Golden Bay property investors face a lending environment where most of the rules changed in the past year.
From 1 July 2027, losses on newly acquired investment properties will only be deductible against other residential property income, not salary or wages. Properties already under contract or settled before 7:30pm AEST on 12 May 2026 keep the old rules. For residents in Golden Bay looking to enter the market or add to an existing portfolio, the timing and structure of an investment loan now carries tax consequences that flow through for years.
What changed with negative gearing from 12 May 2026
Negative gearing still exists, but its scope has narrowed. If you purchased an established investment property after 7:30pm AEST on 12 May 2026, any loss you make on that property from the 2027-28 income year onwards can only be deducted against income from other residential properties, including capital gains on sale. You can carry forward unused losses to future years. Properties you owned or had under contract before that date remain fully deductible against all income, including your salary. New builds purchased after 12 May 2026 also retain full deductibility.
Consider a Golden Bay resident who contracts to purchase an established rental property in nearby Rockingham in August this year. Rental income is $620 per week, and total holding costs including interest, rates, insurance and management fees come to $42,000 per year. Rental income totals $32,240. The $9,760 annual loss can only be offset against other residential property income from the 2027-28 year. If the buyer has no other residential property income, the loss is quarantined and carried forward. If they sell an investment property in a future year and realise a capital gain, the banked losses reduce that gain.
How lenders assess rental income on investment applications
Many lenders shade expected rental income when calculating your borrowing capacity, often to around 80 per cent, but policies vary considerably between lenders. How rental income, existing debts and other commitments are assessed can make a real difference to how much you can borrow.
This is where choosing the right lender becomes important. The cheapest interest rate isn't always the best strategy. Depending on your goals, sometimes lender policy and borrowing capacity matter more. I'll look at your overall position and what you're trying to achieve, then compare the lender options available to find the right fit.
From 1 February 2026, APRA-regulated lenders are also limited in the amount of new investor lending they can write at a debt-to-income ratio of six times or greater. This doesn't mean you automatically can't borrow above six times your income. It is a lender-level limit, and lender policies and servicing assessments can vary.
APRA-regulated lenders currently apply a minimum 3 percentage point serviceability buffer. Other lenders, including some non-bank lenders, can assess borrowing capacity differently. For property investors, these differences can become particularly important when you're trying to maximise borrowing capacity or grow a portfolio.
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Interest only or principal and interest for investment loans
Interest-only periods let you minimise required repayments during the early years of ownership, which can help with cash flow if the property is negatively geared or if you are directing surplus cash toward other investments or paying down non-deductible debt such as your home loan.
Interest-only terms are available across a range of lenders, commonly for a set period such as five years. What happens at the end of that period, whether another interest-only term is available, and the LVR requirements will depend on the lender's policy and your circumstances at the time.
From a tax perspective, interest may be deductible where the borrowed funds are used for an eligible investment purpose, while principal repayments aren't deductible. The purpose and use of the borrowed money matters, particularly if you're refinancing, redrawing or using equity. Your accountant can confirm the tax side, while I'll make sure the lending is structured with your bigger property goals in mind.
Loan to value ratio, deposit requirements and lenders mortgage insurance
Many lenders will lend up to 90 per cent of the property value for investment purchases, though borrowing above 80 per cent typically requires you to pay lenders mortgage insurance. LMI is a one-off premium calculated on a sliding scale based on the loan amount and the loan-to-value ratio. The premium is not deductible as a borrowing cost in the year it is paid, but it can be claimed as a deduction over five years or the term of the loan, whichever is shorter.
For example, a Golden Bay investor purchasing an $800,000 investment property with a 10 per cent deposit would need $80,000, plus stamp duty and settlement costs. The $720,000 loan would be at 90 per cent LVR, with LMI potentially costing up to around $19,000 depending on the lender and insurer. LMI can often be added to the loan rather than paid upfront..
If you own property with available equity, you may be able to use that equity as part or all of your deposit, which avoids the need to draw down savings. Equity release is subject to serviceability and the lender's maximum LVR across all secured properties. Most lenders will allow total borrowing across all loans secured against your properties up to 80 per cent of the combined value without requiring LMI, though some will go higher with insurance.
Fixed or variable rates for investment property finance
Variable rates give you flexibility to make extra repayments or pay out the loan without penalty, and they move in line with the lender's standard variable rate. Fixed rates lock in your repayment amount for a set period, usually between one and five years, but they carry restrictions on extra repayments and often involve break costs if you pay out the loan early.
Some investors split their investment loan between fixed and variable, giving them some rate certainty while keeping flexibility on the variable portion. Offset account availability varies between lenders and products. If you also have a home loan, where you keep your surplus cash can make a difference, particularly when balancing deductible investment debt against non-deductible home debt. I'll help with the loan structure, while your accountant can guide you on the tax side.
Capital gains tax and the transition to indexed cost base from 1 July 2027
For investment properties sold after 1 July 2027, capital gains are taxed under a split treatment. Gains that accrued before 1 July 2027 continue to receive the 50 per cent discount for assets held longer than 12 months. Gains accruing from 1 July 2027 onward are taxed using cost base indexation and a 30 per cent minimum tax rate on the real gain. You can either obtain a market valuation as at 1 July 2027 or apply an ATO-published formula to apportion the gain between the two periods.
Indexation adjusts your cost base in line with inflation, so you only pay tax on above-inflation profit. The 30 per cent minimum rate applies to that indexed gain and only affects you if your marginal rate on that portion would otherwise be lower. Investors on the Age Pension, Disability Support Pension or certain other government payments are exempt from the minimum rate in any year they receive the payment.
New builds purchased after 12 May 2026 can choose at the time of sale between the indexed cost base method and the 50 per cent discount method, giving them access to whichever treatment produces the lower tax outcome.
How to structure your application for multiple properties or portfolio growth
If you already own an investment property and want to add a second or third, lenders will look at your overall position, including your existing loans, personal income and rental income across your portfolio. Many lenders shade rental income, often to around 80 per cent, but policies vary. These differences can have a surprisingly big impact on your borrowing capacity.
For investors looking to grow a property portfolio, good loan structure matters. Separate loan splits can help keep investment borrowing clear and can make things easier for tax reporting or if a property is later sold or refinanced. Offset accounts can also be used strategically, particularly if you have both investment debt and a non-deductible home loan. This is where I like to look beyond just getting this loan approved. If property number two or three is part of the plan, let's think about that now. Sometimes the best lender isn't simply the one with the cheapest rate, but the one whose policy and structure best support what you're trying to achieve next.
Thinking about buying an investment property in Golden Bay or surrounding areas? Let's look at your borrowing capacity, the numbers and what you're trying to achieve, then find the lending strategy that makes sense for you
Call Mel today or book an appointment at a time that works for you.
