You haven't had a rate hike since June. Your income hasn't changed. Your savings are still growing. And yet, if you walked into a bank today to ask how much you can borrow for an investment property, the answer might be 10 to 30% lower than it would have been in April. Nobody hiked anything. The banks just quietly rewrote the calculator.
This is the part of the negative gearing reform nobody warned investors about: the actual tax law doesn't start until 1 July 2027 - but the banks have already started pricing it in, more than a year early.
The announcement everyone remembers, and the one they missed
Everyone remembers Budget night, 12 May 2026: negative gearing restricted to new builds, the 50% CGT discount replaced with inflation-adjusted indexation, existing investors grandfathered. What most buyers missed is that serviceability and tax treatment are two different things - and lenders don't wait for legislation to change the first one.
Within six days of the Budget, Macquarie had already updated its lending calculator to strip negative gearing add-backs from any established-property contract signed after 12 May. By mid-June, ING, NAB, ANZ, Great Southern Bank and CBA had followed, each recalibrating how much of your rental loss they'll still count as reducing your assessed income.
How banks actually calculate your borrowing power
When you buy a negatively geared investment property, the rental loss offsets your taxable income - and historically, banks added that expected tax benefit back in when working out your borrowing capacity, effectively treating the tax refund as extra serviceable income. That add-back is exactly what's being switched off for established properties bought after 12 May.
ING's version of the change, effective 12 June, caps interest expense deductions at rental income for established investment properties purchased after the Budget cut-off - meaning the loss on paper no longer inflates what you can borrow. Macquarie only keeps the add-back if the property meets the definition of a genuine new build that adds to housing supply.
What this actually costs you
For an investor in the 37% tax bracket, brokers are estimating the practical reduction in borrowing capacity at around 10-15%. Push into a higher bracket, or hold more than one negatively geared property, and it gets worse.
| Scenario | Approx. impact |
|---|---|
| 37% tax bracket, single negatively geared property | 10-15% reduction in borrowing capacity |
| 47% tax bracket, $25,000/yr rental loss | ~$12,250/yr less assessed income - roughly $70,000-$80,000 less borrowing capacity |
| Multiple negatively geared established properties | 15%+ reduction, compounding per property |
None of this shows up as a rate change on your statement. It shows up the next time you try to borrow - as a smaller number than the one you modelled six months ago.
What still works
This isn't universal bad news. Three groups are unaffected:
- Anyone who exchanged contracts on or before 12 May 2026 - fully grandfathered, both for the eventual tax treatment and for how banks assess your serviceability today.
- New-build buyers - genuine new dwellings that add to housing supply still get full negative gearing recognition in most lenders' serviceability calculators, and will keep the tax benefit indefinitely under the reform.
- Owner-occupiers - none of this touches serviceability for a home you intend to live in.
This is also exactly why we flagged the first-home-buyer side of the ledger differently to the investor side back in May - the two groups are being pushed in opposite directions by the same reform.
What to actually do about it
If you're mid-strategy on an investment purchase, don't assume the borrowing capacity you calculated a few months ago still holds.
- Get re-assessed before you make an offer. Lender policies differ significantly right now - some have moved, some haven't, and the gap between them is real money.
- Check your contract date. If you exchanged before 12 May 2026, you're grandfathered - don't let anyone tell you otherwise without checking the specific lender's policy wording.
- Consider new-build stock. If serviceability is the binding constraint, a genuine new build keeps the full add-back and may unlock a purchase an established property no longer supports.
- Don't shop lenders blind. With policies changing lender-by-lender and month-by-month, running your numbers through a broker who's tracking each bank's current position beats assuming last quarter's pre-approval still applies.
Run your own numbers through our borrowing power estimator as a starting point, then talk to us about which lenders are still treating your specific property type favourably before you lock in an offer.
Frequently Asked Questions
Does negative gearing still exist in Australia in 2026?
Yes. Negative gearing remains available for new-build properties indefinitely, and for any established property under contract on or before 12 May 2026. From 1 July 2027, negative gearing on newly purchased established properties will no longer be available under the Tax Reform No. 1 Bill 2026.
Why did my borrowing power drop before the negative gearing law even started?
Lenders set their own serviceability policies independently of when tax legislation formally commences. Several major banks - Macquarie, ING, NAB, ANZ, Great Southern Bank and CBA - updated their servicing calculators between 18 May and mid-June 2026, over a year ahead of the 1 July 2027 tax change, because they no longer expect the rental-loss tax benefit to apply to future established-property purchases.
Which banks have changed their negative gearing serviceability policy?
As of this article, Macquarie (18 May 2026), ING (12 June 2026), NAB, ANZ and Great Southern Bank have all recalibrated how they assess negatively geared established-property purchases made after 12 May 2026. Policies and effective dates vary by lender, so it's worth checking the current position with each bank before assuming a figure.
Are new-build properties still fully negatively geared for serviceability?
Yes. Properties that meet a lender's definition of a genuine new build - one that adds to housing supply - continue to receive full negative gearing recognition in most banks' borrowing capacity calculations, and will retain the tax benefit indefinitely under the reform.
What happens if I signed a contract before 12 May 2026?
Properties under contract on or before 12 May 2026 are fully grandfathered - both for the eventual tax treatment and for how banks currently assess your serviceability. The protection follows the contract exchange date, not the settlement date.
