If you own an investment property in Long Jetty or you're considering buying one, the tax treatment of your loan and rental income has changed.
From 1 July 2027, if you purchased an established residential property after 12 May 2026, you'll no longer be able to claim rental losses against your wage or salary income. Those losses can only offset rental income or capital gains from other residential property. The change doesn't affect properties you already owned before Budget night, and it doesn't apply to new builds. For Long Jetty investors who bought before that date, your existing arrangements remain in place.
Understanding what you can still claim, and how the new rules work, makes a real difference to your borrowing capacity and your long-term return. The structure of your investment loan affects how much you pay in interest, how much you can deduct, and whether your property adds to your equity or just sits there costing money each quarter.
What You Can Still Claim on an Investment Property Loan
All interest paid on an investment property loan remains fully deductible, regardless of when you bought the property or whether it was established or new. If your annual loan interest is $18,000, that full amount reduces your taxable income. This applies to both variable and fixed rate loans, whether the loan is interest only or principal and interest, and whether the property makes a profit or a loss.
Consider a buyer who purchased a two-bedroom unit in Long Jetty in early 2026 for $550,000 with a 10% deposit. Their loan amount is $495,000. At a variable interest rate around 6.2%, annual interest sits close to $30,700. That full amount is claimable. If they're earning $95,000 and sitting in the 32.5% tax bracket, that deduction alone is worth around $10,000 in tax saved each year. The interest deduction hasn't changed, and it won't change under the new rules.
Other claimable expenses include property management fees, council and water rates, strata fees if the property is part of a body corporate, landlord insurance, repairs and maintenance, and depreciation on the building and fixtures. Stamp duty isn't deductible in the year you purchase, but legal and conveyancing costs related to the loan can be claimed over five years. Depreciation schedules prepared by a quantity surveyor often uncover $5,000 to $8,000 in annual deductions for newer properties, which compounds the tax benefit considerably.
How Negative Gearing Works Under the New Rules
Negative gearing means your property costs more to hold than it earns in rent. Until now, that shortfall could be claimed against all income, including wages. From 1 July 2027, established properties bought after Budget night can only offset those losses against rental income or capital gains from residential property.
If you bought an established property in Long Jetty after 12 May 2026 and it runs at a $12,000 annual loss, you can't reduce your wage income by that amount anymore. Instead, you carry the loss forward and use it to offset future rental profits or capital gains when you sell. The deduction isn't lost, but the timing changes. That delay affects cash flow, and it reduces the immediate tax benefit that previously made negatively geared properties attractive to salary earners in higher tax brackets.
Properties bought before 13 May 2026 are grandfathered. If you purchased before that date, you keep the old rules. New builds remain fully exempt from the changes, meaning buyers of newly constructed apartments or houses can still claim rental losses against wage income, and they retain the 50% capital gains tax discount when they sell.
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Why Interest Only Loans Still Make Sense for Some Investors
An interest only loan means you're not paying down the principal, so your repayments are lower and your deductible interest remains higher for longer. If your goal is to maximise tax deductions and free up cash flow to fund other investments or offset accounts, interest only can be a useful structure.
In our experience, investors who plan to sell within seven to ten years often choose interest only because they're not focused on paying down the loan. They want the property to grow in value, claim the maximum deduction each year, and exit when the capital gain justifies it. With the new capital gains tax rules, that strategy shifts slightly. From 1 July 2027, capital gains on properties bought after Budget night will be taxed at a minimum 30% rate, with indexation applied to adjust for inflation. New builds let you choose between the old 50% discount and the new system, whichever works in your favour.
For a Long Jetty investor holding an interest only loan on an established property, repayments on a $495,000 loan at 6.2% sit around $2,557 per month. The same loan on principal and interest terms would be closer to $3,050. That difference of roughly $500 per month can be redirected into an offset account linked to your owner-occupied home loan, reducing non-deductible interest on the property you live in. The structure depends on your broader financial position, and it's worth reviewing with someone who understands both lending and tax.
Capital Gains Tax Changes and What They Mean When You Sell
Under the previous system, if you held an investment property for more than 12 months, you paid tax on 50% of the capital gain. That's changing. From 1 July 2027, gains on established properties bought after Budget night will be indexed for inflation, and a minimum 30% tax rate applies to the gain.
If you bought a Long Jetty unit for $550,000 in 2026 and sold it in 2035 for $750,000, your nominal gain is $200,000. Under the new rules, the Australian Taxation Office will adjust your cost base for inflation over that period. If inflation averaged 2.5% annually, your indexed cost base might sit closer to $610,000, so your taxable gain drops to $140,000. You'll pay at least 30% tax on that gain, which works out to $42,000. The old system would have taxed 50% of $200,000 at your marginal rate. Depending on your income, that might have been more or less. The new system is more predictable but removes flexibility for lower-income earners.
New builds retain the option to use either the 50% discount or the new indexed method, so buyers of newly constructed property in Long Jetty can choose the structure that delivers the lower tax bill. That's a meaningful advantage if you're deciding between an established unit near the waterfront or a new townhouse on the western edge of the suburb.
How Lenders Assess Rental Income for Investment Loans
When you apply for an investment loan, lenders assess rental income at a discount, usually 80%. If your Long Jetty property rents for $550 per week, the lender will only count $440 in serviceability calculations. They also apply a higher interest rate buffer than your actual rate, often adding 3% to test whether you can still afford repayments if rates rise.
If you're refinancing or buying a second investment property, lenders look at your entire portfolio. A property running at a loss affects your borrowing capacity because that shortfall has to be funded from your income. Under the new negative gearing rules, if you can't claim that loss against your wages, your taxable income stays higher, but your actual cash flow is tighter. Some lenders adjust their serviceability models to reflect that, while others haven't updated their systems yet. It's inconsistent across the market, which is why working with a mortgage broker who knows which lenders are treating the new rules favourably makes a difference.
Vacancy rates in Long Jetty sit relatively low compared to other parts of the Central Coast, but lenders still apply a standard vacancy assumption, usually around 4 weeks per year. That reduces the rental income they'll accept, even if your property has been tenanted continuously. If you're holding multiple properties, rental income from one can help service the loan on another, but only if the lender's policy allows cross-collateralisation or portfolio lending structures.
Refinancing to Improve Your Tax Position
If your current investment loan is on a higher rate and you're not claiming the full interest deduction because your loan has been partly paid down, refinancing can reset your structure. You might pull equity from your Long Jetty property to fund a deposit on another investment, which increases your loan balance and your deductible interest. That only works if the funds are used for investment purposes. Borrowing against an investment property to renovate your own home, for example, doesn't qualify.
Refinancing also lets you switch between interest only and principal and interest, or move from a fixed rate that's about to expire to a variable rate with an offset account. Offset accounts themselves don't earn interest, so there's no tax implication, but every dollar in the offset reduces the interest you're charged. If that offset is linked to your non-deductible home loan rather than your investment loan, you're paying down the debt that doesn't give you a tax benefit, which improves your overall position.
Call one of our team or book an appointment at a time that works for you. We're based locally on the Coast, and we'll walk through your current structure, your goals, and what the new tax rules mean for your specific situation. You'll know exactly what's claimable, how your loan stacks up, and whether a different structure delivers a better outcome.
Frequently Asked Questions
Can I still claim investment loan interest after the negative gearing changes?
Yes, all interest paid on an investment property loan remains fully deductible regardless of when you bought the property. The changes to negative gearing only affect whether rental losses can be claimed against wage income, not the interest deduction itself.
Do the new tax rules apply to investment properties I already own?
No, properties purchased before 13 May 2026 are grandfathered under the old rules. You can still claim rental losses against all income, and the 50% capital gains tax discount applies when you sell.
Are new build investment properties treated differently under the new rules?
Yes, newly constructed properties remain fully exempt from the negative gearing restrictions, and buyers can choose between the 50% CGT discount or the new indexed method when they sell. This makes new builds more attractive under the updated tax treatment.
How do lenders assess rental income when I apply for an investment loan?
Lenders typically assess rental income at 80% of the actual amount and apply a vacancy assumption of around 4 weeks per year. They also test serviceability at a higher interest rate, usually 3% above your actual rate, to ensure you can afford repayments if rates rise.
Can I claim stamp duty as a tax deduction when I buy an investment property?
No, stamp duty is not deductible in the year you purchase. However, legal and conveyancing costs related to the loan can be claimed over five years, and other ongoing expenses like council rates, strata fees, and property management are fully deductible.
