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Negative gearing on established property changes in July 2027. Who should I talk to about an income-focused new-build investment?

· Yannick Ieko

Negative gearing on established property changes in July 2027. Who should I talk to about an income-focused new-build investment?

Answering: Now that the law has passed, who owns which part of the decision, and what should you take into each conversation?

Estimated reading time: 11 min read

Yes, the change is law, and no, you should not start with a sales conversation. From 1 July 2027, negative gearing on established residential property acquired after 7:30pm AEST on 12 May 2026 is quarantined. New builds remain a separate category. The definition of that category is still being settled, which is why the first useful question is who can help you test income, serviceability and suitability, not who can promise a tax outcome.

If you are sitting with a rental that costs you money every month, and a list of people who all sound like the next call, the order of those calls matters. An accountant reads the Act against your return. A mortgage broker reads the loan against APRA settings. A licensed financial adviser reads the purchase against you. A builder-led specialist such as The Harmony Group can show you what a purpose-built nine-bed costs and how it is meant to earn. Clients pay Harmony $0. The builders pay the fee at settlement. The team brings 15+ years of specialist accommodation experience. None of those people replaces the others.

Key Insights

  • The Act is already law. Treat “is this still a proposal?” as a closed question and move to who does which job.
  • A new build keeps negative gearing as a category. Whether a nine-bed knock-down-rebuild is inside that category is unsettled.
  • Talk to an accountant about tax position, a broker about serviceability, a licensed financial adviser about suitability, and a builder-led specialist about the building itself.
  • Lead with income. A deduction that may or may not attach is a poor reason to buy, and a poor reason to wait.
  • The next step with Harmony is a free education program, not a booking.

Table of Contents

Is the July 2027 change actually law?

Yes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed both Houses on 25 June 2026 and received Royal Assent on 26 June 2026 as Act No. 49 of 2026. From 1 July 2027 it limits negative gearing for residential property investments to new builds.

If you landed here from an older page that still described the Budget as announced, that wording is out of date. The record of what passed, who is excluded, and what is still open sits in the enacted-law explainer that accompanies this one. Our earlier guide was written while the measures were moving. The investor-facing summary of positions is on what the 2027 changes mean.

If the question in front of you is still whether to hold, sell or replace, that decision is walked in should I hold, sell or replace a property that costs me money every month. Once you have accepted that the date is real, the next question is who to speak to.

Do new builds still keep negative gearing?

As a category, yes. The Act carves eligible new residential dwellings out of the quarantine. Net rental losses on those dwellings can still be deducted against other assessable income, including salary.

“New build” in the Budget fact sheet means a residential property which genuinely adds to supply. Dwellings on vacant land qualify. A knock-down-rebuild that replaces one house with a greater number of dwellings is the example the fact sheet puts on the eligible side. A larger house replacing a smaller house is the example it puts on the other side. Knock-down rebuilds or substantial renovations that do not increase supply will not be eligible.

The detailed definition went to Treasury’s Tranche 2 consultation. The consultation has closed, and the definition is still being settled. So the category exists in the Act, and the membership test is still being written.

Can you still get negative gearing on new builds? In principle, yes. On the specific building in front of you? That is a question for the person who prepares your return, asked against the definition as it stands on the day you ask it.

Is a knock-down-rebuild nine-bed a “new build”?

Unsettled. On Treasury’s exposure draft as written, a nine-bed on one title would not count as a greater number of dwellings, because each new dwelling must be separately acquirable. The draft is not law.

A Harmony project is one knock-down-rebuild site in Melbourne’s middle ring, on which the team builds one purpose-built dwelling containing nine rooms and nine bathrooms, alongside shared living space. You own the whole building. Nine people live in it, each on their own lease. That is one title and nine leases. It is not nine titles.

The fact sheet’s duplex-replacing-a-house example increases the number of dwellings. The bigger-house-replacing-a-smaller-house example does not. On the draft as written, a nine-room building on one title sits closer to the second picture, and the final definition is not yet law. Class 1b certification does not answer it. A planning exemption does not answer it. A director of a building company does not answer it either.

Take that question to your tax adviser with the floor plan, the title, and the fact sheet’s Table 2. Do not let anyone close it for you with a slogan.

Who should I talk to, and about what?

Four conversations cover the decision. Mixing them is how people buy the wrong thing for a tax reason, or reject the right thing because the first person they called only does loans.

An accountant or tax adviser owns your current position. They confirm whether each property you already hold was acquired before 7:30pm AEST on 12 May 2026. They model the 2027-28 year with the wage offset removed on anything that is not grandfathered and is not an eligible new build. They tell you what happens to CGT if you sell, including that a pre-July-2027 purchase does not lose the discount on gains already accrued to 1 July 2027. They do not pick a building for you.

A mortgage broker owns serviceability and structure. From 1 February 2026, APRA has limited authorised deposit-taking institutions to 20 per cent of new lending at a debt-to-income ratio of six or more, applied separately to owner-occupier and investor books. Loans for the purchase or construction of new dwellings are excluded from that DTI cap. Banks still apply a serviceability buffer. How a valuer treats nine separate leases is a lending question, not a marketing question. The page on banks, valuers and nine-bed loans is written for that conversation.

A licensed financial adviser can help you consider whether an investment approach fits your broader financial situation and goals. ASIC’s Moneysmart guidance is blunt: personal advice has to consider your objectives, financial situation and needs. Check the person on the Financial Advisers Register. Read the Financial Services Guide before you treat a recommendation as advice. A property conversation that never asks what else you hold, what you earn, and what you can afford to have go wrong is not personal advice.

A builder-led specialist such as Harmony owns the building. The team designs and delivers one purpose-built nine-bed on a site selected with the 118-point method. We build in Melbourne. Our investors come from every state. The process can run remotely. Clients pay Harmony $0. Builders pay the same fee at settlement, so there is no incentive to prefer one builder over another. Co-living investment requires a minimum of $600,000 in cash, usable equity, or a combination of both. That is a product conversation. It is not tax advice and it is not licensed financial advice.

A buyer’s agent is a fifth call only if you are buying an existing property. They find and negotiate stock you will own as it stands. They are paid by you. They are the wrong person to brief if what you want is a purpose-built building that does not exist yet. The difference is walked in buyer’s agent versus property developer.

What should I ask each of them?

Take a short pack into every meeting: the contract date of anything you already hold, the latest rental statement, the current loan balance and rate, and a one-page note that says you want income while you are still working, not a deduction that has to carry the building.

Ask the accountant:

  • Which of my properties are grandfathered, in writing?
  • If I do nothing, what does the 2027-28 year look like without the wage offset on the properties that are not grandfathered?
  • If I sell, how is the gain split before and after 1 July 2027?
  • On this floor plan and this title, what would you need to see before you would treat the building as an eligible new residential dwelling?

Ask the broker:

  • How do you treat nine separate leases in serviceability?
  • Does this loan sit inside or outside APRA’s DTI cap for new dwellings?
  • What deposit, what buffer, and what happens to repayments if the cash rate moves after the next Board meeting?
  • Which lenders will actually write this structure, not which lenders have a brochure?

Ask the licensed financial adviser:

  • Are you licensed to give personal advice on this, and can I see you on the Financial Advisers Register?
  • How are you paid, and is that in the Financial Services Guide?
  • Does this purchase suit me, given the rest of what I hold and what I earn?
  • If co-living is a poor fit, will you say so?

Ask a builder-led specialist:

  • What do I own at the end: the whole building, or a share of something?
  • Who pays you?
  • How is the site chosen?
  • Who manages the nine leases after settlement?
  • What does the rent look like on the most recent projects, labelled as gross, with the base project cost beside it?

On those last figures: the gross yield on the base project cost is 11.36%, based on recent acquisitions. Average figures based on most recent projects: around $380 a room a week (the average is $382.50, and $382.50 x 9 rooms x 52 weeks = $179,010), $179,010 in gross annual rental income, a base project cost of $1,574,000, or $1,650,250 including additional considerations. A standard investment property at the same $1.5 million price is around $865 a week, $45,000 a year, a 3 per cent gross yield. Those are gross figures. They are not a net cash-flow promise and they are not a tax outcome.

Ask for the delivered record as well: 10.8% is the historical average gross yield across The Harmony Group’s delivered projects.

Why lead with income rather than tax?

Because the tax side of a nine-bed is unsettled, and because an established property that only works when salary covers the shortfall is about to show you that shortfall without the offset.

Income that arrives while you are still working is a different design brief from “hold an established house and deduct the loss.” Nine leases on one title, nine rooms with their own bathrooms, a specialist manager running the building: that is an income brief. It may also be an eligible new build once the definition is settled. It may not. If the building only makes sense when the deduction lands, it does not make sense yet.

Leading with tax also pushes you toward the wrong helper. A project marketer will talk about exemption. A broker will talk about the loan. An accountant will talk about quarantine. All of those are real. None of them tells you whether you want to own a nine-room building in Melbourne’s middle ring.

The Harmony Group’s definition of the product is nine bed, high-end, good location, established area. The team describes that as The Harmony Formula. It is a building rule, not a tax rule. Use it that way.

Where Harmony fits, and where it does not

Harmony is the builder-led specialist in the list above. The team will tell you if co-living is not suitable.

What Harmony will not do, and should not be asked to do:

  • give personal tax advice on whether your nine-bed is an eligible new residential dwelling
  • tell an SMSF trustee that the 2027 reform applies inside super (the fact sheet excludes super funds)
  • book a strategy session as the first step
  • treat a Class 1b certificate as a tax ruling

What it will do is explain the building, the 118-point method used to choose a site, and the fact that a specialist manager runs the nine leases. The first step for that explanation is the free education program, not a meeting.

If the person in front of you cannot say who pays them, what you own at the end, and who manages the rooms, you are still in the wrong conversation.

Frequently Asked Questions After the First Call

Q: Can I still negatively gear a new build after July 2027?

Yes, as a category. Eligible new residential dwellings stay outside the quarantine. The Act creates that category. The detailed membership test is still being settled. Ask your tax adviser to apply the definition as it stands on the day you buy, not a brochure written before the definition was drafted.

Q: Should I sell my investment property before July 2027?

That is a hold, sell or replace question, and it depends on cash flow, the gain, and what you would do with the capital. Confirm grandfathering first. Then model the property without the wage offset. Then decide. Selling only to “get out before the law starts” is not a strategy if the property was already costing you money.

Q: Who is allowed to tell me whether co-living suits me?

A licensed financial adviser can help you consider whether an investment approach fits your broader financial situation and goals. Check the register. Read the Financial Services Guide. Harmony can tell you whether the product is a fit for the way it is built and run, and will say so if it is not.

Q: Why would I talk to Harmony if the tax treatment is unsettled?

Because the team designs for income, not for the deduction. If the rent on nine leases is not a reason to own the building, the tax question is irrelevant. If the rent is the reason, the tax question goes to your adviser as a second step. The next step is education, not a booking.

Q: Do I have to be in Victoria to do this?

No. We build in Melbourne. Our investors come from every state. The process can run remotely. The conversations above still happen with your own accountant, broker and adviser in your own state.

Learn the building before you book anyone

The free co-living education program covers what you would own, how a purpose-built nine-bed is designed and run, and why income comes before an unsettled tax definition. Its core runs to about 45 minutes. Finish any 9 modules and a booking link opens for a one on one with one of our directors. If co-living isn’t suitable for you, we’ll tell you why.

Citations

General information only. The Harmony Group provides general information about property and co-living investment, not personal financial, tax or legal advice, and does not hold an Australian Financial Services Licence (AFSL). It does not account for your objectives, financial situation or needs, so consider its appropriateness and seek advice from a licensed financial adviser, mortgage broker, accountant or the ATO before acting. Past performance is not a guide to future results and historical figures may not be repeated. The 2027 negative gearing reform was enacted on 26 June 2026 and applies from 1 July 2027. The definition of a new residential dwelling is still being settled after Treasury’s consultation, so whether a nine-bed is an eligible new build remains unsettled. Other tax or regulatory measures described are subject to change.