Why a Depreciation Schedule Still Matters Under the New Negative Gearing Rules

The 2026-27 Federal Budget reforms have changed how negative gearing works for established residential investment properties. While investors purchasing affected established properties can no longer offset rental losses against salary and wage income, those losses are not lost.

Instead, losses can be carried forward and used in accordance with the new rules, making accurate record-keeping and depreciation documentation more important than ever.

For many property investors, depreciation is one of the largest non-cash deductions available and has the potential to be one of the most significant contributors to tax losses within a property portfolio. By increasing eligible deductions, a depreciation schedule can help maximise losses available for immediate use against other property income, or for carry-forward under the new rules where applicable.

As a result, investors should not view the negative gearing changes as reducing the value of depreciation. Rather, they reinforce the importance of ensuring all available deductions are accurately identified, documented and claimed.

Key Takeaways

• Carried-forward losses are not lost when negative gearing cannot be claimed immediately.
• These losses can help reduce taxable income from future investment property profits.
• Accumulated losses may support future portfolio growth and long-term tax outcomes.
• Maintaining accurate tax records is essential to ensure losses are correctly tracked and applied.
• Eligible new builds continue to retain access to negative gearing and are generally not impacted by carried-forward loss considerations.

Understanding Carried-Forward Losses

Under the new rules, losses generated by affected established residential investment properties are carried forward rather than being claimed against personal income in the year they occur.

This means investors should ensure all eligible deductions, including depreciation, are accurately documented so losses are correctly recorded and available for future use.

1. Saving for the Future

If your investment property is negatively geared today, carried-forward tax losses can help reduce taxable income from that property in future years when it becomes cash flow positive.

As rental income increases, loans are paid down and ownership costs change over time, many investment properties eventually move from a loss position to a profit position. Accumulated losses can then help reduce taxable rental income, improving after-tax returns and supporting long-term investment outcomes.

2. Supporting Future Portfolio Growth

Not every property within a portfolio performs the same way. While one investment property may generate a loss, another may already be producing positive rental income.

Under the new negative gearing rules, losses generated by an affected property can be used to reduce taxable income from other residential investment properties within the same portfolio. This means investors with both loss-making and profit-generating properties may be able to benefit from those losses in the same income year, rather than waiting until a future year.

Where total losses exceed the available residential property income across the portfolio, the remaining balance can be carried forward and applied against eligible income or capital gains in future years in accordance with the legislation.

This is one reason why continuing to claim all eligible deductions remains important. A depreciation schedule helps ensure depreciation deductions are accurately identified and recorded, allowing investors to maximise available deductions and maintain accurate records of losses across their property portfolio.

3. Accurate Financial Reporting and Tax Records

Keeping track of carried-forward losses is essential for maintaining accurate financial and taxation records.

Accurate documentation helps investors:

• Record and monitor accumulated losses year after year
• Maintain reliable tax and financial reporting
• Support future tax return preparation
• Provide clear information to accountants and advisers
• Ensure losses are correctly applied when eligible

A professionally prepared depreciation schedule supports this process by documenting eligible depreciation deductions and capital works claims throughout the life of the property.

4. These Rules Do Not Apply to New Builds

Investors purchasing eligible new residential properties continue to retain access to negative gearing under the new rules. This means rental losses can still be offset against other assessable income in the year they are incurred, rather than being carried forward for future use.

As a result, carried-forward loss considerations are primarily relevant to investors holding affected established residential properties, not eligible new builds.

Why Documentation Matters More Than Ever

With carried-forward losses now playing a greater role in future tax outcomes, investors need confidence that every eligible deduction has been identified and properly recorded.

A professionally prepared depreciation schedule helps ensure:

• All available depreciation deductions are claimed
• Carried-forward losses are accurately calculated
• Capital works deductions are properly documented
• Records remain compliant with ATO requirements
• Investors and accountants have reliable information for future tax planning

Need a Depreciation Schedule?

If you’re managing carried-forward property losses or want to ensure every eligible deduction is being captured, a professionally prepared depreciation schedule can help support both your current tax position and future investment goals.

Capital Claims prepares Australian depreciation schedules for residential, commercial and specialised property investments. Our qualified team helps investors maximise deductions, maintain accurate records and support long-term tax outcomes.

Call 1300 922 220 or request a quote online to discover how much depreciation you may be entitled to claim.