Since the Government announced its changes to negative gearing, many investors have assumed they will now be able to borrow less, particularly if they plan to keep buying established properties.
That may be true in some cases. But not for everyone. Here’s why.
If you’re buying a new build
New builds keep access to negative gearing, so they are generally unaffected by these changes.
If you’re buying an established property and don’t own any investment properties
This is the group most likely to be affected.
For established properties bought after 7:30pm (AEST) on 12 May 2026, from 1 July 2027 rental losses can no longer be offset against your salary, business income or other non-property income.
Before this change, the tax saving from negative gearing could increase the net income some lenders use in their servicing calculations.
Without that tax saving, and if nothing else changes, your borrowing capacity may decrease.
If you already own investment properties, the outcome may be different
Rental losses from a newly purchased established property can still be offset against income from your other residential investment properties. Any losses you can’t use can be carried forward to future years.
For example:
- Property A (owned before the Budget): +$15,000 net rental income
- Property B (bought after the Budget): –$10,000 net rental loss
- Net residential property income: +$5,000
So if you already own several investment properties and some are now positively geared, the changes may have less impact on your borrowing capacity than you might expect.
Some lenders now use more of your rental income
Negative gearing is only one part of how lenders calculate borrowing capacity.
Lenders generally don’t use 100% of your rent. They apply a discount to allow for vacancies and property costs. This is known as rental shading.
For example, if your rent is $1,000 per week:
- A lender using 85% counts $850 per week
- A lender using 90% counts $900 per week
Since the Budget, some lenders have reduced their rental shading. That means they may now count more of your rental income when working out how much you can borrow.
Lower income tax rates from 1 July 2026
From 1 July 2026, the tax rate on taxable income between $18,201 and $45,000 dropped from 16% to 15%. This change was legislated before the Budget, but it took effect around the same time.
Some borrowers now have slightly higher after-tax income, which may lead to a small increase in borrowing capacity. If your borrowing capacity was assessed before 1 July, it was based on the old rates.
Interest rates and lending policies keep changing
Interest rates also affect how much you can borrow. When rates rise, lenders assess higher repayments, which reduces borrowing capacity. When rates fall, the opposite applies.
The Reserve Bank raised the cash rate to 4.60% on 29 September 2026. On its own, that works against borrowing capacity.
At the same time, some lenders have changed how they assess income and rental income. The overall effect depends on your situation and the lender you apply with.
The takeaway
Don’t automatically assume: “Negative gearing has changed, so I must be able to borrow less.”
Your borrowing capacity depends on many factors, including:
- Whether you’re buying a new build or an established property
- Your existing property portfolio
- Your rental income, and whether your properties are positively or negatively geared
- Your income and overall financial position
- Current interest rates
- And importantly, which lender you apply with
If you had your borrowing capacity assessed before the Budget and put your investment plans on hold because you assumed you could now borrow less, it may be worth having it reviewed again. Some changes since then work in your favour, and some don’t.
If you’d like a fresh assessment, feel free to reach out to Cleverly Finance.
Information checked as at 1 October 2026. This content is general information only and does not constitute personal tax, financial or credit advice. Tax treatment and borrowing capacity depend on your individual circumstances and the lending policies that apply at the time of assessment.
