What is negative gearing and does it still work in Brisbane? — Updated for the May 2026 budget

Negative gearing is one of the most talked about — and most misunderstood — concepts in Australian property investing. In April 2026 it is also one of the most urgent. With the federal budget landing on 13 May 2026 and Treasury actively modelling changes to both negative gearing and the capital gains tax discount, first-time investors in Brisbane need to understand what this strategy is, how it works — and what might be about to change.

1. What is negative gearing in plain English

Negative gearing simply means your investment property costs you more to hold than it earns in rent. Your rental income is less than your total expenses — mortgage interest, council rates, property management fees, insurance and maintenance.

In Australia the government allows you to deduct that annual shortfall against your other income — typically your wages — which reduces the amount of tax you pay overall. According to ATO data from 2022–23, approximately 1.3 million Australian taxpayers declared a net rental loss, collectively claiming over $10.2 billion in deductions.

2. How the tax benefit actually works

The higher your income tax bracket the more valuable the deduction becomes. In 2022–23 approximately 37% of all rental deductions went to the top 10% of income earners — and 71% went to the top 30%. But that does not mean the strategy only suits high earners. Here is how the tax saving works across brackets:

The tax benefit turns a real cash loss into a smaller net out-of-pocket cost. But it is critical to understand — the tax saving does not make you money. It reduces how much you lose. The strategy only truly works if capital growth over time more than offsets the accumulated annual losses.

3. A real numbers example for Brisbane

The RBA cash rate currently sits at approximately 4.10% after two rate rises in 2026 — pushing borrowing costs higher again for investors. Here is a realistic breakdown for an $800,000 property in outer Brisbane in 2026:

4. Does it still work in Brisbane in 2026?

The honest answer is yes — for buyers in the right suburbs with the right financial position. Brisbane's fundamentals remain strong despite elevated rates.

CoreLogic data shows Brisbane led capital growth among Australian capitals at 8.1% in the 12 months to March 2026. On an $800,000 property that represents approximately $64,800 in value growth in year one — well above the $11,154 annual out of pocket holding cost in the example above. But capital growth is never guaranteed and past performance does not predict future results.

5. The May 2026 budget reforms — what is being proposed

This is the most important section for anyone considering a negative gearing strategy right now. The federal budget is due on 13 May 2026 and Treasurer Jim Chalmers has confirmed Treasury is actively modelling two specific changes:

A Money.com.au survey of investors found that 39% would step back from the market or sell if the CGT discount were reduced, while 22% said a one-property negative gearing cap would lead them to take similar action — a combined 61% signalling potential pullback under the proposed reforms. However industry modelling warns that restricting negative gearing could reduce dwelling starts by up to 45,500 over five years and push rents up by more than 2% annually in real terms.

6. What the reforms mean for first-time investors

Here is the honest practical impact broken down clearly:

7. When it makes sense — and when it does not

8. The bottom line

Negative gearing is not a strategy in itself — it is a tax outcome that results from a strategy. The strategy is buying quality property in a growth location and holding it long term. For first-time investors in Brisbane and SEQ do not chase negative gearing for its own sake. Focus on finding a property with genuine capital growth potential, run the real numbers on your holding costs at current interest rates and make sure you can comfortably absorb the weekly shortfall. Let the tax benefit be a bonus rather than the primary reason you are buying.