The landscape for property investors in Greater Perth has shifted.
From 1 July 2027, net rental losses on most residential investment properties purchased after 12 May 2026 can no longer be offset against your salary or wage income. Those losses can only be offset against other rental income or carried forward to offset future rental gains. If you're looking at an investment loan right now, the structure you choose and the property type you target will determine whether you're building wealth or subsidising an asset that works against you for years.
The investors we regularly see making progress in this environment are the ones who understand that cash flow now matters more than it used to. Negative gearing still exists for properties purchased before the cut-off date, and it still exists for eligible new builds purchased after that date, but for everything else, the tax benefit that once absorbed a shortfall between rent and loan repayments is no longer available.
What Qualifies as an Eligible New Build Under the Current Rules
An eligible new build includes a dwelling constructed on previously vacant land or a property where the number of dwellings has increased. A knock-down rebuild that replaces one home with one home does not qualify. Neither does a substantial renovation. If a new build is occupied for more than 12 months before it's sold to you as a subsequent investor, it loses access to negative gearing for you.
Consider a buyer purchasing a newly completed townhouse in Baldivis in late 2026. The property was built on subdivided land that previously held a single house, and the development created three townhouses. That property qualifies. The buyer can negatively gear the loss against their income indefinitely, provided they purchased the property as new and it had not been occupied for more than 12 months. The same buyer looking at a renovated character home in Mount Lawley, even if extensively updated, would fall under the new quarantine rules if they settle after 30 June 2027.
Interest Only or Principal and Interest for Investment Loans Purchased After the Rule Change
Investor loans can be structured as interest only or principal and interest. Under the new rules, if your rental income doesn't cover your interest only repayment and you can't offset the loss against your wage, you're funding the shortfall from after-tax dollars with no immediate tax relief. That shortfall can be carried forward, but it doesn't reduce your tax bill this year.
Interest only loans still have a role where rental yield is high enough to cover the interest, or where you're using an offset account funded by other income to manage the gap without formally making principal repayments. We regularly see investors in suburbs like Kwinana or Baldivis, where median rents are strong relative to purchase prices, structure loans as interest only because the numbers hold without subsidy. In those cases, the investor keeps principal repayment capital available for the next deposit rather than locking it into an existing loan.
For properties where rent doesn't cover interest, switching to principal and interest reduces the interest component over time, which reduces the loss you're carrying forward each year. The trade-off is less cash available for further investment in the near term.
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How Greater Perth Vacancy Rates Affect Rental Income Assumptions
When you're applying for an investment loan, lenders assess your borrowing capacity using a shaded rental income figure. Most lenders apply a haircut of around 20 per cent to the expected rental income to account for vacancy, maintenance and periods between tenants. If you're relying on rental income to service the loan or to break even under the new tax rules, that 20 per cent buffer matters.
Greater Perth's vacancy rate has been sitting below 1 per cent in several suburbs over the past year, which means actual vacancy periods have been shorter than the serviceability assumption. But lenders don't adjust their shading based on current vacancy rates. They use a long-run assumption that builds in downside risk. If you're structuring your investment around cash flow neutrality, build your own numbers using a conservative rental income figure and current variable rates, not best-case assumptions.
Leveraging Equity from Your Perth Home Without Refinancing the Entire Loan
Many investors in Greater Perth hold significant equity in their owner-occupied home. Accessing that equity to fund a deposit on an investment property doesn't require refinancing your entire home loan. You can take out a separate split loan secured against your existing property, with the new loan used exclusively for the investment purchase.
This approach preserves the deductibility of interest on the investment portion. If you refinance your owner-occupied loan and blend the borrowing, you risk muddying the purpose test, which determines whether interest is deductible. The ATO looks at what the borrowed funds were used for, not what security was provided. Keeping the investment borrowing separate, even when secured against your home, makes the deduction clear.
In our experience, investors who use this structure also benefit from the ability to later refinance only the investment portion without touching their owner-occupied loan, which may be on a discounted rate or a fixed term they want to preserve.
Loan to Value Ratio Limits and Lenders Mortgage Insurance for Investment Loans
Most lenders cap investment loans at 90 per cent LVR, and many apply an 80 per cent limit where the borrower already holds multiple investment properties. Above 80 per cent LVR, Lenders Mortgage Insurance applies. The LMI premium on investment loans is higher than on owner-occupied loans at the same LVR, and the premium is calculated on the full loan amount.
For a buyer purchasing an investment property in Joondalup at 85 per cent LVR, the LMI premium might add several thousand dollars to the upfront cost, and that premium is typically capitalised into the loan rather than paid in cash. The capitalised premium increases your loan amount, which increases your interest cost, which increases the gap between rental income and repayments if you're not cash flow neutral.
If you're close to an 80 per cent LVR, it's worth considering whether a slightly larger deposit or a lower purchase price keeps you under that threshold. The saving in LMI and the lower ongoing interest cost can outweigh the opportunity cost of holding back equity for the next purchase.
The Debt to Income Lending Limit and How It Affects Portfolio Growth
From 1 February 2026, each lender can fund no more than 20 per cent of new investor loans at a debt to income ratio of 6 times or greater. The cap applies separately to each lender's investor portfolio, and it applies to new lending only. If your total borrowing across all loans, including your owner-occupied home, exceeds six times your gross income, you may find that some lenders decline your application even if serviceability at the buffered rate is met.
This limit affects portfolio growth more than first-time investors. A buyer in their mid-30s earning a combined household income of around $150,000, with an owner-occupied loan and one existing investment property, may already be at or near that six times threshold when they apply for a second investment loan. We regularly see these buyers need to either increase income, pay down existing debt, or accept a smaller loan amount to stay within the cap.
Construction loans for new dwellings and finance for newly erected dwellings are excluded from the cap, which creates an incentive to focus on new builds if you're approaching the limit.
How the Capital Gains Tax Changes Affect Your Exit Strategy
From 1 July 2027, the 50 per cent CGT discount is replaced with cost base indexation and a minimum 30 per cent tax rate on real gains for assets acquired after that date. For properties you already own, the gain is split: the portion accruing before 1 July 2027 is taxed under the old rules, and the portion accruing after that date is taxed under the new rules.
If you're purchasing an investment property now with a 10 to 15 year hold period in mind, the new CGT treatment will apply to most of the gain when you sell. Indexation reduces the taxable gain by adjusting your cost base for inflation, but the 30 per cent minimum rate applies regardless of your marginal tax rate. For investors on lower incomes, or those receiving the Age Pension at the time of sale, this can result in a higher tax outcome than the current 50 per cent discount.
Eligible new builds are exempt from the 30 per cent minimum rate, and you can elect either indexation or the 50 per cent discount when you sell. That election flexibility makes new builds more attractive from a tax perspective, particularly if you expect inflation to remain moderate.
Claimable Expenses and How to Structure Loan Funds for Maximum Deductibility
Interest on an investment loan is deductible to the extent the borrowed funds were used to acquire or hold the rental property. If you redraw from an investment loan to pay for a family holiday, the interest on that redrawn portion is not deductible. If you use an offset account funded by rental income or salary to reduce interest without formally repaying the loan, the full loan balance remains deductible.
We regularly see investors make the mistake of redrawing from their investment loan for personal expenses, which taints the deduction. A better approach is to keep the investment loan untouched and use a separate line of credit or offset strategy for personal liquidity.
Other claimable expenses include property management fees, council rates, insurance, repairs, and depreciation on the building and fixtures. Body corporate fees for strata-titled properties are also deductible. Stamp duty and other purchase costs are not immediately deductible, but they form part of your cost base for CGT purposes when you sell.
Structuring Loan Repayments to Match Rental Income Cycles
Most investment loans default to monthly repayments, but rental income is also paid monthly, typically in advance. If your tenant pays rent on the first of the month and your loan repayment is due on the 15th, the income sits in your offset or transaction account for two weeks before it's applied.
Some lenders allow you to align your loan repayment date with your rental income cycle, which smooths cash flow and ensures rental income is applied to the loan as soon as it's received. This won't change the total interest cost over the life of the loan, but it reduces the average daily balance in any given month, which reduces interest accrued in that period.
For investors managing multiple properties, aligning repayment dates across all loans also simplifies administration and reduces the risk of a missed payment due to timing mismatches.
Variable Rate or Fixed Rate Investment Loans in the Current Environment
Variable rate investment loans allow you to make additional repayments without penalty, access offset accounts, and benefit from rate cuts if the Reserve Bank eases policy. Fixed rate loans lock in your repayment for a set term, but you typically lose access to offset accounts and face break costs if you repay early or refinance before the fixed term ends.
Under the new negative gearing rules, cash flow certainty matters more than it used to. If your rental income is close to covering your interest only repayment and you can't absorb a rate rise from other income, a fixed rate may provide breathing room. The trade-off is that you lose flexibility, and if you need to sell or refinance during the fixed term, the break cost can be substantial.
In our experience, investors who expect to hold the property for more than five years and who value repayment certainty over flexibility tend to fix a portion of the loan rather than the whole amount. A 50/50 split between variable and fixed gives you access to offset and redraw on the variable portion while stabilising repayments on the fixed portion.
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Frequently Asked Questions
Can I still negatively gear an investment property purchased after 12 May 2026?
You can still negatively gear eligible new builds purchased after 12 May 2026. For other residential properties settled after 30 June 2027, rental losses can only be offset against other rental income or carried forward, not against your salary or wage income.
What is the maximum LVR for an investment loan in Perth?
Most lenders cap investment loans at 90 per cent LVR, and many apply an 80 per cent limit if you already hold multiple investment properties. Above 80 per cent LVR, Lenders Mortgage Insurance applies, which increases your upfront and ongoing costs.
How does the debt to income lending limit affect my ability to borrow for a second investment property?
From 1 February 2026, each lender can fund no more than 20 per cent of new investor loans at a debt to income ratio of 6 times or greater. If your total borrowing exceeds six times your gross income, you may need to increase income, pay down debt, or accept a smaller loan amount.
Should I choose interest only or principal and interest for an investment loan under the new rules?
If rental income doesn't cover your interest only repayment and you can't offset the loss against your wage, you're funding the shortfall from after-tax dollars with no immediate tax relief. Principal and interest repayments reduce the interest component over time, which reduces the loss you carry forward each year.
How do the new capital gains tax rules affect investment properties purchased now?
From 1 July 2027, the 50 per cent CGT discount is replaced with cost base indexation and a minimum 30 per cent tax rate on real gains. Properties purchased before that date are taxed under the old rules for gains accruing before 1 July 2027 and under the new rules for gains accruing after that date.
