“We own property jointly, or may rent out our current home later. Do the new negative gearing rules affect us?”

The Government has now fixed two unintended problems in the recent negative gearing reforms.

The changes are especially relevant for people who:

• own investment property jointly
• inherit an interest in property
• go through a relationship breakdown
• or decide to rent out a former home

What was the issue?

Under the new rules, from 1 July 2027, losses from residential rental properties will generally be quarantined.

That means those losses can only be offset against income or capital gains from other residential rental properties.

Properties acquired before 12 May 2026 are generally protected from the new treatment.

The problem was that the original drafting could have treated some later ownership changes as a new acquisition.

That created the risk that someone could lose the protected treatment even though the property itself had been acquired before Budget night.

The “widow tax” issue

Take a jointly owned investment property.

If one spouse died and their ownership interest passed to the surviving spouse, the original rules could have treated that inherited interest as a new acquisition.

That meant the surviving spouse risked losing the ability to offset rental losses in the same way as before.

The Government has now corrected that.

Transfers arising from the death of a spouse or relationship breakdown can now retain the earlier protected treatment in certain circumstances.

Former main residences were also caught

There was another technical problem.

A homeowner may have bought their property before 12 May 2026, lived in it for years, then decided to rent it out later.

Under the original drafting, an existing tax rule could have effectively reset the acquisition date when the property was first used to produce income.

That could have accidentally pushed the property into the new negative gearing regime. The Government has now fixed that too.

For negative gearing purposes, the original acquisition date can continue to apply.

What should property owners do?

If this could apply to you:

• keep clear records of the original purchase date
• keep ownership records
• document any changes caused by death or relationship breakdown
• and get advice before assuming the protected treatment applies automatically.

There can still be separate CGT consequences, so the full tax position should be checked

Final thought

These changes are welcome because they remove some unintended and potentially harsh outcomes.

But property tax rules can get complicated quickly once ownership changes or a former home becomes an investment.

If your situation falls into either category, speak with your Aspen advisor before making assumptions about how the new rules apply.