Investment Property Tax in Australia (2026): Negative Gearing, CGT & Depreciation

Overview

Australia's tax treatment of investment property is among the most favourable in the developed world. Understanding the key rules — negative gearing, the CGT discount, and depreciation — is essential for maximising your after-tax returns.

Negative Gearing: Current Rules

Under current Australian tax law, if your investment property makes a net loss (total deductible expenses exceed rental income), you can offset that loss against your other income, including salary and wages. There is no cap on the amount that can be offset.

This means a property investor on a 37% marginal tax rate who makes a $10,000 rental loss receives a tax benefit of $3,700 — reducing the actual out-of-pocket cost of holding the property.

Model your exact scenario with our Negative Gearing Calculator.

Capital Gains Tax (CGT) Discount

When you sell an investment property held for more than 12 months, you are entitled to a 50% CGT discount. This means only half of your capital gain is added to your taxable income.

For example, if you purchased a property for $500,000 and sold it for $700,000, your capital gain is $200,000 (before deducting costs). With the 50% discount, only $100,000 is added to your taxable income.

Properties purchased before 20 September 1985 are completely exempt from CGT.

Calculate your CGT liability with our Capital Gains Tax Calculator.

Depreciation Deductions

Depreciation allows you to claim the declining value of your property and its assets as a tax deduction — without spending any additional money.

Division 43 (Capital Works)

You can claim 2.5% of the building construction cost per year for 40 years. This applies to properties with construction commencing after 15 September 1987.

Division 40 (Plant & Equipment)

Removable assets (carpets, blinds, appliances, air conditioning) are depreciated at rates set by the ATO. Since 9 May 2017, plant and equipment depreciation on previously used assets can only be claimed by the original purchaser.

A quantity surveyor's depreciation schedule typically costs $400-$700 and can unlock $5,000-$20,000+ in first-year deductions depending on the property's age. See our Property Depreciation Guide for details.

The Policy Debate

Negative gearing and the CGT discount have been subject to ongoing political debate. Some argue these concessions disproportionately benefit higher-income earners and contribute to housing affordability pressures. Others argue they encourage private investment in rental housing and that changes would reduce supply.

As of early 2026, no changes to negative gearing or the CGT discount have been legislated. However, policy discussions continue, and investors should stay informed about potential changes.

Key Tax Brackets (2024-25 Onwards)

Following the Stage 3 tax cuts effective from 1 July 2024, the personal income tax brackets are:

• 0%: $0 – $18,200
• 16%: $18,201 – $45,000
• 30%: $45,001 – $135,000
• 37%: $135,001 – $190,000
• 45%: $190,001+

These brackets affect both the tax benefit of negative gearing and the CGT payable on sale.

Model your tax position: Negative Gearing Calculator | Estimate CGT: Capital Gains Tax Calculator.