Who can claim
This deduction is available to individuals and companies.
- You use or hold a residential dwelling as residential accommodation on or after 1 July 2027.
- Across the covered residential portfolio, otherwise deductible amounts exceed related assessable residential income for the income year.
- For a trust beneficiary, assessable trust income referable directly or through interposed partnerships or trusts to residential accommodation is included in the covered residential income calculation.
What you cannot claim
- An ownership interest last acquired before 7:30 pm ACT legal time on 12 May 2026 is grandfathered. For a contractual acquisition, use the time the contract was entered into.
- A new residential dwelling is excluded only if the requirements in the Minister's legislative instrument are met. A marketing description or first occupancy alone is not enough.
- A dwelling used for a purpose prescribed by legislative instrument, including eligible social or affordable housing purposes, can be excluded where every instrument condition is met.
- Widely held unit trusts, complying superannuation entities and fringe-benefit arrangements have specific exclusions.
- Caravans, mobile tiny homes, other mobile homes, hotels, motels, inns, hostels, boarding houses, qualifying student accommodation, boats and other marine vessels are outside the statutory residential-dwelling definition.
- A quarantined residential amount is not added to the CGT cost base or reduced cost base.
How the amount is worked out
From 2027-28, aggregate otherwise deductible amounts and assessable income across all covered residential dwellings. Reduce any covered-portfolio excess by net income from non-quarantined residential dwellings and by qualifying income-tax gains realised from residential dwellings held as revenue assets. The remaining excess is not deductible against salary, wages or unrelated income. It becomes a quarantined amount that first reduces deferred residential capital gains, then other residential capital gains, before the CGT discount and small-business concessions. Any unused amount carries forward, cannot enter the cost base or reduced cost base, and can be extinguished when the bankruptcy provisions apply.
Records the ATO expects
- Signed acquisition contract and exact contract date and time for every ownership interest
- Construction, first-occupancy and use evidence
- Separate annual income and expense schedules for covered and non-quarantined dwellings
- Residential revenue-asset gain calculations
- Carried-forward quarantined amount register
Before you rely on this rule
The reform is enacted. Complete the classification and portfolio calculation for each year from 2027-28; do not assume a dwelling is excluded without checking the statutory definition and applicable legislative instrument.
Where this rule comes from
Primary source: Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49, 2026 — latest compilation). Reviewed 30 July 2026. Covers the From 2027-28 income years.