Quick Summary
The key reforms impacting investors include:
50% CGT discount abolished from 1 July 2027
30% minimum tax on capital gains
Pre-CGT assets lose their ongoing CGT exemption
Existing investment assets are not fully grandfathered
Negative gearing restricted to new residential builds
Existing investment properties are protected
Established residential properties purchased after Budget Night lose traditional negative gearing benefits.
Rental losses on affected properties will be quarantined and carried forward
Investors in new residential builds retain full negative gearing and favourable CGT treatment.
Valuations at or around 1 July 2027 may become extremely important
Key Dates
| Date | Event |
|---|---|
| 12 May 2026 | Budget announcement and grandfathering cut-off for negative gearing reforms |
| 25-26 June 2026 | CGT and negative gearing legislation passed Parliament and enacted |
| 1 July 2027 | Capital Gains Tax reforms commence |
| 1 July 2027 | Negative gearing reforms commence |
| 1 July 2027 | Future gains on pre-CGT assets become taxable |
Who This Impacts
These reforms are most relevant to:
Property investors
Share investors
Managed fund investors
High-net-worth investors
Family investment trusts
Investors with large unrealised gains
Investors holding pre-CGT assets
Individuals planning to retire and realise investments in future years
1. Capital Gains Tax Reform
What is changing?
The Government is replacing the longstanding 50% CGT discount from 1 July 2027.
For investors, the current system generally allows individuals and trusts to reduce taxable capital gains by 50% where assets have been held for more than 12 months.
This will be replaced by:
Inflation-based cost base indexation.
A minimum 30% tax on capital gains.
Why it matters
This is the biggest change to investment taxation since the original CGT discount was introduced in
2. Cost Base Indexation
Instead of a flat discount, investors will generally receive an inflation adjustment to the asset's cost base.
Example
Purchase price: $100,000
Inflation-adjusted cost base: $120,000
Sale price: $200,000
Taxable gain:
Old system: potential taxable gain of $50,000 after discount.
New system: gain determined after inflating the cost base.
The intention is to tax "real gains" rather than gains caused purely by inflation.
3. 30% Minimum Tax on Capital Gains
The reforms introduce a minimum 30% tax on capital gains from 1 July 2027.
Why this matters
Historically, some investors could realise gains:
In low-income years
During retirement
Using deductions and offsets
and achieve comparatively low effective tax rates.
The new minimum tax significantly reduces these planning opportunities.
4. Existing Investments Are Not Fully Grandfathered
One of the most misunderstood parts of the reform is that existing investments are not completely protected.
The Government intends to preserve gains accrued before 1 July 2027 under the old framework while applying the new system to gains accrued after that date.
This creates a two-period CGT system:
Pre-1 July 2027 gain
Post-1 July 2027 gain
5. Valuation Requirements
Because gains may need to be separated into pre- and post-reform periods, valuations may become critical.
Investors may wish to obtain valuations around:
Residential property
Commercial property
Private investments
Trust assets
as at or around 1 July 2027.
6. Pre-CGT Assets
Historically, assets acquired before 20 September 1985 sat permanently outside the CGT system.
From 1 July 2027:
Historical gains remain protected.
Future gains become subject to CGT.
Common examples
Long-held family property
Farms
Commercial buildings
Legacy investment portfolios
7. Negative Gearing Reform
What is changing?
From 1 July 2027, negative gearing becomes largely restricted to new housing supply.
The reform aims to shift investor demand away from established homes and towards construction of new dwellings.
8. Existing Property Investors Are Protected
Properties owned before 7:30pm AEST on 12 May 2026 remain under existing rules.
For these investors:
Negative gearing remains available.
Rental losses can continue reducing salary and other income.
9. New Builds Retain Full Benefits
New residential builds continue to receive preferential treatment.
Investors purchasing qualifying new dwellings can generally continue:
Negative gearing.
Offsetting losses against salary and wages.
Accessing favourable CGT treatment.
10. Established Properties Purchased After Budget Night
The biggest property impact falls on established dwellings acquired after 12 May 2026.
From 1 July 2027:
Rental losses cannot offset salary income.
Losses are quarantined.
11. Quarantined Rental Losses
Under the new framework, losses are not lost.
Instead they are generally carried forward and may be used against:
Future rental income.
Future residential property gains.
The tax benefit is delayed rather than eliminated.
Bottom Line
For investors, the three biggest changes are:
Removal of the 50% CGT discount and introduction of a 30% minimum CGT tax from 1 July 2027.
Negative gearing becoming largely restricted to new residential builds from 1 July 2027.
Future gains on pre-CGT assets becoming taxable and the need to establish asset values around 1 July 2027.
For most investors, the next 12 months will be a critical planning period for reviewing portfolios, obtaining valuations, considering new-build opportunities, and reassessing future exit strategies.