Can Expats Negatively Gear? Property vs Shares, and the Big Change Now Locked In for 2027

Negative gearing is the closest thing Australia has to a national tax religion. Millions of Australians use it, dinner parties have been ruined over it, and elections have circled it warily for decades. So it’s no surprise that one of the questions we hear most from expats is some version of: “I’m a non-resident now, can I still negatively gear?”

The answer, as with most good tax questions, is “yes, but,” and right now there are two big “buts”: the rules treat property and shares completely differently, and the whole negative-gearing landscape has just changed under a reform that has now passed Parliament and become law. Let’s take all of it in order, because getting this wrong is expensive and getting it right isn’t actually that hard.

First, what negative gearing actually is

Strip away the politics and it’s simple. If you borrow to buy an investment, and the costs of holding that investment (loan interest, maintenance, rates and so on) are more than the income it produces, you’ve made a loss on it. Negative gearing is just the tax treatment of that loss: under the current rules, you can generally use it to reduce your other taxable income, which lowers your tax bill. The investment is “negatively geared” because the gearing (the borrowing) is running at a net loss, with the investor banking on a future capital gain to make the whole thing worthwhile.

That’s the mechanism people love. But two things determine whether an expat can actually use it: the type of asset, and (from 2027) when you bought it.

Property: yes, you generally can (for now), but read the next section

Under the current rules, if you’re a non-resident who lodges an Australian tax return, you can generally negatively gear an Australian investment property. The net rental loss can be used to reduce your other Australian-sourced assessable income, the same broad principle that applies to resident investors.

And here’s the bit the old advice gets right: what if you don’t have much (or any) other Australian income to soak up the loss? As a non-resident, a lot of your foreign income simply isn’t in the Australian tax net, so you might have a rental loss and little Australian income to offset it against. In that case, the loss isn’t wasted. Under Australia’s rules, a tax loss you can’t use this year is generally carried forward indefinitely, sitting patiently in your tax history until you have Australian income to apply it against, whether that’s when you return to Australia to work, or when you eventually sell the property and make a capital gain. The loss waits for you, subject to the ordinary tax-loss rules. It’s one of the few genuinely patient things in the tax system.

So far, so good. Except that “under the current rules” is doing an enormous amount of work in those last two paragraphs, because the rules have just changed.

The big one: negative gearing is being restricted from 1 July 2027

This is the part no honest 2026 article can leave out. As part of the 2026-27 Federal Budget, the Government announced that it would limit negative gearing on residential property. That reform is no longer political smoke in the distance: the legislation (the Treasury Laws Amendment (Tax Reform No. 1) Act 2026) passed both houses of Parliament in late June 2026 and has become law. The key rules start later, but the guessing game is over; this is now legislation with a calendar.

Here’s the shape of it under the new law:

• From the 2027-28 income year, losses from holding residential property as residential accommodation are quarantined where the deductions exceed the assessable income from those residential properties. In plain terms, you can no longer use a residential rental loss to reduce your salary or other non-residential income; the loss is boxed off.
• Existing arrangements are grandfathered. Residential property you acquired before 7:30pm ACT legal time on 12 May 2026 (Budget night) is carved out and keeps the current negative-gearing treatment until you sell it. If you were under a contract entered into before that time, you’re generally treated as having an ownership interest from the time you signed, not when it settled.
• New residential dwellings are also carved out, so they can still be negatively geared. But, and this is important, the precise definition of what counts as a “new residential dwelling” is to be set by the Minister through a legislative instrument, so don’t rely on the loose phrase “new build” alone; the detail will matter.
• For affected (established, non-new-build) residential property bought after Budget night, the quarantined excess losses don’t simply vanish. You can apply them against other residential property income, including residential capital gains, and carry forward any unused amount to future years. They just can’t be deducted against your wages or other non-residential income.
• One more trap worth flagging: the denied residential-dwelling expenditure doesn’t quietly sneak into your cost base instead. The Act specifically prevents expenditure denied under the new rule from forming part of the cost base or reduced cost base. The loss is quarantined under the new rules, not recycled into a different tax bucket.
• The quarantining rule doesn’t catch everyone: widely held unit trusts and complying superannuation entities are carved out, and commercial property and other asset classes (such as shares) aren’t subject to this new residential-property negative-gearing quarantine at all (their CGT treatment is a separate question, addressed below). But don’t read the super carve-out as “SMSF residential property borrowing is business as usual,” because a separate part of the same Act now restricts new limited recourse borrowing arrangements over real property to business real property. Residential property inside an SMSF now needs its own superannuation advice; different rule, same reform package.

Read the grandfathering point again, because it matters enormously for timing: whether your property is caught turns on a specific date and time, and on your contract date. The practical message for expats is simple. The date you bought (or buy), the type of property, and whether it qualifies as a new residential dwelling now matter in a way they never used to, so get current advice rather than relying on the pre-2027 version of the story. We keep the detail current in our 2026 Budget guide for expats, and it’s well worth weighing up whether negatively gearing still stacks up for you once these changes are factored in.

One more linked change worth knowing, because it affects the “bank on a future capital gain” half of the negative-gearing bet: the same Act replaces the 50% CGT discount (for individuals, trusts and partnerships) with cost-base indexation plus a minimum 30% tax rate on capital gains, for gains accruing from 1 July 2027. Gains accrued up to that date generally keep the old 50% discount treatment, where the taxpayer is otherwise eligible for the discount; the new approach applies to gains accruing after it. For eligible new residential dwellings there’s a sweetener: eligible investors disposing of them on or after 1 July 2027 may generally choose between the 50% discount and the new indexation-plus-minimum-tax regime. So both halves of the traditional negatively-geared-property strategy (the loss deduction now, the discounted gain later) have changed. Plan accordingly.

And here’s a catch that sits underneath all of it specifically for expats: foreign and temporary residents generally can’t access the full 50% CGT discount for gains accruing during foreign or temporary resident periods after 8 May 2012 (an apportioned discount can apply). The new law didn’t make that older rule disappear, so an expat selling Australian property after 1 July 2027 may need to model both the new CGT regime and the foreign-resident discount restriction. Two rulebooks, one sale.

Shares: sorry, no, and here’s the logic

Now the asset class that surprises people. If you’re a non-resident, you generally cannot negatively gear a share portfolio, even if you borrowed to buy the shares. The reason isn’t arbitrary; it follows logically from how non-residents are taxed, and once you see it, it makes sense.

The deductibility of an expense is tied to whether it was incurred in earning assessable income. For a resident, interest on a loan used to buy income-producing shares is generally deductible, because the dividends are assessable. But for a non-resident, the income side of an Australian share portfolio largely falls outside the assessable net:

• Fully franked dividends paid to a non-resident generally aren’t subject to further Australian tax (and the franking credits aren’t refundable to you).
• The unfranked portion of dividends, and interest, are generally subject to a final withholding tax and treated as non-assessable non-exempt income.
• Ordinary portfolio shares in Australian companies are often not “taxable Australian property,” so a foreign resident may make no assessable Australian capital gain when selling them. Don’t turn that into a slogan, though: shares can still be caught where they’re indirect interests in Australian real property (for instance, substantial holdings in land-rich companies), or where you previously chose to keep the asset in the Australian CGT net when you ceased residency.

Put those together and the problem becomes clear for ordinary passive portfolio investors: if the income from the shares isn’t assessable to you as a foreign resident, there’s usually no assessable income for your interest and other costs to be deducted against. No assessable income, no deduction. Edge cases can exist (share trading as a business, activity through an Australian permanent establishment, or land-rich interests), but that’s no longer the ordinary “borrow to buy ASX shares” story; that’s a specialist-advice story with a folder. It feels unfair next to the property treatment, but it’s the logical flip side of those genuinely favourable non-resident share rules (which are a real perk in their own right). You can’t have the income tax-free and the costs deductible; the system doesn’t let you keep both halves of that sandwich.

There may be a small consolation. Some non-deducted costs of acquiring or holding shares can, in the right circumstances, form part of the asset’s cost base, which could reduce a future capital gain if those shares ever do fall into the Australian CGT net (for instance, if you’ve become a resident again by the time you sell). But this is technical and record-heavy, and you can’t assume every undeducted dollar magically becomes cost base, so it’s genuinely a “check with your tax adviser before assuming” situation rather than something to bank on.

So where does that leave an expat investor?

Three things to take away. First, on property, non-residents can generally still negatively gear today, including carrying forward unused losses, but from the 2027-28 income year the new law quarantines losses for affected residential dwellings (mainly established properties bought after 7:30pm on 12 May 2026), so timing, contract date and property type now matter enormously. Second, on shares, negative gearing generally doesn’t work for ordinary foreign-resident passive investors, because the income those shares produce largely isn’t assessable to you, so the costs aren’t deductible. Third, and most importantly, this is no longer a “wait and see” situation: the reform has passed Parliament and is law, with commencement set for 1 July 2027, so decisions made on the old assumptions can age badly and fast. This is exactly the kind of thing worth a proper look before you buy, sell, or restructure.

Want to get it right for your situation?

This is exactly what we do. We help Australian expats work out how the negative-gearing and CGT rules (current and new) actually apply to their property and share investments, model the timing, and keep them on the right side of the changes as they take effect. We work remotely with expats all over the world, and our fee is always an upfront quote.

Book an appointment with our specialist team today. Better to plan around the change than be ambushed by it.

General information only. This article doesn’t consider your personal circumstances and isn’t tax or financial advice. The negative gearing and capital gains tax changes described are now law, but many operative effects apply from later income years (chiefly from 1 July 2027), and some detail (including the meaning of an eligible new residential dwelling) is to be set by legislative instrument and should be checked against the final legislation and ATO guidance before acting. Your outcome depends on your specific circumstances, asset type, purchase date, residency and ownership structure. Speak to our specialist expatriate tax team today, or to another registered tax agent, before acting.