Negative Gearing and Capital Gains Tax Changes: What's Now Law and What It Means for You

The negative gearing changes announced in the 2026 Federal Budget are now law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed Parliament on 25 June 2026 and received Royal Assent the following day. The new rules take effect from 1 July 2027.

That matters, because a lot of the commentary written in May still describes these changes as proposals that might not survive the Senate. They did. If you own an investment property, are thinking about buying one, or have held assets for a long time, the negative gearing changes and the related capital gains tax reform are worth a proper look.

Not everything announced on Budget night made it into law at the same time. The negative gearing and CGT changes are legislated. The proposed 30% minimum tax on discretionary trusts is not, and is still working through consultation. This article separates the two, because planning around a law and planning around a proposal are different exercises.

The short version: most changes take effect from 1 July 2027, existing investors are largely grandfathered, and the rules for new investment property differ from those for what you already own. If you would rather skip the read and talk through what it means for you, you can talk to one of our advisers any time.

What’s law and what isn’t

Three measures were announced together on Budget night. They are at different stages, and the distinction affects how much weight you should give each one in your planning.

Now law, effective 1 July 2027

The negative gearing restriction and the capital gains tax changes both sit in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and a related Act. Both passed Parliament on 25 June 2026 and received Royal Assent on 26 June. The Bill was amended in the Senate before passage, including the removal of several ministerial discretionary powers, so the definitions that matter are set in the legislation rather than left to later determination.

Announced but not yet law

The 30% minimum tax on discretionary trusts, proposed to start on 1 July 2028, has not been legislated. The Australian Taxation Office confirms the measure is not yet law. Treasury released a consultation paper on the design in July 2026 and is still working through the detail, including which trusts are captured and how the credits will work.

Still being finalised

Treasury has consulted on a second tranche of legislation covering how the new Act interacts with acquisition rules. Some technical detail will land after this article is published, so the position described here is current as at the date shown above.

The practical difference: you can plan around the negative gearing and CGT rules with reasonable confidence. The trust measure is worth understanding, but restructuring on the strength of a consultation paper is premature.

Negative gearing changes: the new rules

Negative gearing happens when the costs of owning an investment property (interest, maintenance, rates, depreciation) are higher than the rental income it produces. Under the current rules, you can deduct that loss against your other taxable income, including your salary. Under the new rules, that ability is restricted.

Here is how it breaks down from 1 July 2027.

Properties you already own are grandfathered. If you held, or were under contract for, your property before 7:30 pm AEST on 12 May 2026, you can keep negative gearing under the existing rules until you sell. Nothing changes for you day to day.

Established properties bought after Budget night lose access to negative gearing against other income. Losses can only be offset against rental income from other residential properties, or against capital gains from rental property sales. Unused losses carry forward to future years. The loss is not gone, it is ring-fenced.

Eligible new builds remain exempt. Investors who buy newly constructed residential property can still negatively gear and can still access the existing 50% CGT discount. Commercial property and shares are also unaffected by the negative gearing change, and superannuation funds including SMSFs are excluded from it.

In practice, an investor who bought an established rental property after Budget night can still claim losses against salary income until 30 June 2027. After that, the restriction applies.

What counts as an eligible new build

Treasury’s explanatory material lists newly constructed residential dwellings, including apartments bought off the plan. It also covers residential construction on previously vacant land, an established property that has recently been extended, and a granny flat built next to an established property.

That last pair surprises people. A substantial extension or a granny flat can bring a dwelling within the new build category even though the original property is established. If you are weighing up a renovation or a secondary dwelling, the tax treatment is worth checking before you commit, not after.

The capital gains tax changes

The CGT changes reach further than the negative gearing changes because they apply to all CGT assets, not just property. From 1 July 2027, the old rules give way to a new regime.

Until 30 June 2027: the 50% CGT discount applies to assets held longer than 12 months. Your nominal gain is taxed at your marginal rate.

From 1 July 2027: your cost base is indexed to inflation, so only the real gain above inflation is taxed, and a 30% minimum tax applies.

The full picture:

• The 50% CGT discount is replaced with a cost base indexed to inflation for individuals, trusts and partnerships. You are taxed on the real gain, not the nominal gain.
• A 30% minimum tax applies to net capital gains. If your marginal rate sits below 30%, the minimum still applies. If you are above 30%, you pay your normal marginal rate.
• The change applies to gains accruing on or after 1 July 2027. Gains accrued before that date keep their existing treatment.
• The main residence exemption is unchanged. Your home is still CGT free when you sell it.
• Superannuation funds keep their own concessional treatment. Super is excluded from the new regime and continues to access the existing one third discount.
• The 60% discount for qualifying affordable housing is retained in full, as are the four small business CGT concessions.
• Income support recipients are exempt from the 30% minimum tax. This covers means-tested payments including the Age Pension, JobSeeker, the Disability Support Pension and Carer Payment, for any income year in which you receive a payment.

One point that is widely misreported: the exemption for income support recipients applies to the 30% minimum tax only. It does not mean pensioners keep the 50% discount. Their gains are still calculated under indexation like everyone else’s, they just are not subject to the 30% floor.

How the transition actually works

If you hold an asset across 1 July 2027 and sell later, the gain is split at that date. The portion attributable to the period before 1 July 2027 keeps the 50% discount and is deferred until you actually sell. The portion attributable to the period from 1 July 2027 onwards is taxed under indexation with the 30% minimum.

That split has a practical consequence. To calculate it, you need a defensible value for the asset at 1 July 2027. For listed shares that is straightforward. For property, business interests and unlisted assets it is not, and it is worth talking to your adviser or accounting team about what evidence to gather before the date rather than reconstructing it years later.

Investors in new residential property get a choice. On disposal, they can apply the existing 50% discount or the new indexation and minimum tax regime, whichever produces the better result.

Pre-1985 assets are now in the CGT net

Assets acquired before 20 September 1985 have been outside the CGT system since it began. That ends.

From 1 July 2027, pre-CGT assets are brought into the net for gains accruing after that date. Gains accrued up to 1 July 2027 remain exempt, so the historical position is preserved, but growth from that point forward is taxable under the new indexation and minimum tax rules.

For most people this is irrelevant. For a smaller group it is the most significant change in the package. Think of a family that has held farmland, a commercial building, a share parcel or a shack since before 1985. An asset the family has always treated as CGT free now has a taxing point on future growth, and that changes the maths on holding versus selling, and on how the asset passes to the next generation.

If this applies to you, two things are worth doing. Establish what the asset is worth around the transition date, for the same reason described above. And revisit your estate planning, because assumptions built into a will or a succession plan drafted when the asset was CGT free may no longer hold.

What this means if you already own an investment property

If you bought your investment property before 7:30 pm AEST on 12 May 2026, the headline news is reassuring: you are grandfathered. That means:

• You can keep negative gearing the property under the current rules for as long as you hold it.
• The gain accrued up to 30 June 2027 keeps its 50% discount treatment, deferred until you sell.
• From 1 July 2027 onwards, further growth is taxed under the indexed cost base regime with the 30% minimum.

For most existing investors, the day to day experience does not change in the short term. The longer term consideration is the CGT change, because eventually you will sell, and the rules at that point affect your net return.

A few questions worth thinking through:

• Is the property still doing what you bought it to do? Some investors hold property mainly for the tax shelter, others for capital growth, others for retirement income. The CGT change shifts the maths on all three.
• How does it sit alongside the rest of your portfolio? A heavy property weighting was easier to justify when the tax treatment was more generous. An asset mix between property and shares may be worth revisiting.
• Are you planning to add to the portfolio? Buying another established property now brings you under the new rules, even though your existing properties stay grandfathered.
• Do you know what it is worth? If you are likely to hold across 1 July 2027, a recent valuation or appraisal will make the eventual calculation much easier.

If you hold assets in a trust

This one is not law yet, and the distinction matters.

The Government announced a 30% minimum tax on discretionary trusts from 1 July 2028. Under the proposal, the trustee would pay a minimum 30% tax on the trust’s taxable income, and beneficiaries other than corporate beneficiaries would receive a non-refundable credit for the tax the trustee has paid. Fixed and widely held trusts, complying super funds, special disability trusts, deceased estates and charitable trusts sit outside it.

Treasury released a consultation paper on the design in July 2026. Several details remain open, including how “discretionary trust” is defined for the purposes of the measure. The Government has also indicated that income from discretionary testamentary trusts established for genuine testamentary purposes will be exempt, and that a time limited restructure rollover will be available.

What to do with that: understand it, model it if trusts are central to your structure, and hold off on restructuring. The measure has not been legislated, the design is still moving, and a restructure undertaken on the basis of a consultation paper can be expensive to unwind. Two years is enough time to plan properly once the rules are settled.

SMSFs and the new borrowing restriction

One change that received little attention passed as part of the same package. SMSFs are prohibited from using limited recourse borrowing arrangements to acquire residential property.

For a self-managed super fund trustee, this closes off a strategy that has been used for years to buy residential investment property inside super with borrowed money. Funds are otherwise unaffected by the negative gearing changes and keep their existing concessional CGT treatment, so the borrowing restriction is the specific point to check.

If your fund has a residential purchase in mind, or an existing arrangement you were planning to refinance or extend, get advice on where you stand before committing to anything.

Why the detail matters more than the headline

The reason this package matters more than most budget changes is the layering. There are several moving parts:

1. The negative gearing rule and whether your property is established or an eligible new build, bought before or after 12 May 2026.
2. The CGT rule and the shift from the 50% discount to an indexed cost base with a 30% minimum.
3. The transition and which portion of your gain sits under which regime.
4. Pre-1985 assets and whether anything you hold falls into that category.
5. The trust proposal, which is not law and may change before it is.
6. The timing, because 1 July 2027 is close enough to plan for and far enough away that hasty decisions are unnecessary.

That is a lot to hold in your head, and the right answer depends on which layers actually apply to you.

A few examples of how the answer shifts:

• A couple in their 40s with one negatively geared property and a long investment horizon faces different questions than a near-retiree with three properties and a plan to sell down for retirement income.
• A self-employed business owner with assets in a discretionary trust has the trust proposal to watch, alongside the property and CGT changes.
• A family holding an asset bought before 1985 has a taxing point on future growth where there was none before.

Don’t react to the headline. Selling property in a hurry before 1 July 2027, or rushing into a new build because it remains tax advantaged, are both decisions that look reasonable at the headline level and very different once you run the numbers on your own situation.

The sensible move is the one most major tax changes call for: pause, get advice tailored to your circumstances, and review your plan against the new rules before making any irreversible decisions.

What this means if you’re thinking about investing

The investment property maths has changed, but property is not the only way to build wealth. A few options worth considering alongside, or instead of, buying another established rental:

• Eligible new builds. Newly constructed residential property remains tax advantaged. Both negative gearing and the 50% CGT discount continue to apply, and investors get a choice of CGT regime on disposal.
• Commercial property. Not affected by the negative gearing change. The CGT change still applies, but the negative gearing position remains as it is today.
• Shares and managed funds. Subject to the new CGT rules, but no negative gearing change. Cost base indexation can suit a long term investment approach, though the 30% minimum applies to the post-2027 portion of the gain.
• Superannuation. Inside super, the concessional CGT treatment is unchanged, which makes super contributions and salary sacrificing relatively more attractive than they were before.

None of these is automatically better than the others. The right answer depends on your income, your goals, your existing assets, your timeframe, and your appetite for risk. A financial adviser’s job is to look at the full picture and recommend the mix that suits you, not the one that was tax efficient three years ago.

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