Negative Gearing Was Never the Strategy​

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Hey there,

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Welcome to my 26th edition of Wealth Bytes- The only news letter dedicated to Tech Professional's financial planning.

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Since budget night I’ve had a version of the same conversation a dozen times. It usually starts like this: “Mo, is it even worth buying an investment property anymore? They’ve killed negative gearing. Is the whole thing about to tank?”

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I understand the reaction. But I want to gently push back on the question itself - because if you’re asking whether to invest based on what happened to a tax deduction, you’re already one level below where the decision should be made.

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So let’s go up a level. Because the people who build real wealth through property never started from the tax perk in the first place.

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First - what the Budget actually did

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Let’s be precise, because most of the panic is running on a misread.

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From 1 July 2027, negative gearing on established residential property is being removed against your other income. If you buy an existing residential property after 7:30pm on budget night - 12 May 2026 - you’ll no longer be able to use its rental losses to reduce the tax on your salary. Those losses don’t vanish entirely; they’re quarantined - you can still offset them against residential rental income or residential capital gains, and carry them forward. But the headline benefit everyone means by “negative gearing” - knocking your salary tax down - is gone for those properties.

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Three things the noise is leaving out.

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1- Properties you already hold, or have under contract before the announcement, are grandfathered - untouched until you sell.

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2-New builds are deliberately exempt, because the Government wants investment flowing into new supply. And commercial property and shares are completely carved out - none of this touches them.

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3- Alongside it, for individuals, trusts and partnerships the 50% CGT discount is being replaced with inflation indexation plus a 30% minimum tax on real gains, from 1 July 2027. And here is the nuance people keep getting wrong: it is the gain that is split, not the asset that is grandfathered. If you already hold an asset on 1 July 2027, the growth that accrued up to that date keeps the old 50% discount - but every dollar of gain after it is taxed under the new indexation system, with the asset value on 1 July 2027 becoming the cost base for that future portion. Two regimes, two slices of the same gain.

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That’s the actual change. Not an abolition of property investing. A narrowing of one tax deduction, on one type of asset, held in one type of structure, from a future date.

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Negative gearing was always a by-product - never the reason

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Here’s the part I want tech professionals to really sit with.

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Negative gearing is not a strategy. It never was. It’s what happens when an asset runs at a short-term loss and the tax system lets you offset it. That’s a feature you might benefit from along the way - not a reason to buy.

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Think about it from first principles. You buy an investment property for one reason: it’s a quality asset you believe will grow and produce income over a long horizon. If it stacks up on those terms, then any tax efficiency that comes with it is a nice tailwind. And if the tax treatment changes? The asset is still doing its job.

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The flip side is the uncomfortable bit. If the only way an “investment” made sense was the negative gearing - if the numbers only worked because the ATO was subsidising a loss-making asset - then it was never a good investment. It was a tax product wearing a property costume. Removing the deduction didn’t break it. It just revealed it.

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So the right question isn’t “is the tax perk still there.” It’s “would I want to own this asset for the next decade even if there were no tax perk at all?” If the answer is yes, the budget changed very little for you. If the answer is no, the budget did you a favour.

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The force that actually moves property isn’t a tax deduction

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While everyone argues about negative gearing, the genuinely powerful forces are sitting in plain sight - and they all point the same way.

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Australia is not building enough homes, and the reasons are structural, not cyclical. Construction costs have risen more than 40% since 2020. There’s a chronic shortage of skilled trades. Land that can actually be developed is constrained by zoning and planning. And demand keeps arriving - net migration is still running in the hundreds of thousands a year.

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The numbers are stark. The National Housing Accord target is on track to be missed by hundreds of thousands of dwellings. Rental vacancy is sitting near 1% nationally. Some forecasters expect the accumulated shortage to keep widening for years. These are decade-long pressures on the supply side of a market where demand isn’t going anywhere.

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Set that next to the tax change. One is a structural, multi-year imbalance between how many homes exist and how many people need them. The other is a deduction adjustment with a 2027 start date and a fistful of carve-outs. They are not the same order of magnitude. Pretending the tax tweak is the dominant force is like worrying about the cabin temperature while ignoring the altitude.

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The Government’s own modelling doesn’t say it tanks

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Here’s what I find most telling. Even Treasury - the people who designed these changes - aren’t forecasting a crash.

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In the Budget’s own words (Budget Paper No. 1, Statement 4, Page 158), the modelling suggests housing prices will grow “around 2 per cent less over a couple of years” than they otherwise would have - against a long-run average of roughly 6% per year since 2000. They estimate a median-priced buyer would save around $19,000. That’s the entire projected effect: a couple of years of slightly slower growth, then back to trend.

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Let’s take their own assumption at face value and just do the arithmetic - not as a forecast, but as an illustration of what their numbers imply. If a property grew at around 4% for two years and then at the long-run 6% for the eight after, a $700,000 asset would land somewhere near $1.2 million over the decade. I’m not predicting that - nobody can predict a specific price, and assumptions are not guarantees. I’m simply pointing out that the Government’s own figures describe a speed bump, not a cliff. The people calling it a collapse haven’t read the modelling they’re reacting to.

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And to keep myself honest: this cuts both ways. The RBA has been raising rates this year, which tightens borrowing capacity and is a real headwind. Treasury’s own data shows investment-property returns have ranged from small losses to solid gains depending on the asset and the decade. Property is not a guaranteed escalator. Which is exactly why the asset you choose - and the strategy around it - matters far more than the tax setting attached to it.

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The conversation almost no one is having: structure

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Notice who these changes are actually written for. They target individuals, trusts and partnerships. Superannuation sits under a separate tax framework - and this package doesn’t touch it. A self-managed super fund faces no change here at all: not its CGT treatment, not the way a geared asset’s income and deductions work inside the fund. If you already hold property in an SMSF, this budget changed nothing about it.

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That’s not a loophole to chase, and I’d be wary of anyone selling it as one - super has its own strict rules, costs and contribution limits, and it isn’t the right home for every asset or every person. But it makes a point most people never stop to consider: the structure you hold an asset in can decide whether a rule change touches you at all. Two people can buy the very same property and end up in completely different positions, purely because of how they held it. That is the heart of the decision - not whether one deduction survived.

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The lesson isn’t “go and set up an SMSF.” It’s that two people can buy the same asset and end up with completely different outcomes purely because of how they held it. That’s Phase 2 of the Confident Choice System™ - configuring ownership structures - and it’s the kind of decision that quietly compounds for thirty years. It’s also exactly the sort of thing worth getting right before you buy, not after.

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So - should you invest?

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I can’t answer that for you in a newsletter, and I wouldn’t try. But I can reframe the decision so you’re making it at the right level.

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If you are curious, go and read my book https://www.mywealthchoice.com.au/propertyvsshares

 

Here is what I tackle in the book:

 

• The 7 comparison factors that actually change outcomes: taxes, cash flow, leverage, liquidity, diversification, costs, and behaviour.

• A simple worksheet to map your numbers and see tradeoffs clearly.

• How concentrated risk shows up in both property and shares (and ways to manage it).

• When time horizon matters most - and when it doesn’t.

• Questions to ask before using leverage or tying up equity.

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Don’t ask whether the tax perk survived. Ask whether you’re looking at a quality asset you’d be glad to own for a decade, bought in the right structure, as part of a plan that doesn’t depend on any single tax rule staying put. If it is, a deduction changing in 2027 is a footnote. If it isn’t, no amount of negative gearing was ever going to save it.

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That’s the difference between investing and tax-product shopping. The budget just made it easier to tell them apart.

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On a Personal Note

 

1. I am off to Bali- 3 weeks working holiday. 4 hours of work a day and the rest is fun.

2. I am back to high strength training - love it!

3. For some reason I am reading more than usual. Here is what I am reading.

 

• The Almanack of Naval Ravikant: A Guide to Wealth and Happiness

• The book of life by Jiddu Krishnamurti

• The Beginning of Infinity David Deutsch

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One Question Before You Go

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If you’re weighing up a property decision right now: strip the tax treatment out of your spreadsheet entirely. Does the asset still make sense? That single test will tell you more than any budget commentary will.

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Whenever you're ready, here are a few ways I can help you read on where you stand, the fastest levers to pull, and whether property is your engine or your anchor. No BS. Just clarity.

 

 

1. Listen to my Podcast - Real financial strategies on the only podcast in the world dedicated to tech pros, no boring jargon.

2. The Wealth Byte Newsletter - quick, no-BS emails once a month.

3. Follow me on LinkedIn - over 6,000 tech pros already do.

4. Wealth Bytes - YouTube - bite-sized videos on the only YouTube in the world dedicated to tech pros, no boring jargon.

5. Work 1:1 with me - build a strategic, work-optional financial plan to retire early on 10-20k per month.

 

Mo!

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This is general information only and does not take into account your personal objectives, financial situation, or needs. It is not a recommendation to buy, sell, or hold any investment or to adopt any particular strategy. Tax treatment depends on your individual circumstances and on legislation that may change. Please consider whether it is appropriate for you, and seek personal advice, before acting. My Wealth Choice Pty Ltd is an Authorised Representative (No. 001247597) of Beryllium Advisers Pty Ltd (AFSL 528250).