The 2026 Budget: Can Your Landlord Raise Your Rent Because of the Negative Gearing Changes?

Since the May 2026 federal budget, some landlords have been using the negative gearing changes as justification for rent increases. The script usually sounds like: "The government changed the tax rules and my costs have gone up." Here is what you need to know before you respond.

The short version: the negative gearing changes apply only to new property purchases made after the budget announcement. If your landlord already owned their investment property before the budget, the changes do not apply to them.

What the May 2026 budget actually changed

Two changes were announced in the May 2026 federal budget that affect investment property:

• Negative gearing deductions restricted for new purchases. Landlords who purchase new residential investment properties after the budget announcement date can no longer claim negative gearing deductions. Properties purchased before the budget are fully grandfathered: existing landlords retain all deductions, permanently.
• Capital gains tax discount reduced for new purchases. The CGT discount on new investment property purchases was reduced from 50% to 25%. This affects the tax paid when a property is eventually sold, not the current rental income or deductions of existing landlords.

Neither change affects your landlord's rental cash flow directly. The negative gearing change does not increase their costs. It prevents a deduction on future losses, but only if they bought after the budget. The CGT change affects their eventual sale return, not their current monthly position.

For a full explanation of how these changes work and who they actually affect, see our guide to the 2026 negative gearing changes for renters.

Who the changes actually apply to

The overwhelming majority of landlords currently renting out properties fall into the first category. They have faced real pressure from interest rate rises, insurance increases, and general cost inflation. They have not been affected by the negative gearing changes.

Is the budget a valid basis for a rent increase?

No, even for landlords who did buy after the budget. In every Australian state, the test for whether a rent increase is excessive is based on market rent for comparable properties, not on the landlord's costs, tax treatment, or deductibility position. A tribunal will not assess your increase based on what the budget did to your landlord's deductions. It will assess it based on what comparable properties in your area are renting for.

The same principle that applies to interest rate rises applies to the budget: a change in your landlord's cost structure or tax position is motivation. It is not justification.

For broader context on all the pressures driving rent increases in 2026, see our post on why rent is going up in Australia in 2026.

What your landlord is saying (and how to respond)

When a landlord cites the budget in a rent increase notice, they are doing what they do when they cite "the market has moved" or "the RBA raised rates": pointing to an external event to make the increase feel inevitable. It is not.

The right response is not to argue about the budget. It is to redirect to the number that actually governs your negotiation: what it would cost your landlord to replace you.

• Two weeks of vacancy: typically $1,000 to $1,600 depending on your rent
• Reletting fee charged by the agent: 1 to 2 weeks rent
• Advertising on Domain and REA: $200 to $400
• Cleaning and repairs between tenancies: $300 to $800

Total: typically $2,000 to $5,000 or more. That figure has not changed because the budget was announced.

If your counter-offer is below the break-even rent (the rent at which your landlord nets the same result whether they replace you or keep you), then your landlord is financially better off accepting it than finding someone new. That is the argument. The budget is a distraction from it.

What to do if your landlord cites the budget

1. Check whether the budget changes actually apply. Ask when your landlord purchased the property. If it was before the May 2026 budget, the negative gearing changes do not apply to them. This alone may end the stated justification.
2. Do not argue about the budget directly.Acknowledge you are aware of the budget changes, then redirect. "I understand there have been changes to investment property tax rules. Here is what I'd like to discuss."
3. Frame your response around replacement costs. Walk through the real cost of replacing a reliable tenant: vacancy, reletting fee, advertising, repairs. A counter-offer below the break-even rent is a better outcome for your landlord than losing you.
4. Check market rents in your postcode. If the proposed rent is above what comparable properties are renting for, you have a second independent basis for your counter-offer. For NSW tenants, the NSW Rent Check tool provides postcode-level data from actual bond lodgements.
5. If negotiation fails, apply to your state tribunal. The budget will not help your landlord at tribunal. Market rent is the only relevant benchmark.

For the full negotiation process including templates and scripts, see our guide to negotiating a rent increase in Australia and our counter-offer email templates.

The bottom line

The May 2026 budget changed the rules for new investment property purchases. It did not change the rules for existing landlords, and it did not change the legal test for whether a rent increase is excessive.

"The budget changed the tax rules" is the 2026 version of "the RBA raised rates": a real thing that happened, used as though it automatically justifies whatever number appears in the letter. It does not.

The replacement cost has not changed. Your leverage has not changed. The negotiation frame is the same.