The 2026–27 Federal Budget proposed changes to how negative gearing interest deductions are calculated on investment property. Lenders are pre‐emptively updating their serviceability calculators — Macquarie Bank rolled out their revised calculator on Tuesday 26 May 2026, and we use it as a benchmark for the new lending landscape. Here's what changed, who's affected, and what it means for your borrowing capacity.
The TL;DR
- Federal Budget 2026 proposed negative gearing changes are still being legislated, but lenders are already updating serviceability ahead of the law passing
- Macquarie was first out the gate — new calculator effective from Tuesday 26 May 2026
- Investors must now supply 5 inputs per property: loan balance, tax deductibility (Y/N), annual rental income, annual expenses, ownership share
- Net effect: most investors will see their assessed borrowing capacity reduced by 5–15% — portfolio investors see the biggest impact
Who this article is for
Sydney property investors planning an additional purchase, considering refinancing, or simply wanting to know what their up‐to‐date borrowing capacity looks like under the new lender approach. Especially relevant if you already own one or more investment properties.
What Changed in the Federal Budget 2026
The 2026–27 Federal Budget included proposed reforms to negative gearing rules — specifically how interest expenses on investment property loans interact with rental income and personal income for tax deductibility. The exact final form is still being legislated, but the direction of travel is clear: tighter rules on what can be deducted, particularly for investors with multiple properties.
It is important to flag what this article is not: it is not personal tax advice, and the changes are not yet law. We are not lawyers or tax accountants — for definitive interpretation of the Federal Budget tax measures, speak to a registered tax agent or read the official Budget materials.
What we can talk to is the lender response: how Australian banks are updating their serviceability calculations in response to the proposed changes, and what that means for your ability to borrow.
How Lenders Are Responding — Macquarie Leads on 26 May
Macquarie Bank has historically been one of the fastest movers on policy‐driven serviceability changes. True to form, Macquarie released an updated serviceability calculator on Tuesday 26 May 2026 — the first major lender to publish a calculator that reflects the proposed Federal Budget approach, ahead of legislation passing.
We don't use Macquarie's update as an endorsement of one lender over another — we use it as a benchmark because it's the leading indicator of where the broader market is heading. Other lenders are expected to follow over the next 4–6 weeks.
Under Macquarie's new calculator, brokers now enter the following per investment property:
- Loan balance — the current outstanding loan amount, not the original loan limit
- Tax deductibility eligibility — Y/N flag indicating whether interest on this loan is currently deductible
- Annual rental income — verifiable rental received from this property in the past 12 months
- Annual property expenses — rates, insurance, strata, management fees, repairs and maintenance
- Ownership percentage per applicant on the loan
The calculator then pools interest expenses across multiple investment properties held in the same name — meaning the deductibility view is taken at the portfolio level, not per property in isolation. The main serviceability worksheet auto‐populates with the aggregated annual rental income and expenses.
NextGen / ApplyOnline note for industry readers
If you're a broker reading this: NextGen's ApplyOnline doesn't yet reflect Macquarie's new approach. Macquarie has advised brokers to use the new calculator for the final serviceability check before submitting, and a Net Serviceability Ratio (NSR) warning in ApplyOnline can be proceeded past if the application passes serviceability under the new calculator.
What This Means for Your Borrowing Capacity
The impact varies by portfolio structure. Three illustrative scenarios:
Single investment property holder
If you own one investment property and are looking to purchase a second (or refinance), the impact is typically modest — under 5% reduction in assessed borrowing capacity. The new calculator effectively rewards properties where the rental yield comfortably covers interest expense, and slightly penalises heavily negatively geared positions.
Two–property investor
With two investment properties already held, the pooling effect starts to matter. A typical Sydney investor with two properties — say one yielding 4% gross in the inner west and one yielding 5% in Western Sydney — may see assessed borrowing capacity reduced by approximately 7–12% compared to the pre‐change calculation, depending on how negatively geared each position is. The exact figure depends on ownership structure and loan‐to‐value ratios.
Three–plus property portfolio
Portfolio investors see the biggest impact. With three or more investment properties pooled, the cumulative effect of the new interest deductibility view can reduce assessed borrowing capacity by 10–15% or more, particularly where one or more properties are significantly negatively geared. The pooling effectively means the worst‐performing property in the portfolio drags down the deductibility view for the whole position.
This makes structuring (which property is held in whose name, joint vs sole ownership, the order of acquisitions) more important than it has been at any point in the last decade. Speak to an investment–focused broker and your tax accountant in tandem.
Free recalculation under the new rules
Find out your real 2026 borrowing capacity
We run your portfolio against multiple lender calculators in parallel — including lenders that have updated to the Macquarie‐style approach and those still on the prior method — and recommend the structure that gives you the highest assessed capacity. No credit check, no obligation.
Get My Recalculated Borrowing Capacity →What Investors Should Do Now
Practical action list for Sydney investors over the next 6 weeks while the market transitions:
- Recalculate your borrowing capacity under the new approach — even if you're not actively buying, knowing the gap matters for portfolio planning
- Gather your numbers per property: loan balance, last 12 months rental income, annual expenses (rates, insurance, strata, management), ownership share
- Speak to your tax accountant about your current and prospective deductibility position — this affects the Y/N flag lenders now require
- If you're actively shopping, request pre‐approval from a lender that has not yet updated — this may briefly preserve a higher capacity, but most lenders reassess at full application
- Compare across multiple lenders — the spread in assessed capacity between lenders on the new vs old approach is currently the widest it's been all year
- Don't lodge multiple speculative applications — each enquiry shows on your credit file. A broker pre‐qualifies first
- Use our borrowing power calculator for a quick starting estimate before the broker conversation
How a Broker Helps in the New Landscape
For the next 4–6 weeks, different lenders will be using different serviceability approaches — some will have updated to the Macquarie‐style methodology, others will still be on the prior approach. The variance between lenders is therefore unusually wide right now.
A specialist broker runs your scenario against multiple lenders' calculators in parallel and recommends the lender whose current approach best fits your portfolio structure. For investors with multiple properties, the right lender choice in 2026 can mean a difference of $100,000–$300,000+ in assessed borrowing capacity for the same set of inputs.
We also coordinate with your tax accountant where useful — the deductibility flag in the new calculator should reflect your accountant's view of your current position, not just a default assumption.
Related reading: our investor home loan guide, how borrowing power is calculated, and SMSF property purchases (which sit outside negative gearing rules entirely).
Get your investor borrowing capacity under the new rules
Tell us your situation. We'll model your borrowing capacity against multiple lender calculators — including the new Macquarie‐style approach and lenders still on the prior method — and tell you which lender gives you the highest assessed capacity right now.
Frequently Asked Questions
The 2026–27 Federal Budget proposed changes to how interest expenses on investment properties can be deducted. The exact final form is still being legislated, but lenders are pre‐emptively updating their serviceability calculators to reflect the proposed approach — Macquarie Bank rolled out its updated calculator on 26 May 2026, and other lenders are expected to follow.
Most investor borrowers will see their assessed borrowing capacity reduced slightly under the new calculations, because lenders now request loan balance, tax deductibility eligibility (Y/N), annual rental income, annual property expenses, and ownership percentage per applicant for each property held. The new worksheets often result in lower net rental income added back to serviceability than the old method, depending on the structure of the portfolio.
Macquarie has historically been one of the fastest movers on policy‐driven serviceability changes — its calculators are typically updated within days of a major Budget announcement, before regulatory guidance is finalised. The bank is acting on the proposed Federal Budget changes ahead of legislation passing, which is why their May 2026 update is being used as the leading benchmark across the broking industry.
It depends on your situation. If you are actively shopping for an investment property, getting pre‐approval now (with a lender that has not yet updated its calculator) may preserve a slightly higher borrowing capacity than waiting. However, most lenders will reassess at full application stage regardless of pre‐approval, so this strategy has limits. A broker can model both scenarios against your specific portfolio.
Existing investment loans are not directly affected by serviceability calculator changes — those calculators are used to assess NEW applications. However, if you refinance an existing investment loan or apply for a new investment property, the new calculation methodology will apply. Tax deductibility of interest on existing loans is governed by tax law, not lender policy, and any changes there depend on the final legislated form of the Budget proposals.
A specialist broker can run your scenario against multiple lenders' calculators in parallel — including lenders that have updated to the new approach (Macquarie) and those still on the old approach — and recommend the best lender for your specific portfolio structure. We work with 40+ lenders, so we can identify which serviceability approach gives you the best borrowing capacity in 2026.
Under the new rules — find out your real 2026 borrowing capacity
Free recalculation across 40+ lenders — including those on the new Macquarie‐style approach and those still on the prior method. We recommend the lender giving you the highest assessed capacity for your portfolio.
General information only. The information in this article is general in nature and does not constitute personal financial, taxation, or credit advice. Federal Budget 2026–27 measures referenced are proposed and not yet legislated — the final form is subject to the legislative process. Lender serviceability methodology is current as of 26 May 2026 and may change as further lenders update their calculators. Mortgagefy is an authorised credit representative under Australian Credit Licence 348324 (Credit Representative No. 532656). Before acting on any information, consider whether it is appropriate to your personal circumstances and seek independent tax, financial or credit advice. Sources: 2026–27 Federal Budget materials (budget.gov.au), Macquarie Bank broker communication 25 May 2026, NextGen ApplyOnline documentation.
"Two existing IPs plus our PPOR — our last bank said we'd hit the wall. Raif moved one loan to a lender still using the old method and structured the next purchase around the new Macquarie assessment. We picked up another $310k of capacity for the third property."
Daniel & Priya K. · Kellyville · 3-property investor
Ready to talk to a broker?
Get a straight answer about your borrowing power — no credit check, no obligation. Our Sydney mortgage broker team is available Mon–Sat 9am–7pm.