The new build definition for negative gearing is now one of the most searched questions in Australian property investment.
The law has passed, but the detailed rules around exactly what qualifies are still being finalised. Here is a plain-English summary of where things stand as of July 2026.
Last updated July 2026. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed both houses of Parliament on 25 June 2026 and received Royal Assent on 26 June 2026. The core law is settled. The detailed new build definition will be set by ATO legislative instrument – that guidance is expected in late July 2026 and beyond. This is not tax advice. Speak with a qualified accountant about your individual circumstances.
Why is the new build definition for negative gearing still being debated?
When the 2026 federal budget announced that negative gearing would be restricted to new builds from 1 July 2027, it created an immediate question: what exactly counts as a new build?
The housing industry pushed back hard. Master Builders Australia, the Housing Industry Association and the Property Council of Australia all called for a broader definition. One that would include granny flats, knockdown rebuilds, dual occupancies and major renovations. Their argument was that a narrow definition would reduce housing supply at exactly the time Australia needs more of it.
Treasurer Jim Chalmers extended consultation on this specific question before the legislation was passed. But while the core law is now settled, the fine print (the exact definition of what qualifies) is still being determined by the ATO via legislative instrument. That guidance is expected in late July 2026.
What the industry wanted included in the new build definition
The housing industry lobbied for the definition to be broad enough to include:
- Granny flats built adjacent to existing properties
- Knockdown rebuilds (where an existing home is demolished and replaced with a new one)
- Dual occupancies
- Major renovations that substantially upgrade an existing dwelling
Their argument was straightforward: all of these add value to Australia’s housing stock and should be treated the same as a brand new home when it comes to negative gearing.
The government’s position has been narrower. The law as passed requires that a new build must genuinely add to Australia’s housing supply. Meaning it must result in a net increase in the number of dwellings.
What does and does not qualify as a new build. What the sources are saying
Austral Financial is not an accounting firm and the following is not tax advice. This section summarises what Chartered Accountants ANZ (the peak body representing over 140,000 accountants across Australia and New Zealand) and other reputable professional sources are currently reporting. The ATO has not yet released its formal guidance. Everything below reflects current best understanding and may be updated as that guidance is released.
Based on current reporting from professional sources, here is what is expected to qualify:
- Properties constructed on previously vacant land
- Off-the-plan apartments
- House-and-land packages
- A knockdown rebuild that replaces one house with two or more dwellings (because it increases housing supply)
- Qualifying duplex developments that result in a net increase in dwellings
And here is what is currently expected NOT to qualify:
- Granny flats built adjacent to an established property – Housing Minister Clare O’Neil confirmed this in Senate Estimates
- A knockdown rebuild that replaces one house with another single house (no net increase in dwellings)
- A renovation that does not increase the number of dwellings on the property
- A newly built property that has already been occupied for more than 12 months before being sold (the new build status does not transfer to a subsequent buyer)
The key test is whether the development results in a net increase in housing supply. A duplex replacing a single house qualifies. A single house replacing a single house does not. A granny flat on its own does not.
This is exactly what the housing industry has been pushing back on. And why the ATO’s forthcoming guidance matters so much.
The current understanding is based on what the law says and what government ministers have confirmed in Parliament. The formal ATO instrument will provide the authoritative final word.
What the new build definition for negative gearing means for investors right now
The debate about the new build definition for negative gearing is not yet fully resolved, but the direction is clear. The government’s intent is to reward new housing supply, not renovations or replacements. Purpose-built new construction sits in the strongest position under the law as it currently stands.
Tax policy is one part of a property investment decision, not the whole picture. Location, long-term demand, loan structure and your personal circumstances all matter just as much. Tax benefits alone should not drive a new build decision, but understanding how the rules work is an important part of making an informed one.
We track these developments so we can help families understand what they mean. We will update our information as the ATO releases its formal guidance in the weeks ahead.
If you would like to talk through what the negative gearing changes mean for your property decisions, send us a message.
Disclaimer: This article is for general information purposes only and does not constitute financial, investment, or tax advice. The information reflects the legislation as passed and reporting from reputable professional sources as at July 2026. The ATO’s formal guidance on the new build definition has not yet been released and the above may be updated as that guidance becomes available. Tax laws and their application vary depending on individual circumstances. Speak with a qualified accountant or financial planner before making any decisions based on this information.
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