How to Restructure Property Loans Before Negative Gearing Shrinks

Most investors are asking the wrong question after the 2026 Budget. It’s not “Should I sell?” – it’s “Have I structured my loans so the new tax rules don’t quietly bleed me for the next 20 years?”

Restructuring existing loans now is about one thing: making sure every dollar of interest that can still be deductible actually is, and every non-deductible dollar is paid down first. Under the 2026–27 reforms, negative gearing on many established properties purchased after 12 May 2026 is effectively abolished from 1 July 2027, while older and qualifying new-build properties keep current rules.[1][2][10][12][17] How your loans are set up will decide whether you adapt smoothly or end up stuck with expensive, inflexible debt.

What I tell my clients is simple: don’t wait for your accountant’s 2027 year-end meeting. Use this year to deliberately reshape your home and investment loans so the new tax landscape works with your structure, not against it.

1. The new tax landscape: why structure suddenly matters more

Before we talk about refinancing or splitting loans, you need a clean mental model of what’s actually changing.

1.1 Quick recap of the 2026–27 reforms

From the current Budget package and reform bill:

1. Negative gearing on many established properties is being wound back. For established residential properties purchased at or after 7:30pm on 12 May 2026, investors can only offset rental losses against salary and other income until 30 June 2027. From 1 July 2027, those losses are quarantined against rental or capital gains only.[8][11][12][17]
2. Existing properties are broadly grandfathered. Residential investments held before 7:30pm on 12 May 2026 can continue under current negative gearing rules until you sell.[2][6][7][16]
3. New builds and certain structures are carved out. Negative gearing continues for qualifying new residential builds, certain build‑to‑rent and affordable housing programs, and residential property in superannuation funds.[1][3][9][15][20]
4. CGT treatment also tightens. The 50% CGT discount for individuals and trusts is being replaced with a more complex, often less generous regime, tied to CPI indexation and a 30% minimum tax on most capital gains.

In other words: from 2027, you’ll see a dual system – old rules for grandfathered holdings and new builds; new, harsher rules for many post‑Budget established properties.[10][19]

1.2 Why your loan structure is now a tax problem

Tax law doesn’t care what you call a loan – it looks at what the borrowed funds were actually used for.

That matters more now because:

• Deductible interest is scarcer – future negatively geared losses are quarantined and CGT relief is slimmer.
• Mixed-purpose loans are a headache – redraw used for home renovations, business cashflow or a car can permanently contaminate a loan that should have been fully deductible.
• APRA’s 3% buffer still bites – if you need to refinance to clean things up later, higher assessed rates can block your options.

My rule of thumb: if your loan statements don’t make it obvious which dollar belongs to which property or purpose, you’re flying blind in the new regime.

For a gentle primer on gearing concepts in this environment, see Plain-English Gearing Basics Every Australian Property Investor Must Know.

2. The three big mistakes I’m seeing in 2026 portfolios

Most restructuring work I do for investors and small business owners starts with the same three problems.

2.1 Home and investment debt blurred together

Common patterns:

• One big loan secured by the home, used over time for the home, an investment property deposit and maybe even shares.
• A single offset account used for both personal savings and rental income.

Result: the interest is partly deductible, partly not, and very hard to untangle. Under the new rules, that complexity isn’t just annoying – it can mean permanently losing deductions you might otherwise have kept.

2.2 Cross‑collateralised, inflexible security

Many lenders still love this structure:

• One large facility secured by the home and multiple investment properties.
• Limited internal splits, so each adjustment requires the whole portfolio to be re‑assessed.

As I explain in How to Design Flexible Investment Loan Structures for Smarter Gearing, cross‑collateralisation kills flexibility. In a tightening tax regime, you want the ability to sell or restructure one asset at a time without the bank re‑pricing your entire portfolio.

2.3 Redraw used as an all‑purpose piggy bank

Investors often:

• Park salary and rent into an investment loan with redraw
• Pull funds out later for private expenses

From a tax perspective, each redraw for personal use converts a slice of the loan from deductible to non-deductible. If you keep doing it, you eventually end up with a loan the ATO may see as part investment, part personal, and very hard to apportion.

What I tell my clients: in the new regime, offset is your friend, redraw is for emergencies.

Separating home and investment debt with clear splits and offsets makes tax treatment cleaner under the new rules.