expects — they can't keep approving loans based on tax benefits that won't exist by the time the loan is being repaid. Moving early reduces their risk.
Australian lenders are required to assess "not unsuitable" loans under the NCCP Act. If a lender approves a loan today based on the assumption that the borrower can continue to claim negative gearing against salary — and that assumption is overturned next year — the lender carries the regulatory risk, not the borrower. Several lenders have moved publicly to put their new policies in writing precisely to manage that risk.
It's also worth noting that some lenders compete on serviceability. The ones who move first lose some volume in the short term but reduce their exposure if the policy lands. The ones who hold out keep volume in the short term but risk having to re-assess pipelines later. Either way, by mid-2026 it's reasonable to expect all major lenders to align with the reform.
Who does this actually affect right now?
Five groups are affected today: investors mid-purchase on established properties, investors with conditional pre-approvals, investors refinancing established holdings, investors looking at new builds, and existing portfolio holders considering their next purchase.
You're house-hunting for an established investment property
Your borrowing capacity at NAB, Macquarie, Great Southern and ANZ is already lower than it was three weeks ago. CBA and Westpac haven't announced yet, but the industry expectation is they will. Get your numbers re-modelled with current lender criteria before signing any contract — and check eligibility for grandfathering if you executed a contract before the 12 May cut-off.
You have a conditional pre-approval issued before Budget night
This is the highest-risk group. ANZ has stated unconditional approvals are protected, but conditional pre-approvals can be reassessed at renewal or before unconditional. Check the issuing lender, the expiry date, and what their post-Budget policy actually says about your specific situation.
You're refinancing an existing investment property
Generally fine. Refinances of properties purchased on or before 12 May 2026 retain negative gearing in serviceability at the lenders who have announced changes. Top-ups and cash-out for property improvement remain eligible at ANZ. This is one of the few areas where the new rules don't materially hurt.
You're looking at new builds, off-the-plan or knock-down rebuilds
This is where the new policy is genuinely friendly. Negative gearing on new builds is preserved. CGT — the 50% discount on new builds is also preserved. The policy intent is to incentivise new supply, and the lender treatment reflects that. Worth running the numbers comparing an established target to a new-build alternative.
You already own a negatively geared portfolio
Everything you currently hold is grandfathered. Negative gearing on those properties continues exactly as before until you sell. The issue isn't your existing portfolio — it's the next property. With your serviceability already largely committed to your existing loans, a 10–15% reduction in borrowing capacity for the next purchase can mean an established property you could afford a month ago is now out of reach with the same lender.
What about properties I already own?
Existing investment properties owned on or before 12 May 2026 are fully grandfathered. Negative gearing on those properties continues exactly as it does today, until you sell. There is no time limit on the grandfathering.
This is one of the cleanest parts of the package. If you owned a negatively geared property on Budget night, nothing about that property's tax treatment changes. You can keep claiming losses against salary. The 50% CGT discount still applies to those holdings on sale.
The trigger event for losing grandfathering is selling. If you sell a grandfathered property and reinvest in a new established property after 12 May 2026, the new one is treated under the new rules. That's worth thinking carefully about for anyone who was considering portfolio rebalancing.
Do new builds escape the changes?
Yes. New residential builds — vacant-land construction, off-the-plan, and knock-down rebuilds that add a dwelling — keep full negative gearing and the 50% CGT discount under the new rules. This is the policy's deliberate carve-out to encourage new housing supply.
A "new build" under the proposed framework includes vacant-land construction (build a house on land you own), off-the-plan purchases (buy the dwelling before it's finished), and knock-down rebuilds where the result adds a dwelling. Established homes — even if extensively renovated — are not new builds for these purposes.
From a lender's perspective, the ones who have updated policy continue to apply negative gearing to serviceability when the property qualifies as a new build. So the borrowing-capacity gap between an established and a new-build investment purchase has widened: the new build gets both the tax treatment and the favourable serviceability calculation.
Worth weighing up: new builds typically cost more to construct, can carry longer settlement timelines, and have different valuation and finance considerations than established stock. The tax-and-borrowing edge is real, but it doesn't make every new build the right purchase — the underlying property, location and price still matter.
What should investors do this week?
Three actions: get your current borrowing capacity re-modelled under the new lender rules; check the status of any in-flight applications or conditional pre-approvals; and review your portfolio strategy against the new tax framework before your next purchase.
1. Re-model your current borrowing capacity
The number a lender quoted you in April 2026 is not the number they'd quote you today. If your investment strategy depended on a specific borrowing figure, that figure needs revisiting. A good broker will run scenarios across multiple lenders so you can see where each one currently sits — not all lenders have moved by the same amount, and the ones who haven't moved yet are going to.
2. Check in-flight applications and pre-approvals
If you have an application sitting at NAB, Macquarie, Great Southern Bank or ANZ, find out exactly where it sits in their pipeline. Unconditionally approved applications generally proceed. Conditional pre-approvals may be reassessed. The lender's broker channel can tell you the specific status of your file — and if it's at risk, there may be alternative lenders that can move faster.
3. Review your portfolio strategy
If your strategy was built around buying further established properties using negative gearing to drive serviceability, that strategy now needs a rebuild. Options include shifting your next purchase to a new build (where the old rules still apply), restructuring existing loans to free up serviceability, or holding off on the next purchase until the dust settles. Each of these has trade-offs and the right answer depends on your individual position.
This is where independent advice matters more than usual. The lender with the best rate for your situation may not be the one with the best policy for your situation right now — and the gap between them has rarely been wider.
The Budget measures discussed here had not been legislated at time of writing. The proposed commencement date is 1 July 2027 for negative gearing and CGT changes, and 1 July 2028 for the discretionary trust minimum tax. Final details may change before commencement.
The borrowing-capacity figures quoted are illustrative ranges drawn from publicly reported industry estimates. Your individual capacity depends on your income, debts, tax bracket, property type, lender choice and a number of other factors.
This is general information only, not personal financial, tax, legal or credit advice. For tax advice, speak to a registered tax agent. For credit advice tailored to your situation, speak to a licensed credit representative.
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Book a portfolio reviewGlossary of key terms
- Negative gearing
- When the costs of owning an investment property (loan interest, rates, repairs, depreciation) exceed the rent it produces. The loss can currently be deducted against your other income — that's the "gearing" benefit being changed for established properties.
- Serviceability
- A lender's assessment of whether you can afford a loan based on income, existing debts, expenses and stress-tested repayments. The negative-gearing changes affect how your assessed income is calculated.
- Borrowing capacity
- The maximum amount a lender is willing to approve for you, given their serviceability model. With lenders removing negative gearing from the calculation, this number is falling for many investors.
- Grandfathering
- Continuing the old rules for arrangements already in place. Properties owned on or before 12 May 2026 are grandfathered — they keep the existing negative-gearing treatment indefinitely.
- New build
- Under the proposed rules, vacant-land construction, off-the-plan purchases, and knock-down rebuilds that add a dwelling. New builds keep full negative gearing and the 50% CGT discount.
- Established property
- A previously occupied residential property, as opposed to a new build. Established properties bought after 7:30pm on 12 May 2026 lose the ability to offset rental losses against salary.
- CGT discount
- The 50% capital gains tax discount currently available on investment properties held longer than 12 months. Being replaced (for established properties) with CPI indexation plus a 30% minimum tax on the real gain.
- Stress-test rate
- A buffer rate (currently around 8.5–9.0%) at which lenders assess your repayments, regardless of the actual rate you'll pay. Built in for borrower protection if rates rise.
Frequently asked questions about the 2026 negative gearing changes
When do the negative gearing changes take effect?
The tax change itself is proposed for 1 July 2027. However, several lenders — NAB, Macquarie, Great Southern Bank and ANZ — have already changed their serviceability calculations for new purchases of established investment properties, effective immediately. The 50% CGT discount change is also proposed for 1 July 2027. A 30% minimum tax on discretionary trusts is proposed for 1 July 2028.
Which banks have changed their lending rules so far?
As at 28 May 2026, NAB, Macquarie Bank, Great Southern Bank and ANZ have publicly updated their investor serviceability policies. Commonwealth Bank and Westpac had not announced policy updates at time of writing, but the industry expectation is they will follow.
How much will my borrowing capacity drop?
Industry estimates suggest a typical investor on the 37% tax bracket with one negatively geared established property will see a 10–15% reduction. Higher tax brackets, larger rental losses or multiple properties can push that beyond 20%, with dollar-terms reductions running into the hundreds of thousands. The exact figure depends on your income, deposit, property type and choice of lender.
Are properties I already own affected?
No. Properties owned on or before 12 May 2026 are fully grandfathered. Negative gearing continues exactly as before on those holdings, with no time limit. The 50% CGT discount also continues to apply to those holdings on eventual sale.
Do new builds still allow negative gearing?
Yes. New residential builds keep full negative gearing under the proposed rules — including vacant-land construction, off-the-plan purchases, and knock-down rebuilds that add a dwelling. New builds also keep the 50% CGT discount. This is the policy's deliberate carve-out to encourage new housing supply.
What happens to my pre-approval issued before Budget night?
This depends on the lender and whether your approval is conditional or unconditional. ANZ has stated unconditional approvals are unaffected, but conditional pre-approvals can be reassessed at renewal. Speak to your broker or lender directly to confirm the status of your file.
Can I refinance my existing investment loan without losing negative gearing?
Yes. Refinances of properties purchased on or before 12 May 2026 retain negative gearing in serviceability at the lenders who have announced changes. Top-ups and cash-out for property improvement on grandfathered properties also remain eligible at ANZ.
Has the legislation actually passed?
Not at time of writing. The Budget bill needs to pass the Senate. Labor doesn't hold a Senate majority and is negotiating with the Greens. The Coalition has indicated it will vote against. Industry expectation is that the bill will pass with some amendments. Lenders are moving on the basis they expect it to pass.
Should I rush to buy before the rules change?
The "rush to buy" window for grandfathering closed at 7:30pm on 12 May 2026 — contracts executed after that date are subject to the new rules regardless of when settlement occurs. The current question for most investors isn't "should I buy fast" but "does my strategy still make sense in the new framework." That's a question worth discussing with a broker and a tax agent.
Does it cost anything to talk to Everstone Finance?
No. We're paid by lenders at settlement, not by you. There's no cost for the initial review and we'll give you an honest answer on where you stand — including "wait and see" if that's genuinely the right call.
The bottom line: the 2026 Budget changed the tax rules, but it's the lenders' response that's changing borrowing capacity right now. If your investment strategy depended on a borrowing figure quoted before mid-May, that figure may no longer hold. Get it re-checked before you commit to anything.
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