Major lenders move on negative gearing as Budget bill heads to parliament

As prime minister Anthony Albanese gears up for a parliamentary showdown to get Labor’s contentious Budget bill through parliament, major banks and challenger lenders are scrambling to get their negative gearing ducks in line.

Despite the bill facing a bumpy ride through the Senate, some lenders have moved to put their new policies in writing, suggesting they are all but certain the bill will pass with little effort.

The opposition has vowed to vote down the bill, leaving the balance of power to The Greens. Although The Greens are using their Senate leverage to demand tougher terms, it appears unlikely that the minor party will block the bill’s path.

Negative gearing benefits on established residential properties purchased after 12 May will be scrapped should the legislation pass. New builds will reatain the benefit, with losses only deductible against rental income or future residential property gains.

But there is confusion over the treatment of in-flight applications, dollar-for-dollar refinances, and fundamental questions over what constitutes a ‘new build’. Not to mention borrowing capacity.

Having engaged with one bank's new serviceability calculator, mortgage broker Troy Phillips, managing partner at Cronulla-based FirstPoint Mortgage Brokers, told MPA that “early indications” show that Labor’s negative gearing proposal could hit borrowing capacity by between 8% and 12%, although “there could be more variables around tax rates”.

In other words, an investor who was previously eligible for a $1 million mortgage could see their borrowing availability reduced by $120,000. Of course, there is a whole host of variables to take into consideration, but one thing is clear – borrowers are going to need expert credit guidance more than ever.

MPA has gathered the latest updates from Australian mortgage finance lenders to see who is staying the course, and who is pushing ahead with serviceability changes.

Macquarie moves first, NAB follows

Macquarie Bank became the first major bank to announce its new negative gearing policies.

At Macquarie, negative gearing will continue to apply to serviceability calculations where a contract was executed on or before 12 May. For contracts executed after that date, negative gearing will only apply where the property qualifies as an eligible new build.

Dollar-for-dollar refinances of pre-12 May properties remain eligible. Where cash out is included, negative gearing applies only where funds are used to purchase a pre-12 May property, an eligible new build, or to improve an existing pre-12 May investment property.

These changes apply immediately to all applications.

“In light of last week’s Federal Budget, we want to outline our approach to negative gearing,” Macquarie said in a letter to brokers. "We're taking a considered approach aligned with existing regulatory guidance and responsible lending requirements.”

“As such, it is a foreseeable change for customers that will impact their servicing capacity over the life of their loan,” continued the letter. “As a result, we’re required to factor this into how we service loans to comply with responsible lending obligations. We appreciate you’ll also be taking this into consideration when discussing the affordability of loans with your customers.”

NAB came hot on the heels of Macquarie with its own, broadly similar changes.

At NAB, negative gearing will still apply to serviceability when the contract for sale was executed prior to 12 May.

NAB confirmed that conditionally approved applications when the contract of sale was executed after 12 May will need to be reassessed by close of business on Tuesday, 26 May.

If a NAB contract of sale is executed after 12 May, and the application is not unconditionally approved by Tuesday 26, negative gearing will only apply to new builds.

“We’re continuing to support customers as they navigate the proposed changes to negative gearing announced in the Federal Budget,” NAB executive home ownership Lin Lu told MPA.

“While these changes are not yet legislated, they represent a known and foreseeable factor that may affect a customer’s financial position over the life of a loan. As part of our responsible lending obligations, we take foreseeable changes like this into account when assessing serviceability.

“This is about helping ensure customers don’t take on debt they may not be able to service if those changes come into effect. Our focus is making sure customers can comfortably meet their repayments over the life of the loan, not just at the point of approval.”

NAB drew a clear distinction between what does and doesn’t constitute a new build.

Eligible new builds include:

• A newly constructed apartment bought off the plan

• A duplex constructed through a knock down rebuild replacing a single free standing house

• Any residential construction on previously vacant land

• A newly built property which is occupied for less than 12 months before being sold

Non-eligible new build include:

• An established property that has recently been extended to add additional bedrooms

• A free standing house constructed through a knock down rebuild replacing an older smaller free standing house

• A granny flat built adjacent to an established property that is not eligible for gearing

• A newly built property which is occupied for more than 12 months before being sold to a subsequent investor

Below are some scenarios provided by NAB:

Westpac stays the course

Westpac has decided to retain current policies “until further notice”. The bank said: “While these proposals are yet to be passed into law by Parliament, we all need to take a balanced and considered approach that supports our Responsible Lending Obligations.”

But Westpac warned that when (or if) legislation is passed, serviceability will be reassessed in line with the new policies. Unconditionally approved Westpac applications will not be reassessed retrospectively, while conditionally approved applications will be assessed per the policy in place once the approval becomes unconditional

Great Southern Bank moves ahead

Great Southern Bank has confirmed that its negative gearing policy has changed following the Federal Budget.

For all investor applications on established property after Tuesday, 12 May, negative gearing will not be included in servicing.

Eligible new builds must be either:

• A newly constructed apartment bought off plan

• A duplex constructed through a knock-down rebuild replacing a single, free-standing house

• Any residential construction on previously vacant land

• A newly built property which is occupied for less than 12 months before being first sold

Serviceability on dollar-for-dollar refinancing of a grandfathered residential investment property will include negative gearing.

Great Southern Bank confirmed that, when a property held on or before 12 May and is later converted into an investment property, negative gearing may be used for servicing once the property is rented out.

Brighten brings clarity to negative gearing assessment

Brighten is one of the few non-bank lenders to confirm its new negative gearing policies.

The group confirmed that unconditionally approved applications will not be reassessed retrospectively. Conditional approvals will be reassessed at the point of unconditional approval under the latest applicable credit policy. Brighten warned that where serviceability is reliant on negative gearing benefits, conditional approvals may not progress to formal approval if those benefits are removed.

For new lending on established investment properties, applications where the contract was executed before 7:30pm AEST on 12 May 2026 remain eligible for negative gearing in serviceability calculations. For contracts executed after that time, negative gearing benefits may no longer be included in serviceability assessments for established properties, while new dwelling investment property transactions remain unchanged.

“We will continue to monitor developments and provide updates as legislation is finalised. In the interim,” said Brighten. “Our credit policy, tools, and calculators are currently under review, and updates will be shared in due course.”

MPA will provide updates as more banks announce their negative gearing changes.