Major lenders have already moved on negative gearing changes

Major lenders have already moved on negative gearing changes

The Federal Budget's proposed changes to negative gearing are not yet law, but many of Australia's major lenders aren't waiting for Parliament to act.

For property investors, the Budget changes don't just affect tax returns – they could also affect how much a bank will lend you. When a lender assesses whether you can afford an investment loan, they factor in any tax savings that come with negative gearing, effectively treating it as income that helps offset the cost of holding the property. Remove that offset, and the same property becomes more expensive to hold in the lender's eyes, your serviceability position weakens and your borrowing capacity falls.

That's exactly what's now flowing through to lender policy. Major lenders such as CommBank, NAB, Macquarie and Great Southern Bank have already updated their serviceability assessments, meaning the changes are effectively live for anyone applying for finance on an investment property purchased after 12 May 2026. Westpac has held its current position for now, but flagged that it will reassess once legislation passes.

But before property investors make any decisions, there are a few key distinctions to understand:

• Properties purchased on or before 12 May 2026 retain their negative gearing entitlements under grandfathering provisions, meaning existing investors are protected for as long as they hold those assets, subject to the legislation being enacted in its current form.

• New builds – including off-the-plan apartments, knock-down rebuilds on single dwellings and construction on vacant land – remain fully eligible for negative gearing regardless of purchase date, under the Government's proposed framework.

For property investors actively in the market or planning a purchase, understanding how your specific situation will be assessed is now more important than ever. Borrowing capacity outcomes will differ depending on what you're buying, when contracts were exchanged and which lender you're with. That's exactly where working with an experienced finance broker makes a real difference.

Why your borrowing capacity can vary between lenders

The lender moves on negative gearing following the 2026-27 Budget are a timely reminder that not all lenders assess your position the same way, and the gap between them can be significant.

Many people assume borrowing capacity is a fixed number – something a lender calculates based on your income and debts. In reality, the same borrower can receive vastly different loan offers depending on which lender they approach.

The reason comes down to how each lender builds their assessment model. Key variables include:

• Income treatment: Lenders assess income differently, particularly for borrowers with bonuses, commissions, rental income or business distributions. One lender may include 100% of a regular bonus, while another may cut it to 50% or exclude it entirely. Rental income is treated with similar variation, and for property investors, the way a lender models rental income against holding costs determines how negative gearing flows through to serviceability.

• Existing debts: Most lenders assess credit card limits, not just balances, as a liability. A $50,000 limit across two cards can reduce borrowing capacity by more than you'd expect, even if the cards are rarely used.

• Living expense benchmarks: Lenders use different household expenditure benchmarks, with some applying more conservative figures than others. At higher loan amounts, small differences in these assumptions can compound significantly.

• Risk appetite: Each lender sets its own policy around property types, locations, loan-to-value ratios and borrower profiles. A lender with a conservative view on high-density apartments or certain postcodes may decline or limit a loan that another would approve comfortably.

For professionals with complex income structures, the gap between lenders can be substantial. A finance broker who knows each lender's assessment model can identify where your position is viewed most favourably, before you commit to an application.

How 3LANE Finance can help

At 3LANE Finance, we work across a broad panel of lenders and regularly assist property investors, self-employed borrowers and professional clients with complex income structures – exactly the situations where borrowing capacity outcomes can vary most significantly between lenders.

As lender policies continue to change in response to the Budget changes, we can help you model serviceability outcomes across our panel to ensure you’re matched with the lender that suits your needs.

A strategic finance review with 3LANE covers your borrowing capacity, lender appetite for your specific position and how recent policy changes may affect your plans. Book today on enquiries@3lane.com.au or 0402 110 025.

FAQs

I already own an investment property. Am I affected by the negative gearing changes?

If you purchased before 7:30pm AEST on 12 May 2026, your negative gearing entitlements are protected under grandfathering provisions for as long as you hold the property. The changes only apply to established properties purchased after that date.

I'm looking at buying a new build as an investment. Does it still make sense?

New builds remain fully eligible for negative gearing under the proposed rules, which makes them potentially more attractive than established properties for new investors. Your borrowing capacity and overall return should still be modelled carefully, but the tax treatment remains intact.

How much could the negative gearing changes reduce my borrowing capacity?

The actual impact will vary depending on your income, tax rate and the lender's assessment model. The only way to know your specific position is to have it properly modelled.

What do lenders look for when assessing a loan application?

Lenders assess your income, existing debts, living expenses and the nature of the security property. But the weight each lender gives to different factors varies.