Australia negative gearing and rental deductions
This explanation covers the ATO’s rental expense categories, apportionment rules and rental loss treatment for Australia’s 2026–27 income year.
On this page
- Negative gearing
- Deductible rental expenses exceed rental incomeATO rental expenses
- Tax-year scope
- 2026–27 income year; changes legislated from 1 July 2027 are excludedATO rental expenses
The tax-year boundary
Under the published explanation for the 2026–27 income year, a property is negatively geared when deductible expenses exceed income earned from it. A property is positively geared when deductible expenses are less than that income. ATO rental expenses (opens in a new tab).
The ATO says the negative-gearing changes announced in the 2026–27 Federal Budget are now law and apply from 1 July 2027. ATO tax reform (opens in a new tab).
Immediate and longer-term deductions
The ATO lists interest on loans, council rates, repairs and maintenance as examples of expenses deductible in the income year incurred. ATO rental expenses (opens in a new tab).
Capital works, borrowing expenses and the decline in value of certain depreciating assets belong to categories deductible over several years. The expense category affects when the deduction is claimed. ATO rental expenses (opens in a new tab).
Private use and apportionment
Apportionment is required where expenses relate partly to private use, part-year income-producing use, renting only part of a property, below-market rent or private use of an investment loan. Time-based and area-based methods may both be relevant. ATO rental expenses (opens in a new tab).
Co-owners attribute rental income and expenses according to their legal interest in the property. Expenses solely related to renting, such as tenant advertising and real estate commissions, do not need apportionment. ATO rental expenses (opens in a new tab).
Costs excluded from rental deductions
The ATO lists expenses paid by tenants and acquisition or disposal costs such as purchase and conveyancing costs as not deductible. Acquisition and disposal costs are usually included in the property’s capital gains tax cost base instead. ATO rental expenses (opens in a new tab).
Personal expenses are not deductible. The page also restricts deductions for second-hand depreciating assets, vacant land and holiday homes not mainly used or held to produce rental income. ATO rental expenses (opens in a new tab).
Loss treatment and scope
Under the published explanation for the 2026–27 income year, rental expense deductions can be claimed against rental and other income, including salary, wages or business income. If other income cannot absorb the loss, it can be carried forward to the next income year. ATO rental expenses (opens in a new tab).
This general explanation is scoped to the 2026–27 income year and does not apply the changes legislated from 1 July 2027. It provides no deduction calculation, investment recommendation, cash-flow projection or personal tax estimate. No matching rental deductions calculator or numerical worked example is provided.