The decision to shield existing landlords from negative gearing reform will create an unfair generational divide and hurt mum-and-dad investors, property experts have warned.
Negative gearing was effectively abolished for existing properties in the 2026 federal budget – but a grandfathering policy means investors who owned their property before 7.30pm on May 12 can indefinitely benefit from the friendly tax break.
Lucky owners who purchased before budget night can still reduce their yearly tax by deducting net losses from their investment property from their overall income.
READ MORE: Here are the big changes you probably missed in the budget
EXCLUSIVE: Expat Annie decided to move back to the UK. She lasted just six months
From July 1, 2027, negative gearing will be limited to newly built homes.
Buyer's advocate and Property Investment Professionals of Australia (PIPA) chair Cate Bakos described the retrospective exemption as an "enormous injustice" for future investors.
"It certainly feels like the older cohort, particularly those of retiree age or emerging retirement age owners, are broadly unaffected," Bakos told nine.com.au.
"It's disappointing that younger buyers are missing out on opportunities that those who got in a day ahead of them were able to get."
She said negative gearing primarily benefitted mum-and-dad investors with one or two properties, not property moguls with an expansive portfolio.
Instead, Bakos said the tax concession is being snatched away from those who really "need it".
The exemption for new builds won't be of much help, either.
"I don't think enough investors will be able to get their hands on new properties," Bakos added.
"Investors are being marginalised now in terms of new property being their only real viable option as a property investment. "
WHAT'S IN IT FOR YOU? The winners and losers from the federal budget
Loan Market Australia chief executive Sam White said the decisions made this week will deepen the inequity in Australia's housing market.
The goal of the tax reforms, according to the federal government, was to "level the playing field" for Australians – but White said older Australians emerge victorious while younger buyers lose out.
"I don't quite see where the fairness is in what they wanted to achieve," he explained.
"They had a decision to make, and they went that way.
"I think the consequence of that is that the inequity that was there before is probably just being reinforced."
Treasurer Jim Chalmers defended the government's decision to grandfather negative gearing during his National Press Club address, explaining the reforms needed to "respect and recognise" past investments.
"It is essentially a prospective set of tax reforms that we are proposing," Chalmers said, adding that "we think we've found the right way through".
He also defended removing the previous tax breaks, pointing out that future generations of investors will still have access to negative gearing and the CGT discount, just as long as they help increase Australia's housing stock.
Bad news for renters, property mogul warns
Prolific investor Eddie Dileen, who owns over 100 homes, said the tax reform will be unwelcome news for prospective buyers who waited too long to pull the trigger.
"Unfortunately, people who didn't take action, maybe in the last one to four years, because they were waiting for the most opportune time… I feel bad for them," Dileen told Nine.com.au.
But ultimately, future investors are not the biggest losers of this budget announcement.
Dileen grew up in social housing and said renters will bear the brunt of the disappearing negative gearing.
He described the treasury's prediction that the reforms will only drive the median rent up by $2 per week as "ridiculous" and claimed it could cause rents to be raised by $100-$150.
"It will hurt people living in rentals, it's going to hurt the entry-level people, more than anything, unfortunately," he said.
"And then entry-level rentals won't be $500 or $600 for a unit anymore".
NEVER MISS A STORY: Get your breaking news and exclusive stories first by following us across all platforms.
- Download the 9NEWS App here via Apple and Google Play
- Make 9News your preferred source on Google by ticking this box here
- Sign up to our breaking newsletter here
