The short answer
Whether you are grandfathered comes down to one date and one fact. Sign your contract before 7:30pm AEST on 12 May 2026 and you keep negative gearing for as long as you hold. Sign after, and it depends on whether the property is an eligible new build - if not, your losses are quarantined from 1 July 2027.
Why one evening in May splits every investor in two #
The 2026 federal budget drew a single line through the residential investment market: 7:30pm AEST, 12 May 2026 - the moment the negative gearing changes were announced. The measures are now enacted law (Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Royal Assent 26 June 2026), so this is not a proposal to watch - it is the rule that already applies to every contract signed from that evening on.
The design is deliberate. Existing investors who contracted before the announcement keep the rules they planned around - grandfathering. New investment from that point is steered toward adding housing supply - the new-build exemption - while established-property purchases carry the reform's actual bite: a quarantine on how rental losses can be used, starting from the 2027-28 income year.
Three outcomes exist, not two: grandfathered, new-build exempt, or established and quarantined. Which one applies to a purchase comes down to exactly three questions - the same three the checker tool asks.
Questions 1 and 2: your contract date, and which side of 7:30pm #
The first question is simply whether the contract was signed before 12 May 2026. The law deems your ownership to start on the contract date, not settlement, so a contract from March 2026 that settles in 2027 is grandfathered throughout. Only contracts signed exactly on 12 May 2026 need a second question - which side of 7:30pm AEST the signature fell on, since date fields alone cannot distinguish 6pm from 9pm.
| Contract date | Result |
|---|---|
| Any date before 12 May 2026 | Grandfathered |
| 12 May 2026, signed before 7:30pm AEST | Grandfathered |
| 12 May 2026, signed after 7:30pm AEST | Not grandfathered - Question 3 decides |
| Any date after 12 May 2026 | Not grandfathered - Question 3 decides |
Verdicts computed with src/engine/regimes.ts classifyAcquisition() - the same function behind the grandfathering checker.
The trap sits in that second row. Two contracts signed on the same calendar day can land in different regimes entirely, and a date field alone will not tell you which. If a purchase is genuinely close to the cutoff, the exact signing time is worth confirming from the contract itself, not memory.
Question 3: is it an eligible new build? #
Missing grandfathering does not automatically mean quarantining. A property contracted after the cutoff is exempt from the new rules entirely if it is an eligible new build - broadly, a dwelling that genuinely adds to housing supply and has never previously been sold as residential premises. Newly constructed homes and off-the-plan purchases qualify; knock-down rebuilds only qualify where more dwellings replace fewer. Renovations and one-for-one rebuilds do not, and the exemption belongs to the first owner only - buy an ex-new-build second-hand and it is established in your hands.
| Post-cutoff purchase | Result |
|---|---|
| Eligible new build (first owner, never previously sold) | New build exempt - full negative gearing retained |
| Established dwelling | Quarantined from 1 July 2027 |
Verdicts computed with the same classifyAcquisition() function for a contract dated after the cutoff.
The precise eligibility rules sit in a ministerial determination that had not been made as at August 2026 - the broad shape above is settled, but the edge cases (partial rebuilds, mixed-use conversions) are not yet defined. Confirm anything close to the line with an adviser before relying on it.
What it is actually worth: one $12,000 loss, three outcomes #
The three questions above decide more than a label - they decide what a loss is worth in your pocket this year. Take the same rental result under each regime: a $120,000 taxable salary, a $12,000 net rental loss for the year (rent minus vacancy, operating expenses, interest and depreciation), no other residential rental income, and no existing loss pool, in FY2027-28 - the first income year the quarantine rules fully apply.
| Acquisition class | This year's tax effect | What happens to the loss |
|---|---|---|
| Grandfathered | +$3,840 | Fully deducted against salary, same as always |
| New build (eligible) | +$3,840 | Fully deducted against salary - same treatment as grandfathered |
| Established (quarantined) | $0 | Banked in a loss pool ($12,000) - carried forward, usable only against rental income or a residential capital gain |
Computed with src/engine/regimes.ts yearTax() - the function behind the Negative Gearing Calculator's year-by-year projection.
The same $12,000 loss is worth $3,840 back at tax time this year if the property is grandfathered or an eligible new build - and $0 this year if it is established and post-cutoff. The loss is not gone in the third case, only deferred: it sits in a loss pool until there is residential rental income or a residential capital gain to offset.
Grandfathering does not touch capital gains tax #
The most missed part of the reform: grandfathering is a negative gearing concept only. Every CGT asset held at 30 June 2027 - grandfathered or not - is deemed sold at market value and reacquired that day. The gain banked to that point keeps the 50% discount when the property is eventually sold; the gain accruing after uses CPI indexation on the reset cost base plus a 30% minimum tax instead. A grandfathered investor who assumes the old rules cover the whole sale is pricing the deal on the wrong assumption. The capital gains tax calculator splits a sale into the pre- and post-reform components for any acquisition class.
The traps at the edges #
Four places the answer surprises people who assumed the obvious one:
- Contract date, not settlement. A pre-cutoff contract that settles well into 2027 is still grandfathered - the deeming rule anchors to signing, not handover.
- Ownership changes reset the clock. Refinancing does not affect status, but transferring a grandfathered property to a spouse, a trust or a company after the cutoff is a new acquisition under the new rules on the plain reading of the law. Announced rollover relief for some restructures is not yet legislated.
- Moving in and back out does not un-grandfather. Living in the property and later re-renting it does not change its acquisition class either way.
- A renovation is not a new build. Only genuine additional-supply construction qualifies for the exemption - upgrading an established dwelling does not reclassify it.
Check your own three answers #
The three questions above are the entire test: contract date against the cutoff, which side of 7:30pm if it lands on the day itself, and new build or established if grandfathering is missed. The grandfathering checker runs all three against a specific date in a few seconds. Once the class is known, the negative gearing calculator projects what it is worth year by year, and the Deal Auditor runs the full deal against the regime that applies.
Run your own numbers
Every figure here comes from the engine behind the grandfathering checker. Put your own inputs in and test the result against your criteria.
Frequently asked questions
What does "grandfathered" mean for negative gearing?
If you signed the contract to buy before 7:30pm AEST on 12 May 2026, the property keeps the old negative gearing rules for as long as you hold it - your rental losses deduct against your salary and other income at your marginal rate every year, with no quarantining. The date that counts is the contract date, not settlement.
What is the exact cutoff, and is it actually law?
7:30pm AEST on 12 May 2026 - the moment the changes were announced in the federal budget. The measures are now enacted law (Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Royal Assent 26 June 2026), so this is the rule that applies to every contract signed from that evening on, not a proposal still being debated.
Does being grandfathered also protect my capital gains tax?
No. Grandfathering is a negative gearing concept only. The CGT changes apply to every property, grandfathered or not: any asset held at 30 June 2027 is deemed sold and reacquired that day, the gain banked to that point keeps the 50% discount, and the gain accruing after uses CPI indexation plus a 30% minimum tax instead.
What counts as an eligible new build?
Broadly a dwelling that genuinely adds to housing supply and has never been sold as residential premises before - newly built homes, off-the-plan purchases, and knock-down rebuilds only where more dwellings replace fewer. Renovations and one-for-one rebuilds do not qualify, and the exemption belongs to the first owner only. The precise eligibility rules sit in a ministerial determination that had not been made as at August 2026.
Does refinancing or transferring ownership affect grandfathered status?
Refinancing does not - status follows the property, not the loan. But a change of ownership is treated as a new acquisition: moving a grandfathered property into a spouse's name, a trust or a company after the cutoff puts the new owner under the new rules on the plain reading of the law. Announced rollover relief for some restructures is not yet legislated.
How much does quarantining actually cost, in dollars?
On the same $12,000 net rental loss and $120,000 taxable salary, a grandfathered or new-build owner gets roughly $3,840 back at tax time this year - an established, post-cutoff owner gets $0 this year, with the $12,000 carried forward in a loss pool for later use. The negative gearing calculator projects this year by year for your own numbers.