It just got harder for investors to borrow money thanks to the Albanese budget...

There are various consequences of last week's budget announcement by Anthony Albanese and Jim Chalmers, the Federal Treasurer for Labor Party, regarding the sweeping changes to negative gearing.

Jim Chalmers announced that for any properties bought after budget night, negative gearing can no longer be used by an investor to reduce tax on an established property.

Prior to Budget night 12 May 2026, where rental income was insufficient to cover expenses on an established property, the net loss could be deducted by an investor against other income including wages. This is called negative gearing.

What's changed?

From 12 May 2026 onwards, investors can no longer claim negative gearing to reduce their tax when purchasing an established property. It has been restricted to the purchase of new properties only.

For many investors seeking properties in residential areas where tenants want to live, the ability to purchase new properties rather than established properties is a lot more limited.

There is also the time lag between the commencement and completion of a new build, where the investor is having to meet loan repayments when there is no income (rent) being received. Many new builds can take 12 months to 18 months to complete.

Ouch.

While the removal of negative gearing for established properties will negatively impact many investors, there is another glaring consequence that is not being readily discussed. Investors now can borrow significantly less that what they could before the Albanese budget announcement.

How?

The banks used negative gearing calculations to work out how much an investor can borrow. Now, with the removal of negative gearing benefits, any investor intending to borrow money to purchase an established property can borrow less than what they could pre budget night.

It is the double whammy.

Loss of tax benefits and reduced borrowing power.

The dust is only settling on how this will impact the property market and availability of properties for first home buyers, as touted as the driver behind this decision by Anthony Albanese and Jim Chalmers. We will continue to watch this space.