Key takeaways
Major banks including Westpac have already changed investor serviceability settings following the Federal Budget reforms.
Some investors could see borrowing power reduced if negative gearing benefits are no longer included in lender calculations.
Existing investors with grandfathered properties may not be affected, but pre-approvals should still be reviewed.
New build investment properties continue to retain access to negative gearing concessions under the enacted reforms.
If you're a property investor, something important has already happened, and most people haven't noticed it yet.
Following the Federal Budget reforms becoming law, major lenders have adjusted how they assess investor borrowing capacity.
Australia's major banks have now implemented changes to investor lending policies following the Federal Budget reforms. While each lender's approach differs, all five major banks have updated their serviceability settings for affected investment lending.
For investors, this could affect borrowing power, pre-approvals, and future investment strategy sooner than expected.
The reforms announced in the Federal Budget passed Parliament on 25 June 2026 and received Royal Assent on 26 June 2026. The changes commence from 1 July 2027.
Investors should seek independent financial, tax, and legal advice before making decisions.
The information in this article is based on publicly available information as of July 2026.
What actually changed in the Federal Budget?
The Federal Budget introduced reforms to negative gearing and Capital Gains Tax arrangements for future investment property purchases, which are now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.
Under the enacted reforms, negative gearing concessions would only remain available for eligible new build residential properties purchased after Budget night.
Investors who purchase established residential properties after 7:30pm AEST on 12 May 2026 would no longer be able to offset rental losses against salary or wage income from 1 July 2027.
Instead, losses would generally only be able to offset future rental income or capital gains from property assets.
The reforms also changed Capital Gains Tax treatment. The Treasury factsheet confirms the current 50% CGT discount would be replaced with a CPI-linked cost-base indexation model and a minimum 30% tax on real gains accrued after 1 July 2027 for affected assets.
The reforms passed both houses of Parliament on 25 June 2026, received Royal Assent on 26 June 2026, and commence from 1 July 2027.
Why are banks already changing lending settings?
Now that the reforms have become law, lenders have implemented updated serviceability settings to reflect the new tax framework.
While all major banks have now confirmed their policy positions, individual treatment of grandfathered properties, refinances and existing portfolios may still differ between lenders.
Lenders regularly review serviceability models to reflect expected changes in borrower risk, household cash flow, and responsible lending obligations.
Under the enacted reforms, investors purchasing affected established residential properties after the Budget cut-off will no longer receive the same negative gearing treatment from 1 July 2027. Lenders have updated their serviceability models to reflect those changes.
Macquarie Bank confirmed to industry publications The Adviser and Mortgage Professional Australia that it has removed negative gearing tax add-backs from investor serviceability calculations for established property loans contracted after 12 May 2026.
Westpac updated its credit policy from 29 June 2026, distinguishing between negative gearing and rental income tax deductions (RITD) in its serviceability assessments.
Industry reporting indicates the bank had previously notified home lending teams that the negative gearing reforms could reduce borrowing capacity for some investor clients.
While the bank has not yet formalised a policy change, Capital Brief reported that Westpac had advised teams to stop counting negative gearing in some investor serviceability assessments for established properties.
You might also be interested in: How the Federal Budget is influencing property investment decisions
Where the major banks currently stand
Bank | Current reported position | Reported action |
|---|---|---|
Macquarie | Policy changed | Removed negative gearing tax add-backs for affected established property investment loans contracted after 12 May 2026. |
Westpac | Policy changed | Updated credit policy effective 29 June 2026, distinguishing between negative gearing and rental income tax deductions (RITD) in serviceability assessments. |
CBA | Policy changed | Updated serviceability framework from 28 May 2026. Tax deductibility no longer applies to affected established property investment loans unless they meet the eligible new build definition. |
NAB | Policy changed | Updated investor lending policy following the enacted reforms. |
ANZ | Policy changed | Updated investor lending settings following the enacted reforms. |
While the major banks have now finalised their policy settings, treatment of grandfathered properties, refinances and multiple-property portfolios may still vary between lenders.
If you're investing or refinancing, it's worth reviewing your position with your broker before making your next move.
Why the lender you choose matters more than ever
Although the major banks have now implemented their updated policies, differences remain in how individual lenders assess grandfathered properties, refinances, and investors with multiple properties. Understanding those differences may still affect your borrowing options.
Illustrative example of how lender policy may differ depending on your circumstances:
Area | Lender A | Lender B | Lender C |
|---|---|---|---|
Investor income | $120,000 | $120,000 | $120,000 |
Negative gearing add-back included? | No | Partial | Yes |
Estimated borrowing capacity | ~$575,000 | ~$640,000 | ~$720,000 |
Variance vs. most conservative | — | +$65,000 | +$145,000 |
This example is illustrative only and does not represent actual lender policy or loan approval. Lending criteria differ between lenders and may continue to evolve.
This is where working with an Aussie Broker makes a practical difference. When you approach a single bank, you get one set of serviceability settings. If that bank has already adjusted its investor calculator, that is your only option.
An Aussie Broker has visibility across 25+ lenders** and tracks how each one is responding to the reforms as policies change. That means your situation can be matched to the lender whose current settings may be suited for you, based on where things actually stand today.
For investors, that kind of access could mean thousands of dollars more in borrowing capacity, on the same income and the same property.
What this could mean for borrowing power
Negative gearing has historically been treated as additional assessable income within some lender calculators because the tax refund may improve household cash flow.
If lenders stop recognising those tax benefits, some investors could see reduced borrowing capacity.
To understand why borrowing power changes, it helps to see how lenders have historically treated negative gearing in serviceability calculations, and what removing it actually does to the numbers.
When a property is negatively geared, the investor makes a net rental loss. Under previous lender settings, the annual tax refund generated by that loss was treated as additional assessable income, effectively boosting the borrower's serviceable income and therefore their maximum loan amount.
Here's how that works in practice for an investor earning $120,000 annually.
Step | Detail | Amount |
|---|---|---|
Annual rental income | Rent received on investment property | $26,000 |
Annual holding costs | Interest, rates, insurance, management fees | -$40,000 |
Net rental loss (negative gearing) | Holding costs minus rental income | -$14,000 |
Tax benefit at 37% marginal rate | Annual loss × marginal rate = annual refund | +$5,180/yr |
Monthly add-back to assessable income | Tax benefit treated as income by lender | +$432/mo |
Borrowing capacity with add-back | Established property, investor on $120K salary | ~$720,000 |
Borrowing capacity without add-back | Same borrower, add-back removed by lender | ~$575,000 |
Reduction | Difference in borrowing capacity | ~$145,000 (-20%) |
This example assumes an investor earning $120,000 annually purchasing an established residential property. The tax add-back rate applied is 37%, consistent with the marginal tax rate for this income level. This is illustrative only and does not represent an actual loan assessment. Borrowing capacity depends on individual income, existing debts, living expenses, lender policy, and the specific property. Speak to an Aussie Broker for a calculation based on your own situation.
Who may be affected most?
The reforms affect different investors in different ways depending on when they purchase property, what type of property they buy, and how they structure their investments.
Investors who may be impacted
Under the enacted reforms, the following groups may be most exposed to the changes:
Investors purchasing established residential properties after 12 May 2026
Borrowers relying on negative gearing tax offsets to improve serviceability
Investors using rental losses to reduce taxable salary income
Investors currently relying on older pre-approvals that may no longer reflect updated lender settings
Investors who may be less affected
The enacted reforms mean some groups may remain protected or retain access to concessions, including:
Existing investors with grandfathered properties contracted before Budget night
Eligible new build investors
SMSFs and some widely held trusts
Certain build-to-rent and government housing projects
You might also be interested in: CGT indexation is back – What it means for your investment property
What investors can do right now
1. Review your pre-approval
If your pre-approval was issued before the Budget announcement, it may have been assessed under previous lending settings.
Given some lenders have already adjusted serviceability calculations, it may be worth reviewing your position before making an offer or signing a contract.
An Aussie Broker can check your pre-approval against current lender settings across the panel, not just the lender who originally approved it.
2. Understand whether you are grandfathered
Under the enacted reforms, investors who already owned investment properties before the Budget cut-off may continue under existing tax arrangements for the life of the asset.
This means not every investor will be affected equally.
3. Reassess cash flow assumptions
Some investors may need to place greater emphasis on rental yield and cash flow rather than relying on tax refunds to support affordability.
Under the current framework, stronger yielding markets may become more attractive to some investors.
4. Consider new build opportunities carefully
The reforms retain negative gearing concessions for eligible new build properties.
However, investors should still complete thorough due diligence.
The Treasury factsheet confirms, only properties that genuinely qualify as new builds under the government's definition retain access to negative gearing concessions.
Not every new build investment carries the same risk profile. Factors such as developer quality, vacancy rates, rental demand, and construction timelines still require careful assessment.
5. Speak with both a broker and accountant
The enacted changes involve both lending policy and taxation considerations.
A broker may help explain how lenders are currently assessing borrowing capacity, while an accountant can explain how the enacted reforms may apply to your individual tax position.
6. If you hold multiple properties, review your refinancing position
Reduced borrowing capacity doesn't only affect new purchases, it can affect your ability to refinance existing loans.
Investors who hold multiple properties and built their portfolio under previous serviceability settings may find that refinancing, whether to access equity, restructure debt, or secure a better rate, is now assessed differently under updated lender calculators.
If you've been considering a refinance, reviewing your position now and understanding how current lender settings apply to your situation, may give you access to a broader range of options.
An Aussie Broker can assess your current position across the panel and identify whether refinancing remains viable and at what terms.
Timing matters here. Waiting until more lenders have moved could mean fewer options to choose from.
Common misconceptions about the reforms
Myth: “Negative gearing has been abolished”
This is not entirely accurate.
Under the enacted reforms, negative gearing would still remain available for existing grandfathered investments and eligible new builds.
Myth: “My family home will now be subject to CGT”
The Federal Budget confirmed the main residence exemption for owner-occupiers remains unchanged under the enacted reforms.
Myth: “All investment deductions are gone”
The enacted reforms specifically target how rental losses may be offset against salary income for affected investors.
Other common deductions, including depreciation, maintenance costs, council rates, insurance and property management fees, would still generally remain deductible under the reforms.
Myth: “Existing investors should sell immediately”
Some commentary following the Federal Budget encouraged investors to sell before the reforms took effect.
However, the enacted CGT changes only apply to gains accrued after 1 July 2027. Gains accrued up to that date would still remain eligible for the existing 50% CGT discount under the current framework.
That means investors who sell today may crystallise a less favourable tax outcome by giving up access to the current discount on gains already accrued, while also potentially triggering selling costs, stamp duty on replacement purchases and other transaction expenses.
Investors should seek independent financial and tax advice before making reactive decisions.
Myth: “My SMSF investment property will be affected by both reforms”
Some SMSF trustees have expressed concern that both the negative gearing and CGT reforms may significantly affect property held within superannuation.
SMSFs are excluded from the negative gearing changes under the enacted reforms. As Pitcher Partners explains, super funds already operate under different tax settings, including concessional tax rates, which means the impact may differ significantly from direct individual investors.
The interaction between the new CGT rules and superannuation tax rules can be complex, so SMSF trustees should seek advice specific to their fund structure and circumstances.
Despite the changes, Australia's rental vacancy rates remain tight across most capital city markets, and the fundamentals of well-selected investment property remain intact.
What's changed is the strategy and having the right broker and buyer's agent makes that navigation significantly easier.
You might also be interested in: Should you buy an investment property before 1 July 2027?
What about SMSF borrowing?
While SMSFs remain excluded from the negative gearing changes, a separate reform now affects how some SMSFs can invest in residential property.
From 10 August 2026, SMSFs can no longer enter into new limited recourse borrowing arrangements (LRBAs) to acquire residential property. Existing residential LRBAs entered into before that date are unaffected, and borrowing for eligible commercial business real property remains available under the legislation.
Because SMSF borrowing rules are complex and subject to superannuation law, investors should seek independent financial and taxation advice before making decisions involving their fund.
How an Aussie Broker can help
Although the major banks have now implemented their updated lending policies, differences remain in how lenders assess individual circumstances. An Aussie Broker can help you understand how current lender settings apply to your situation.
An Aussie Broker can help you:
Review your borrowing capacity under current lender settings
Reassess an existing pre-approval
Compare lender policy differences across available options
Understand how serviceability calculations may differ between lenders
Explore loan options that may suit your circumstances
While the reforms are now law, lenders may continue refining their assessment policies over time.
For investors considering purchases, equity access or refinancing, the gap between lenders is wider than it's been in years.
Reviewing your position now can help you understand how the enacted reforms and current lender policies may affect your borrowing plans.
An Aussie Broker can help you understand how current lender settings may apply to your situation, and what options may be available to you.
