Borrowing capacity just shrank: how lenders are rewriting investor servicing after the tax bill

G'day.

The negative gearing and CGT bill cleared parliament last week (covered in the Greens–Labor deal explainer). Within days, lenders started moving. ING was first out in mid-June; NAB, Macquarie, Great Southern Bank and several non-majors have now followed, with more updates landing through this week. Broker Daily reported on Monday that the list of revised investor serviceability policies is "growing daily."

For self-managing landlords, this is the bit of the reform that actually bites now — not in 2027. If you're planning another purchase, a refinance, or even just an equity release, your borrowing power has likely shrunk in the last 14 days. Here's what changed.

What the lenders actually did

Before the reform, most lenders added back 100% of an investment property's negative-gearing tax benefit to your assessed income when calculating serviceability. That tax shield made investor loans look more affordable on paper than they were, and it's why portfolio investors could keep stacking properties.

The new policies — and they vary by lender — do one or more of these:

• Cap the tax shield add-back at one property (matches the new legislation: only one property can be negatively geared against salary income from 1 July 2027).
• Reduce or remove the add-back entirely for new applications on second-and-beyond investment properties.
• Re-rate rental income shading — many lenders previously shaded rent to 75–80%; some are now going lower (70%) on the basis that flat 2026 forecasts mean weaker net yields.
• Tighten CGT modelling in exit-strategy assessments for borrowers near retirement, reflecting the 35% (vs 50%) future CGT discount on post-2027 acquisitions.

Mortgage Professional Australia's early modelling on the first round of NAB/Macquarie changes back in May suggested borrowing capacity drops of 10–18% for two-property investors and more for three-plus portfolios. The latest ING update is in a similar range.

Who's hit hardest

1. Investors with 2+ properties looking to buy a third. This is the demographic the policy intends to target, and the lender changes amplify the legislative effect. Expect the biggest cuts here.
2. High-LVR investors refinancing. If you're rolling off a fixed rate and need to re-prove serviceability, your assessed borrowing capacity may now be lower than your existing loan balance. That doesn't force a sale, but it can mean you stay with your current lender on whatever rate they offer rather than shopping the market.
3. Equity-release applicants. Pulling equity out of property 1 to fund a deposit on property 3 was already getting harder. It's significantly harder this week.

Who's not really affected

• Owner-occupier applications — no change. The reform and the lender responses are investor-loan specific.
• First investment property purchases — the new legislation still allows full negative gearing on one investment property, and most lender policies preserve the add-back for the first one.
• Existing portfolios with no new borrowing planned — grandfathering plus no application means no serviceability re-test. Sit tight.

What I'd do this week

1. Don't apply blind. If you were planning a purchase or refinance in the next 90 days, ask a broker for a fresh borrowing-capacity assessment against at least 3 lenders now. The dispersion between lenders is unusually wide right now because they're updating policies on different timelines.
2. Pull every rental statement and tax summary into one place. Lenders are asking for more documentation, faster, and want clean income evidence — not a shoebox of PDFs. (Yes, this is what PropAlly does. No, I'm not above mentioning it.)
3. Re-run your purchase modelling with a 10–15% lower borrowing cap as the base case. If the deal still works, you have a margin. If it only worked at the old capacity, the deal has changed.
4. Talk to your broker about lender order. The lender that gave you the best capacity 6 months ago may not be the best now. Order matters because each application hits your credit file.
5. If you're at or near retirement, get explicit on your exit strategy with the lender. Some are now demanding more detailed CGT and disposal modelling for borrowers >55.

What I'm watching next

• Macquarie's next update — they moved early in May and tend to recalibrate quarterly. The next revision could either soften (if applications drop too far) or tighten further.
• APRA guidance. No formal change yet, but APRA tends to follow the industry's lead within ~6 months. If serviceability buffers get reframed around the new tax regime, expect another round of changes late 2026.
• The "widows and divorcees" carve-out Chalmers committed to on Sunday. If passed, it would slightly soften the impact for inherited or settlement-acquired properties — relevant to a small but real cohort of landlords.

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— PropAlly, Brisbane

General information only — not financial, tax, or credit advice. Lender policies are changing weekly; confirm current rules with a licensed mortgage broker before acting.