Macquarie Bank has rewritten its investor credit rules, stripping out key tax benefits as the major banks weigh their options.
Macquarie Bank has become the first lender to remove most negative‑gearing tax add‑backs from its serviceability calculators for investment loans, following the federal government’s move to restrict negative gearing to new builds.
The budget’s negative‑gearing reforms mean that, for future purchases of existing properties, investors will no longer be able to offset rental losses against wage income for tax purposes.
For years, lenders have incorporated that tax benefit directly into their calculators.
Whenever an investment property’s interest and running costs exceed its rent, lenders calculate the annual loss, apply the borrower’s marginal tax rate, and treat the resulting tax refund as extra monthly income, which significantly boosts borrowing capacity for highly geared investors.
Brokers have warned that this practice is no longer sustainable because the tax refunds underpinning those add‑backs will not materialise for post‑budget purchases of established stock.
Macquarie’s ‘considered’ step away from add‑backs
Macquarie formally briefed brokers of the changes on Monday (18 May), outlining a new investor serviceability policy that rewrites how negative gearing is treated for both new purchases and refinances.
For buyers of a new investment property, contracts executed on or before Tuesday, 12 May 2026, will remain eligible for negative‑gearing add‑backs in Macquarie’s serviceability calculations.
For contracts executed after the cut‑off, the bank will only include negative gearing in the calculator if the property meets the definition of a “new build” and “genuinely adds to housing supply”.
A Macquarie spokesperson linked this directly to the budget’s tax changes and the bank’s duty to stress‑test loans against the environment investors now face.
“In light of the Federal Budget, we have made changes to our investor lending policy to ensure we continue to comply with our responsible lending obligations,” Macquarie Bank told The Adviser.
“These changes help us ensure property investors are able to afford their loan when the changes to negative gearing come into effect.”
For dollar‑for‑dollar refinances of existing investment properties purchased before 12 May 2026, negative‑gearing tax benefits will still be recognised in serviceability checks.
Where borrowers are seeking additional cash out on a refinance, the bank will only include negative gearing on the extra debt if it is used to purchase another investment property with a pre‑12 May contract to fund an eligible new build or to improve an existing investment property bought before the cut‑off.
Macquarie also clarified how it would treat owner‑occupied homes that transition into investments.
For properties acquired on or before 12 May 2026 that later become rentals, the bank said it would continue to apply negative‑gearing benefits in servicing for the debt used to acquire or improve those pre‑cut‑off assets.
It will continue to allow interest expenses to be deducted against rental income within the calculator and will still permit the grouping or pooling of rent and interest across multiple investment properties held in the same name.
Beyond negative gearing, Macquarie is also tightening how it assesses servicing guarantees for properties held in companies and trusts.
Effective from Thursday, 21 May 2026, applicants who are providing servicing guarantees for any properties held in a company or trust “will be required to provide further information about servicing those commitments”.
It added that this updated policy only applied to new applications and that files lodged before that date would still be assessed under the previous rules.
Macquarie stressed that the shift was framed around prudential expectations and the long‑term affordability of loans.
It said the new rules “were already effective for all applications” and advised that “we’ll reach out to you directly if we need further details such as proof of a pre‑12 May contract or ‘new build’ status”.
Macquarie is also rebuilding its systems to embed the new policy, with the bank stating: “We’re working on an updated serviceability calculator and will share it with you once it’s ready.”
Westpac told The Adviser that it had notified its home‑lending teams that the proposed negative‑gearing ban on most existing properties could reduce borrowing capacity for investor clients, though it has not yet implemented policy changes.
National Australia Bank, Commonwealth Bank of Australia, and Australia and New Zealand Banking Group all confirmed they were working through their serviceability settings in light of the changes.
Borrowing power hit as live files reworked
In one case shared with The Adviser, Macquarie recalculated a pre‑approved investment loan after stripping out the negative‑gearing benefit, slashing the maximum loan the borrower could obtain from about $1.7 million to $1.27 million based on the same income and expense data.
Eventus Financial founder and mortgage broker Alex Veljancevski has been modelling how the new rules play out for would‑be investors with clean profiles and said the results underscored how heavily lenders relied on tax benefits to stretch borrowing limits.
“Under current settings, this borrower can access approximately $750,000 for an investment loan, with negative gearing factored in. Remove negative gearing from the equation, and that same borrower can access approximately $600,000. That is a $150,000 reduction, or a 20 per cent drop in borrowing capacity, despite no change to income, expenses or interest rates,” Veljancevski said.
“A 20 per cent reduction in borrowing power is the difference between being able to buy in a suburb you want to invest in and being priced out of it entirely.”
He said many clients underestimated the way tax settings had been embedded in bank models and were only now discovering their importance.
“Most people think negative gearing is just a tax refund at the end of the financial year, but lenders actually use those projected tax benefits to increase borrowing capacity upfront,” he said.
“If those benefits are reduced or removed for established properties, a lot of investors who qualify today may not qualify in the future.”
Market recalibration as investors reassess plans
Sydney‑based broker and The Mortgage Agency director Tony Xia said the emerging pattern was a clear downward reset in borrowing capacity for both new and established investors.
“The market will flatten out, especially for investment-grade properties due to borrowing power limitations. A lot of investors will have to pivot lower their expectations on properties,” Xia said.
“Because of these factors, I think both new and old-school investors will take a breather to reassess their next investment plans. I think everyone will take time to readjust to what is happening.”
Xia’s recalculations for clients planning to buy after the 12 May cut‑off suggest that some investors face substantial reductions.
“We recently re-ran borrowing power without negative gearing for clients looking to buy after May 12, 2026, and to no surprise, it dropped by around 25 to 30 per cent,” he said.
“For example, we had a client on a $100k salary, living at home with family, with HECS the only debt and a proposed rental income of $500 per week. Their pre-budget borrowing power was $675k. Post-budget, it fell to $490k.”
Xia expects the day‑to‑day process of structuring deals to become more involved.
“We’ve discussed this extensively with my broker network. The process will take a little time on our end to ensure we do sufficient checks on exactly when the property was purchased before calculating and submitting to the lender,” he explained.
[Related: Government to reform housing tax]
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