Australia's 2026 CGT Reform: What Property Investors and Business Owners Actually Need to Know

The Australian Federal Budget 2026-27 introduces the most significant change to capital gains tax in nearly three decades. From 1 July 2027, the long-standing 50% CGT discount will be replaced by cost base indexation and a 30% minimum tax floor on net capital gains. Alongside this, negative gearing for residential property will be restricted to new builds only.

For property investors, business owners holding assets in trusts, and high-income individuals with diversified portfolios, this represents a fundamental shift — not just in how much tax is owed, but in how investment decisions should be structured from day one.

This article breaks down what's changing, who's affected, the transition rules, and — crucially — why now is the time to sit down with your accountant rather than wait.

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What's actually being replaced

Since 1999, individuals, trusts, and partnerships have benefited from a 50% CGT discount on assets held longer than 12 months. Sell a $100,000 capital gain after a year, and only $50,000 is added to your assessable income.

From 1 July 2027, that 50% discount disappears. In its place:

1. Cost base indexation — your asset's original purchase price is adjusted for inflation over the holding period, so only the real gain (above inflation) is taxed.
2. A 30% minimum tax — applied to net capital gains for assets held more than 12 months.

The combined effect is meant to tax "real" gains rather than nominal ones, while ensuring no one pays below a 30% effective rate on capital gains.

Who's affected — and who's not

The reform applies to:

• Individuals
• Trusts
• Partnerships
• Pre-1985 CGT assets (previously exempt — now caught)

Notably exempt from the changes:

• Superannuation funds (including SMSFs) — retain the existing one-third CGT discount on directly held assets
• Companies — already pay flat company tax; no discount currently applies
• Main residence — exemption unchanged
• Income support recipients — exempt from the 30% minimum tax

This creates a sharp asymmetry. An investment property held personally and one held inside an SMSF will face very different tax treatment from 2027 onwards. A trading business held in a company structure will be largely unaffected, while a discretionary trust distributing capital gains to individual beneficiaries will be.

The transition window — and why timing matters

This is where careful planning matters most. The rules are not retrospective, but they are time-sensitive:

• Negative gearing changes: Properties acquired before 7:30pm AEST on 12 May 2026 are grandfathered indefinitely under the current rules — including the ability to deduct rental losses against other income. Properties acquired after this cutoff (other than eligible new builds) lose negative gearing from 1 July 2027.
• CGT changes: For assets sold before 1 July 2027, the full 50% discount applies. For assets sold after that date, a split calculation applies — gains accrued up to 30 June 2027 keep the discount; gains accrued from 1 July 2027 onwards use the new indexation + 30% floor regime.

In practical terms: every existing property, share portfolio, or business asset will need a 30 June 2027 "valuation event" calculation if it's sold afterwards. Records of acquisition cost, improvements, and market value at the cutoff will be critical.

Negative gearing — the parallel change

The Government is restricting negative gearing on residential property to new builds only from 2027-28. The rationale: over 80% of new investor lending currently goes to existing dwellings, and the policy aims to redirect investor capital toward new housing supply.

This means a typical investor strategy of buying an established rental, claiming losses against PAYG income, and relying on capital growth has been doubly squeezed — the income deduction is gone for new purchases of existing homes, and the eventual capital gain is taxed less favourably.

For investors targeting new builds, however, both negative gearing and a choice between the old/new CGT regime remain available, creating a clear policy preference for off-the-plan and house-and-land purchases.

Real-world impact: three scenarios

Scenario 1: Individual with a Sydney investment property

Bought for $800,000 in 2023, projected to sell for $1,400,000 in 2030. Under the current rules, the $600,000 gain attracts a 50% discount → $300,000 added to taxable income → at top marginal rate (45% + 2% Medicare) the tax bill is ~$141,000.

Under the new rules (after the transition):

• Gain accrued pre-1 July 2027 (~3 years of growth) keeps the 50% discount
• Gain accrued post-1 July 2027 (~3 years of growth) uses indexation
• Effective tax could rise 15-25% depending on inflation indexation captured

Scenario 2: Family trust with diversified portfolio

A discretionary trust distributing capital gains to adult children loses the 50% discount on all distributions from 1 July 2027. Moving forward, families may need to evaluate whether bucket companies (taxed at 25-30%) or SMSF strategies offer better long-term outcomes.

Scenario 3: SMSF with property and shares

Largely unaffected. SMSFs retain their one-third CGT discount on direct holdings, and in pension phase pay 0% CGT. The relative advantage of holding growth assets inside super has increased materially under the new regime.

Why your current structure may need to change

The reform changes the answer to several long-standing questions:

• Personal name vs trust vs company vs SMSF — the after-tax math has shifted, especially for assets you expect to hold for 5+ years
• Negative gearing strategy — the case for new builds versus established properties has strengthened
• Realisation timing — for assets close to their target sale price, accelerating disposal before 1 July 2027 may preserve the full 50% discount
• Bucket company strategies — companies are now relatively more attractive for capital gains too
• SMSF contributions — building wealth inside super is now meaningfully more tax-efficient than outside

These are not decisions to make in isolation. The interaction between income tax, CGT, super contribution caps, Division 296 (the new $3M super tax), trust deeds, and stamp duty implications of restructuring is complex.

What to do in the next 12 months

If you own any of the following, a tax review before 30 June 2027 is strongly recommended:

1. Investment properties held personally or in trust
2. Share portfolios with significant unrealised gains
3. Business assets approaching potential sale
4. Pre-CGT assets (acquired before 20 September 1985)
5. Trust structures distributing capital gains regularly

A proper review covers:

• Modelling the cost of holding vs realising under both regimes
• Stress-testing your structure against the new rules
• Identifying assets where pre-2027 disposal makes sense
• Evaluating whether restructuring to a company or SMSF is worth the stamp duty + CGT cost
• Documenting cost bases properly for the eventual 30 June 2027 calculation

The reform window is also a planning window. Decisions made now will determine after-tax outcomes for decades.

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A note from CPL TaxWin

CPL International Group's TaxWin division has been modelling the impact of these reforms across our client base — investment property owners, business owners, SMSF trustees, and high-net-worth individuals. Every client situation is different, and the right answer depends on holding period, marginal tax rate, structure, and the asset class.

If you hold significant investment assets and haven't reviewed your tax structure since the Budget announcement, now is the time. Even a single one-hour consultation can clarify whether your current setup is still optimal — or whether restructuring before 1 July 2027 could save you tens or hundreds of thousands in lifetime tax.

Book a tax structure review →

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This article reflects the announced reform package as of May 2026. The legislation is currently before Parliament; final detail may vary. Always seek personalised advice — general information cannot replace specific professional guidance.