The Commonwealth Government’s 2026-27 tax reform package introduces major changes to negative gearing, capital gains tax (“CGT”), and the taxation of trusts. The reforms aim to improve housing affordability, encourage investment towards new housing supply, and address perceived tax advantages in property and trust structures. These changes are set to commence from 1 July 2027 (and 1 July 2028 for trust reforms). The Government has also included important grandfathering and transitional provisions to protect many existing investments and allow affected taxpayers time to restructure their affairs.
You can find further information on these reforms at the Commonwealth Government’s Budget 2026-27 Tax Explainer: Negative Gearing and Capital Gains Tax Reform.
The key reforms are:
- Negative gearing will generally be confined to newly constructed residential properties from 1 July 2027;
- The 50% CGT discount will be replaced by a system of cost-base indexation and a 30% minimum tax rate on capital gains from 1 July 2027; and
- A 30% minimum tax on discretionary trust distributions will apply from 1 July 2028, subject to several exclusions and restructuring relief measures.
The key features of the reforms are summarised below:
| Aspect | Negative Gearing | CGT | Trusts |
| Key Reforms | Negative gearing limited to new residential properties (new builds) only. Losses on existing properties (purchased after 12 May 2026) can only offset other residential property income, not salary/wages. Carry forward of excess losses allowed to offset future residential property income. | 50% CGT discount replaced with cost base indexation and a 30% minimum tax rate on capital gains. Applies to all CGT assets (properties, shares, etc) held for at least 12 months. | 30% minimum tax on discretionary trust distributions. Primarily targets discretionary and family trusts; fixed/unit trusts and superannuation funds generally excluded. |
| Application | Applies to new residential properties only; existing properties subject to transitional rules. | Applies to all CGT assets (including property and shares); pre-CGT assets (acquired pre-20 September 1985) remain exempt. | Primarily discretionary and family trusts; fixed/unit trusts less affected; superannuation funds (including SMSFs) excluded. |
| Criteria for Inclusion or Exclusion | Applies to new builds: dwellings constructed on vacant land, or where existing properties are demolished and replaced with a greater number of dwellings; must genuinely add to supply; knock-down rebuilds or renovations that do not increase supply are not eligible. A new build cannot have been previously sold unless first owned by the builder and not occupied for more than 12 months. | Applies to new and old CGT assets; pre-CGT assets remain exempt; transitional rules for assets held before 1 July 2027. Investors in new builds can choose between the 50% CGT discount or indexation and minimum tax when selling. | Discretionary/family trusts caught; testamentary trusts distributing to minors retain normal tax rates; fixed/unit trusts may be excluded. |
| Commencement Date | 1 July 2027 | 1 July 2027. | 1 July 2028. |
| Grandfathering | Properties held before 7:30pm AEST, 12 May 2026, exempt from negative gearing changes; can continue to be negatively geared until sold. | Pre-CGT assets remain exempt; gains accrued before 1 July 2027 retain the 50% discount; for assets held before 1 July 2027, only gains accruing after this date are subject to new rules. | Testamentary trusts created via wills may retain some exemptions. |
| Transitional Arrangements | Properties purchased between 12 May 2026 and 30 June 2027 can be negatively geared until 1 July 2027; after that, losses can only offset other residential property income; excess losses can be carried forward. | For assets owned prior to 1 July 2027 and sold after, gains up to 1 July 2027 get the 50% discount; gains after 1 July 2027 use indexation and minimum tax; asset value at 1 July 2027 determined by valuation or ATO formula. | Three-year rollover relief for eligible restructuring of discretionary trusts into companies or fixed trusts. |
| Exemptions | Negative gearing remains for new builds; exemptions for private investors supporting government housing programs; commercial property and other asset classes (e.g. shares) not affected. | Main residence exemption, small business CGT concessions, and affordable housing incentives retained; recipients of means-tested income support (e.g. Age Pension, JobSeeker) exempt from minimum tax in the year of realisation. | Testamentary trusts distributing to minors retain normal tax rates; fixed/unit trusts and superannuation funds generally excluded. |