Highlights

  • A less discussed question is whether it will still count as new for the next buyer.
  • Under Treasury's exposure draft, "new" status is tested owner by owner and lapses 24 months after the first occupancy certificate.
  • With the bill carrying the definition introduced to Parliament on Wednesday, that clock deserves attention.
  • From 1 July 2027, they apply to residential property acquired after 7:30pm AEST on 12 May 2026, but new dwellings are carved out.

Under Treasury's draft rules, a dwelling's 'new' status for negative gearing is tested owner by owner and lapses 24 months after its first occupancy certificate. That could affect who buys it next. Investors buying newly built apartments and houses to keep negative gearing are focused on whether the property counts as "new" for them.

How 'new' is tested for each owner

The negative gearing limits are already law. The legal meaning of "new" was left for later legislation. Treasury's exposure draft, released on 4 August, fills that gap. In general, a dwelling is "new" if it genuinely adds to housing supply and is acquired within 24 months of the first certificate of occupancy. The Budget had proposed 12 months. Treasury said the draft doubled the window to give builders time to sell their stock. The draft explanatory material makes clear that the test applies separately to each owner. If Person A sells to Person B, the dwelling is "not automatically new for Person B".

The 24-month window for the next buyer

Under the draft, a later buyer generally qualifies only if all of the following apply: the certificate of occupancy was first issued on or after 7:30pm AEST on 12 May 2026 that certificate was issued no more than 24 months before the buyer acquires the dwelling the dwelling was "new" for the seller the buyer acquires a legal interest in it Two features of the draft favour investors. "There is no restriction on the dwelling being occupied during this time or the number of times the dwelling is sold," the explanatory material says. A dwelling can be lived in or rented and still pass to a new owner as "new" within the window. Once 24 months have passed, "the status of new residential dwelling ceases to apply". Joint owners are each tested at the time they acquire their own interest. For off-the-plan purchases, the draft treats the interest as acquired at settlement, after the occupancy certificate has issued, so the 24-month rule can apply to those buyers too.

How the clock plays out on a resale

Hypothetical example: An apartment receives its first certificate of occupancy on 1 March 2027. Investor A acquires it on 1 May 2027, so it is "new" for A, and A can deduct rental losses against other income. If Investor B acquires the apartment on 1 February 2029, that is within 24 months of the certificate, which runs to 1 March 2029. The dwelling is "new" for B as well. If B instead acquires it on 1 April 2029, the window has closed. The apartment is not new for B, and B's rental losses are quarantined from the 2028–29 income year. Assume B earns $30,000 a year in rent and has $40,000 in interest and other deductible costs. That produces a $10,000 rental loss. If the dwelling is "new" for B, the loss can reduce tax on B's salary. At an assumed combined marginal rate of 32%, that is worth $3,200 in the year it is claimed.