Policy uncertainty is not new in Australian property. But proposed changes to negative gearing rules have resurfaced with unusual intensity in recent years — and if you hold an investment property that runs at a cash-flow loss, it's worth understanding what's actually being proposed, who it affects, and what you can do about it now.
What's being proposed (and what's actually changed)
Various proposals have focused on restricting or removing the ability to deduct investment property losses against other income — what's commonly known as negative gearing. Some proposals have suggested grandfathering existing properties while limiting the concession to new builds only. Others have proposed reducing the capital gains tax (CGT) discount alongside changes to negative gearing deductibility.
The key point: nothing is confirmed. No legislation of this kind has passed at time of writing. But the direction of debate has been consistent for years, and that trend itself is a planning consideration. Waiting for confirmation before thinking about your position is a reasonable strategy — but it leaves less time to act when the moment arrives.
Legislative uncertainty is itself a risk. The question is whether your property strategy is resilient enough to absorb a policy change — or whether it depends on the current rules holding.
Who would be affected
Negatively geared properties — where costs exceed rental income — currently rely on the deductibility of those losses to make the strategy financially viable. If you hold such a property, the first question to ask is: how dependent am I on that deduction?
Here's a concrete way to frame it. A property with a $12,000 annual shortfall (costs minus rent) generates $4,440 in annual tax relief for an investor on a 37% marginal rate. Remove that subsidy and the full $12,000 shortfall is borne entirely out of pocket. That's the direct financial exposure of a negative gearing change — not hypothetical, but a real number you can calculate from your own situation.
Positively geared properties are not directly affected. If your investment property generates more income than it costs to hold, you don't have deductible losses to begin with. Any change to negative gearing policy is irrelevant to your cash-flow position. This is an important distinction — and it's the reason income-focused property arrangements have attracted renewed attention.
What could change in practice
Most proposals have included some combination of the following:
- Loss deductibility restricted or removed. If investment property losses can no longer be offset against other income (wages, business income, etc.), investors would need to carry those losses forward and offset them against future income from the same property. This doesn't eliminate the deduction permanently — but it defers it, which changes the cash-flow picture materially in the short term.
- Grandfathering rules. Most proposals have included some form of protection for existing properties — the concession would continue to apply to property held before a specified date, with restrictions applying only to new acquisitions. Grandfathering makes reform politically easier to implement, but it also means any property purchased after a cutoff date could be subject to the new rules. And grandfathering provisions can be walked back; they are not a permanent guarantee.
- CGT discount changes. Negative gearing reforms are often discussed alongside proposed changes to the capital gains tax discount — currently 50% for assets held more than 12 months. A reduction in the CGT discount would affect the after-tax return on sale, which is a key part of the investment thesis for many negatively geared properties.
The practical result: negatively geared properties become harder to hold without a clear path to a positive cash-flow position. The strategy only works cleanly if capital growth is large enough and fast enough to justify the annual shortfall — a calculation that becomes more exposed when the tax treatment shifts.
The real risk — compounding uncertainty
The more significant risk is not either factor in isolation — it's both at once. Interest rate risk widens the annual shortfall: higher rates mean higher mortgage repayments, which push negatively geared properties further into the red. Legislative risk removes the deductibility cushion that makes that shortfall manageable.
Each risk is manageable when considered alone. Interest rates move in cycles; investors have lived through them. Legislative uncertainty is uncomfortable but not unusual — tax rules change. But investors who are simultaneously exposed to both — running thin margins on negatively geared property in a higher-rate environment — face compounding pressure that is harder to absorb.
The question is not whether you can survive one shock. It's whether your property income strategy is structured to survive two at once.
Eleva Property can help you structure your property for better income — without selling.
Explore the Property Income model →What Queensland property owners should be thinking about now
You don't need to wait for a policy announcement to take useful preparatory steps. Three actions worth doing now:
- Model your cash-flow position without the deduction. Take your current annual shortfall (costs minus rent) and remove the tax saving. What does your out-of-pocket position look like? If it's manageable, you have options and time. If it's significant, you want to understand that before a policy change forces the question.
- Consider whether the property could generate more income. Income-focused arrangements — structured to close the gap between costs and rental returns — can improve your position without requiring you to sell. The goal is to reduce or eliminate the shortfall itself, rather than depending on a tax concession to make it bearable.
- Speak to your accountant about your specific exposure. The impact of any negative gearing change depends on your marginal tax rate, the size of your shortfall, your overall portfolio, and your timeline. General information only takes you so far — tailored advice from your tax adviser is the right next step for specific decisions.
The Eleva angle — income that doesn't depend on a tax concession
Eleva's Property Income model is structured to generate genuine cash flow from properties — aiming for a position where income exceeds costs without relying on the tax treatment of losses. The model works by preparing and repositioning properties to maximise their income-generating potential, then operating them under a long-term arrangement that gives the owner predictable returns.
Whether your property suits the model depends on a few key factors: size, location, layout, and your goals as an owner. It's worth understanding the option now — before a policy change forces the question and reduces your lead time to act.
The most resilient property income strategy is one that works whether or not negative gearing exists. Not because we know it will be scrapped — but because building dependence on a single policy setting is a fragile foundation. Properties that generate genuine income don't need the rules to stay the same to stay viable.