7 Worked Examples: Negative Gearing Before and After the 2027 Reform

Abstract policy debates have done little to clarify what the 2027 negative-gearing reform actually means in dollars for typical Australian investors. This article walks through seven concrete scenarios drawn from Treasury examples and our own modelling showing exactly how much difference the reform makes for each investor. The headline result: for most existing landlords, the change is essentially zero. For new acquisitions, the differences range from a few hundred dollars to tens of thousands depending on structure.

Example 1 Michael, grandfathered property

Michael owns a $600,000 investment property in Brisbane purchased in 2022. Annual rent: $26,000. Annual deductible expenses: $40,000. Annual loss: $14,000.

Under old rules (continued): Michael deducts the $14,000 against his $135,000 salary. Tax saving at 37%: $5,180/year.

Under new rules: Because Michael owned the property before 7:30pm AEST 12 May 2026, full grandfathering applies. Tax saving: $5,180/year unchanged.

Reform impact: $0/year.

Example 2 Yoonseo, post-announcement buyer

Yoonseo buys a $519,000 established property in October 2026 (after the announcement). Annual rent: $22,000. Annual deductible expenses: $33,000. Annual loss: $11,000.

2026-27 financial year: Yoonseo is in the transitional window. She deducts $11,000 against her $95,000 salary. Tax saving at 32.5%: $3,575.

From 1 July 2027: losses convert to carry-forward. Over the next 10 years, she accumulates approximately $22,879 in carry-forward losses (Treasury's figure). When she sells in year 12 for $700,000, the carry-forward absorbs much of the capital gain.

Total reform impact over 10 years (Treasury figure): $186 more total tax than under old rules. The deduction is deferred but largely recovered through the CGT offset on disposal.

Example 3 Priya, new-build buyer

Priya signs an off-the-plan apartment contract in November 2026 for $680,000. Settlement October 2028. Annual rent on first lease: $30,000. Annual deductible expenses including substantial first-year depreciation: $48,000. Annual loss year 1: $18,000, tapering to $11,000 by year 10 as depreciation reduces.

Old rules treatment: $18,000 in year 1 deducted against $180,000 salary at 47%: saving $8,460.

New rules treatment: Off-the-plan apartment qualifies as new build. Full negative gearing preserved. Tax saving identical: $8,460 in year 1.

Reform impact: $0/year. Off-the-plan apartments retain all benefits.

Example 4 Chen family SMSF

The Chen SMSF holds a $750,000 investment property purchased in 2023 with an LRBA. Annual rent: $32,000. Annual deductible expenses (including interest): $46,000. Annual fund-level loss: $14,000.

Old rules: $14,000 loss reduces fund taxable income. Tax saving at 15% fund rate: $2,100/year.

New rules: SMSFs are excluded from the reform. LRBAs continue. Tax saving identical: $2,100/year.

Reform impact: $0/year. SMSF strategies are unaffected.

Example 5 Sarah, mixed portfolio

Sarah has three investment properties: Property A (grandfathered, loss $12,000/year); Property B (grandfathered, loss $9,000/year); Property C (purchased July 2028 post- commencement established, loss $11,000/year). Salary: $185,000 (47% marginal rate).

Property A + B (grandfathered): $21,000 deducted against wages. Tax saving $9,870/year. No reform impact.

Property C (post-2027 established): $11,000 enters the carry-forward register annually. No wage offset. Lost immediate tax saving at 47%: $5,170/year deferred.

Reform impact: $5,170/year deferred, recoverable when Property C is sold and the register absorbs the capital gain.

Example 6 Tom, commercial pivot

Tom sold his residential investment property in 2024 (CGT realised) and is choosing between a $900,000 residential apartment and a $900,000 strip-retail shop in 2028. Both produce $14,000 annual loss. Salary: $135,000 (37%).

Residential established (post-2027): Loss enters carry-forward. No immediate wage offset. Annual immediate tax saving: $0.

Commercial shop: Loss continues to offset wages directly. Annual tax saving: $5,180.

Reform impact: $5,180/year structural advantage for commercial over established residential. Over 10 years (present value at 3% real): approximately $44,000.

Example 7 Aisha, duplex KDR

Aisha buys an $800,000 single-house lot in 2027 with the existing house demolished and a duplex constructed for $1.1m. Total project cost (excluding land): $1.3m. Each duplex half rents for $34,000/year. Combined annual rent: $68,000. Combined annual deductible expenses including new-build depreciation: $86,000. Annual loss: $18,000.

Old rules: $18,000 deducted against $160,000 salary. Tax saving at 39% effective: $7,020/year.

New rules: Duplex satisfies supply test (1 → 2). Both halves qualify as new builds. Full negative gearing preserved. Tax saving: $7,020/year unchanged.

Reform impact: $0/year. Qualifying KDR preserves all benefits.