Negative Gearing Changes: Why More Investors Are Looking at Commercial Property
New laws restrict negative gearing for certain established residential properties from 1 July 2027. Here is what changed and how commercial property finance differs.
Since the May 2026 Budget, a lot of our clients have asked the same question: with negative gearing restricted on established homes, does commercial property make more sense now? Below is what changed and how commercial property is financed.
What changed
From 1 July 2027, losses from established residential investment properties acquired after 7:30 pm AEST on 12 May 2026 will generally no longer be deductible against unrelated income such as salary and wages. Instead, affected losses may be applied against income from residential properties, including applicable capital gains, with excess losses carried forward for use against residential-property income in future years.
| Property or ownership category | General treatment from 1 July 2027 |
|---|---|
| Established residential property held at 7:30 pm AEST on 12 May 2026, including property already under contract | Existing negative-gearing treatment generally continues until the property is sold |
| Established residential property acquired after the announcement time | Affected losses generally cannot reduce unrelated income such as salary and wages; excess losses may be carried forward |
| Eligible new build | Negative gearing remains available, subject to the new-build eligibility rules |
| Commercial property | Not affected by the new residential-property negative-gearing restrictions |
| Property held by a superannuation fund, including an SMSF | Excluded from the negative-gearing changes |
| Property held by a widely held trust | Excluded from the negative-gearing changes |
For individuals, partnerships and trusts, the new legislation generally replaces the 50% CGT discount with cost-base indexation and introduces a 30% minimum tax rate on real capital gains accruing from 1 July 2027. The new arrangements apply broadly to eligible CGT assets, including commercial property, with transitional provisions and specific exemptions applying.
Commercial property is therefore outside the new residential negative-gearing restriction, but it is not automatically outside the broader CGT reforms. The actual result depends on the owner, entity, acquisition date, holding period and available concessions. Your accountant should model the expected tax outcome for your circumstances.
Why commercial property is getting more attention
The new negative-gearing restrictions apply to residential property, not commercial property. Existing tax rules therefore continue to apply to commercial-property income and deductions.
Whether a commercial-property loss can reduce other assessable income depends on the taxpayer, ownership entity, deductibility of the expenses and any applicable trust, company or loss-limitation rules. Obtain tax advice for the proposed ownership structure.
There are other reasons investors look at it too. Commercial leases are usually longer than residential ones, and on many leases the tenant pays some or all of the outgoings. Yields are often higher than on residential property.
It’s a different kind of investment though. Vacancies can last longer, deposits are bigger, loan terms are shorter, and values are more tied to how the local economy and the tenant’s business are going. It suits some investors and not others.
Business owners: buying your own premises
For business owners, the most practical option is often the building you already work from. Instead of paying rent to a landlord, your business pays rent to you, your family trust or your SMSF. Subject to superannuation law, the fund’s investment strategy and its governing rules, an SMSF may acquire qualifying business real property and lease it to a related business on arm’s-length commercial terms, including market rent. If the SMSF borrows to complete the acquisition, the borrowing must also comply with the LRBA rules. Specialist accounting, legal and appropriately licensed financial advice should be obtained before proceeding. For LRBAs entered into on or after 10 August 2026 to acquire real property, the property generally must qualify as business real property. This makes qualifying business premises particularly relevant to new SMSF property borrowing. Transitional provisions apply to certain earlier contracts, existing LRBAs and qualifying refinances.
We explain the structures and what lenders look for on our commercial property loans Sydney page.
How commercial finance differs from a home loan
| Home loan | Commercial loan | |
|---|---|---|
| Deposit | Can be 5 to 20 percent | Usually 30 to 40 percent |
| Loan term | Usually 30 years | Often shorter, sometimes with reviews |
| What the lender assesses | Mainly your income | Your income, the property, the lease and the tenant |
| Rates | Lower | Usually higher, priced on risk |
| Low doc options | Available | Available, with a bigger deposit |
For a deeper comparison, see our guide to commercial vs residential investment lending.
Before you buy
Get the structure right before you sign a contract. Whether the property sits in your name, a company, a trust or your SMSF affects your tax position and which lenders will accept the loan, and changing it after exchange is costly. Talk to your accountant first. If you don’t have one who works with property investors, the accountants at YML Group can help.
Then get your finance assessed before you start making offers, so you know your deposit and borrowing position.
Important information: This article contains general information only and is not legal, taxation, accounting, financial or superannuation advice. It summarises legislation and government guidance available as at September 2026. The application of the rules depends on the property, acquisition date, ownership entity and taxpayer’s circumstances. ATO and Treasury guidance may be updated from time to time.
Speak with a registered tax agent and other appropriately qualified advisers before acting. Credit criteria, rates, fees and loan terms vary between lenders and are subject to change.
Acctpro Finance Pty Ltd trading as YML Finance | Australian Credit Licence 398415 | MFAA Member. View our Credit Guide for information about our services, remuneration and complaints process.