Buying Negatively-Geared Property After the 2026 Budget

The government has now removed the ability to negatively gear investment properties from 1 July 2027 that were purchased after 12 May 2026 if they are not brand new properties. So what can I buy that will still allow me to negatively gear?

·         Off the plan or new apartments

·         Off the plan or newly completed townhouse/villa

·         A newly built duplex

·         A house and land package

·         Purchasing a block of land and building a house on it

·         Purchasing an existing house and knocking it down to build a duplex

·         Purchasing an existing house and knocking it down to build strata residences on it

Off the Plan or New Apartments

Apartments purchased off the plan i.e. either when the block of land is still empty or while the apartments are under construction will be eligible to be negatively geared. New apartments that have not been lived in, or have been lived in for no more than 12 months can also be negatively geared if you are the first owner after the developer. If the property was purchased by someone else but they onsold it at or after completion, even if the property hasn’t been lived in, you are deemed the 2^nd owner and not eligible for negative gearing benefits.

There are a few disadvantages of purchasing off the plan as an investor which may outweigh the advantage of being able to negatively gear

·         You pay the purchase price as signed on the Contract of Sale, not what the property is worth at the time of completion. In a market that is in a downturn, like most areas of eastern Australia at present, by the time that the property is completed it may be worth less than what you are contracted to buy it for. In these circumstances you are still required to pay the contract price and may need to cover more of the deposit to make up for the lower valuation figure

·         If there is an oversupply of apartments or if there is a plan to redevelop the suburb to high density living, it may take some time to see any capital growth, which ultimately is the reason we invest in property. Weigh up whether an off-the-plan apartment is good buy when comparing with existing properties, even though an existing property would not provide a negatively gearing benefit

Off the Plan or New Townhouse or Villa

The same rules apply for townhouses and villas as per apartments mentioned above. The same cautions also apply to ensure that you are the first owner after the developer. The turnaround time between buying off the plan and the property being completed would usually be a shorter timeframe than an apartment complex, so there is likely to be a lesser risk of the valuation being lower than the contract price in a falling market.

Newly Built Duplex

It may be an option for you to purchase a brand new duplex, or one that is less than 12 months old. A developer building duplexes will often hold onto them for a little while after completion and rent them out, so if you receive confirmation that the ownership has not changed after completion of the property then these may be a good option to purchase a near-new property that already has a tenant in it that can be negatively geared.

House and Land Package

Developers will sometimes collaborate with a builder to build a house on a block and sell it on completion. This is more prevalent in a downturning market where demand for blocks of land is lower.

As per the other types of properties mentioned earlier in this article, you must ensure that you are the first owner after the developer or you will not be eligible for negative gearing.

Purchasing a Block of Land to Build on It

To ensure that you are the first owner of the property and be eligible for negative gearing benefits, you may choose to select your own block of land in a new estate. There are three options to build:

·         In some estates, the developer has a relationship with a builder, so if you secure the land, you will proceed with a builder that is already allocated to that site and has a floor plan and price ready. They usually have you sign the contract for the land and then shortly thereafter, pay the builder a deposit and sign a contract for them to build. The land will settle first and you start making repayments on it once you own it. You will start paying the building component once the slab is laid.

·         Some developers sell house and land packages where you only pay 5% upfront and then nothing until the house is completed. You generally pay a bit more to purchase under this method as the developer and builder are covering the costs to build and hold the land until completion.

·         You may wish to find your own block of land and then choose your own builder to build a house on it. This is a very hands-on approach and not recommended for those who are time-poor or have no experience with finding a builder or understand the build process. The upside is that it can be cheaper than the other options as you are engaging the builder directly and negotiating the price. I have done this numerous times and can guide you through the process if this is your preferred option.

Purchasing an Existing House and Knocking it Down to build a Duplex

One of the workarounds of the Budget is that if you add to the housing population you can negatively gear what you create. So if you purchase an existing house to knockdown and replace with a duplex that can be subdivided, both of the properties can be negatively geared after completion. Alternatively if you build a second dwelling on a property and that second dwelling can be subdivided from the existing property on the site after construction is complete, that will also be eligible for negative gearing.

One important note is that if you are keeping the existing house and are building another, it must be subdivideable to be eligible for negative gearing. If you build a granny flat, this does not fit the eligibility and cannot be negatively geared.

Knockdown rebuilds of a single property are also not eligible for negative gearing as you are just replacing one existing house with a new one in its place.

Purchasing an Existing House and Knocking it Down to Build Strata Residences

As per the building of a duplex, all dwellings that you build on the property if you build more than one are eligible for negative gearing.

How to Buy Properties Eligible for Negative Gearing

There are different borrowing rules when buying off the plan or building so it is worth having a chat prior to going down these paths. For example if buying off the plan you may not be able to obtain a full loan approval prior to committing to the purchase. For construction, there are different loans to apply for that allow construction and they work differently to a standard home loan. When you are ready to explore this path, we can have a meeting to run through your borrowing options and if you qualify for a construction loan.

Only Buy Directly from the Developer if you Don’t Want to Overpay!

While nothing to do with negative gearing, I want to note that there are developers who pay mortgage brokers and buyers’ agents a finder’s fee if they refer a client to them. I am contacted regularly to ask if I can provide my client list to developers and they will offer me between 10-20K if my client buys a property from them. I always decline the developer offers as it usually results in you overpaying for the property to cover the broker’s incentive fee. Adding the incentive fee to the purchase price may result in the property being valued at a figure lower than you’ve paid for it, particularly if the valuer is aware of the incentive payments built into the purchase price.

Any Questions?

If any of the above options interest you and you’d like to find out if you qualify to purchase a new property to negatively gear, call or message me to arrange a meeting either in person or online.

jennifer@jblhomeloans.com.au 0414670151