If you already own a rental property, the first question is usually this one: do the 2027 negative gearing changes apply to me? For many existing owners, the answer is no. Properties acquired before 7.30 pm, by legal time in the Australian Capital Territory, on 12 May 2026 are carved out of the new loss quarantine. You can keep deducting net rental losses against other income, including salary, after 1 July 2027.

Grandfathering is narrower than it first sounds. It is about negative gearing, not capital gains tax. Even a fully grandfathered property will have gains that accrue from 1 July 2027 taxed under the new CGT settings, unless a specific CGT exception applies. It also turns on when you acquired the interest, not on when you first rented the property or when you last refinanced.

The core rules are already law. They were enacted in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026, and they apply from 1 July 2027. Later legislation has started to deal with some transfers, including certain interests acquired from a spouse, former spouse or co-owner. The detail is technical, so this guide separates the main cut-off from the situations that need a closer look.

This is general information only. It is not personal advice or tax advice, and it does not take into account your objectives, financial situation or needs. Before you buy, sell, refinance or change the ownership of a rental property, consider speaking with a registered tax agent.

What does grandfathering actually protect?

From the 2027-28 income year, net rental losses on many established residential investment properties can no longer be deducted against salary, wages or other non-property income. Those losses can still be used against income from residential properties, including capital gains, and any unused amount can be carried forward. That is the quarantine rule explained in the Never Lose Interest guide to the 2027 negative gearing and CGT changes.

Grandfathering takes a property out of that quarantine. If the exception applies, the Act tells you to disregard the deductions and income that relate to that ownership interest when you work out the quarantined excess. In practical terms, a grandfathered established dwelling can still be negatively geared against your other income after 1 July 2027, on the same broad basis as today.

It does not:

  • freeze the CGT rules for that property
  • change what expenses are deductible in the first place
  • apply automatically to a different property you buy later
  • apply to an established dwelling you acquired after the Budget night cut-off, unless another exception applies (for example, it is a new residential dwelling in relation to you, or a later transfer rule applies)

The Budget explainer puts the same point in one sentence: properties held before announcement (7.30 pm AEST on 12 May 2026) will be exempt from the negative gearing changes. The CGT reforms will still apply to gains accruing after 1 July 2027.

What is the exact cut-off time?

The Act uses 7.30 pm, by legal time in the Australian Capital Territory, on 12 May 2026. Official Budget materials often describe this as 7.30 pm AEST on Budget night. For almost everyone who signed days or weeks earlier, the exact minute will not matter. If you signed on 12 May 2026 itself, keep evidence of when the contract was entered into.

If you acquire a dwelling under a contract, the Act treats you as having an ownership interest from the time you enter into the contract, not from settlement. Signing before the cut-off, and settling after it, should not knock out grandfathering on that ground alone. Have the contract checked if the timing is tight, or if the contract was not binding at that time.

How do I work out whether my property is grandfathered?

Work through the property, not your portfolio as a whole. You can have one grandfathered property and another that is not.

You entered into a binding contract to buy the property before 7.30 pm ACT legal time on 12 May 2026. The ownership interest is generally grandfathered for negative gearing, even if settlement happened later, and even if you first rented it out after the announcement.

You bought an established home after that cut-off. The property is not grandfathered. You can still claim rental deductions. From 1 July 2027, a net loss can only be used against residential property income (including capital gains) and can be carried forward. It cannot reduce your salary or wages. Until 30 June 2027, the current rules continue to apply, including for properties bought after Budget night.

The dwelling is, or will be, a new residential dwelling in relation to you. New builds can continue to be negatively geared before and after 1 July 2027, if they meet the legal test. That test is not fully settled. See the Never Lose Interest guide to new builds versus established property after 2027.

You hold the property in a complying superannuation fund, including an SMSF, or in a widely held unit trust. The quarantine rule does not apply to those entities. They still have their own tax rules. Trustees should get advice on the structure, not assume the individual grandfathering test is the only issue.

You inherited the property, received it after a relationship breakdown, or took a transfer from a co-owner. The original Budget night cut-off is not always the end of the story. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026, which received Royal Assent on 26 August 2026, includes a schedule of negative gearing amendments. The explanatory material for that bill described changes so that, in some situations, a person who acquires an interest from a spouse, former spouse or co-owner (including because of inheritance or relationship breakdown) can keep the treatment the interest had in the previous owner's hands. The conditions are specific. Do not assume that every inherited or transferred property is grandfathered, and do not assume that none of them are. Get the current law checked against the actual transfer.

Does refinancing, rebuilding or adding a co-owner end grandfathering?

The enacted cut-off looks at when you last acquired the ownership interest, not at whether you have since changed the loan. Refinancing the same interest, on its own, is not the same thing as acquiring the property again. Keep the original contract. If you change the way the property is held, the analysis can change.

Adding a new co-owner, transferring a share to a spouse, or moving the property into a different entity can create a new acquisition of that interest. Whether the new interest is grandfathered depends on when it was acquired and on any later transfer rules that apply. A rebuild or a substantial renovation can also raise a separate question: whether the dwelling is, or becomes, a new residential dwelling. Until the new-build definition is settled, do not assume that knocking down a grandfathered house and replacing it will keep the old treatment, or that it will automatically qualify as a new build.

If you are considering any of those steps, get advice before you sign.

What if I bought after Budget night but before 1 July 2027?

You are not grandfathered, but the quarantine does not start until 1 July 2027. For the 2026-27 income year, the current negative gearing rules continue to apply. From 2027-28, net losses on that established dwelling are quarantined unless another exception applies.

That matters for cash flow. A property that stacks up in 2026-27 because a rental loss reduces your salary tax may look different from 1 July 2027, once that loss can only be used against residential property income. Model both periods, and read the new builds versus established property guide if you are still deciding what to buy.

Does grandfathering protect me from the CGT changes?

No. Grandfathering under the negative gearing rules does not lock in the 50% CGT discount for the whole of your gain. Gains that accrued before 1 July 2027 can still get the 50% discount if you were entitled to it. Gains that accrue from that date are generally taxed under cost base indexation and the 30% minimum tax. The law uses a deemed sale and reacquisition at market value just before 1 July 2027, with the calculation deferred until you actually sell.

That is a separate set of rules, and it applies to shares and other CGT assets as well as property. See the Never Lose Interest guide to CGT old versus new rules.

What records should I keep?

If grandfathering may apply, the documents that prove the acquisition date are the ones that matter most:

  • the signed contract, including the date and, if you signed on Budget day, any evidence of the time it became binding
  • transfer and settlement documents
  • records of any later change in ownership, such as a transfer to a spouse, a deceased estate, or a new co-owner
  • your cost base records, including the purchase price, incidental costs and capital improvements, which you will need for CGT even if the property is grandfathered for negative gearing

From 1 July 2027 you will also need a defensible market value for CGT purposes, or a method the law allows you to use instead, when you eventually sell. You can wait until the year of sale to finish that calculation, but the evidence is easier to collect now.

Frequently asked questions

I signed before the cut-off but settled in June 2026. Am I grandfathered?

For negative gearing, the Act treats you as having an ownership interest from the time you enter into the contract. A later settlement date, on its own, should not remove grandfathering. Keep the contract and have it checked if there is any doubt about when it became binding.

I bought off the plan before Budget night, and the building was finished later. Is that grandfathered?

The contract date is still the starting point for the ownership-interest rule. Whether the finished dwelling is also a new residential dwelling in relation to you is a separate question, and that definition was still being completed as at November 2026. Get advice on both tests if the timing or the nature of the dwelling is unusual.

Can I buy another established property and have that grandfathered too?

No. Grandfathering attaches to the interest you acquired before the cut-off. A later purchase of an established dwelling is assessed under the new rules from 1 July 2027, unless it qualifies as a new residential dwelling or another exception applies.

I hold my rental in an SMSF. Do I need to worry about grandfathering?

Complying superannuation entities are excluded from the quarantine rule. That is a different form of protection from individual grandfathering. SMSFs have their own contribution, borrowing and CGT rules, so trustees should still get advice.

If my property is grandfathered, should I sell before 1 July 2027 anyway?

Not as a general rule. Selling before 1 July 2027 can keep the 50% CGT discount on the whole gain, if you were entitled to it, but it also brings forward the tax, selling costs, and the risk that any replacement established property will not be grandfathered. That is a personal calculation. A tax agent can compare the two outcomes on your figures.

General information warning

This article is general information only. It is not tax advice, legal advice or personal financial product advice. It does not take into account your objectives, financial situation or needs. Some transfer and new-build rules were still being implemented in later legislation when this page was reviewed. Consider seeking advice from a registered tax agent before you make a decision.

Sources

Last reviewed: November 2026.