Capital Gains Tax changes and Negative Gearing: What investors actually need to know
Every Budget creates winners, losers and at least one group chat where someone confidently declares the property market is finished.
If you own an investment property, shares, managed funds or a family business structure with wealth tucked inside it, the proposed capital gains tax and negative gearing changes may have made you sit up a little straighter.
The question underneath all the noise is pretty simple: will I pay more tax, and should I be doing something before the rules change?
The honest answer is the least satisfying one in finance: it depends!
But for many existing investors, this is probably less “drop everything” and more “let’s understand the detail”.
From 1 July 2027, the Government’s reforms will limit negative gearing for residential property to new builds, replace the 50% CGT discount with cost base indexation, and introduce a 30% minimum tax rate on capital gains. The measures are now law, with transitional rules designed to limit the impact on many existing investments.
So before anyone panic-sells a perfectly good asset or rushes into a slightly dodgy “tax strategy”, it’s worth slowing down and asking better questions: which assets are affected, when do the rules apply, what records will matter, and does your investment strategy still make sense after tax?
If you want to zoom out from the tax headlines, our wealth management approach is built around connecting investment decisions back to your bigger financial picture.
What the proposed CGT and negative gearing changes really mean
The headline version is neat and tidy. Unfortunately, tax rules are rarely kind enough to stay neat and tidy.
The changes do not mean negative gearing vanishes. They do not mean every capital gain is suddenly taxed at 50%. And they definitely do not mean every investor should sprint towards a buy, sell or restructure decision before 1 July 2027.
From 1 July 2027, the key changes are:
Restrict negative gearing benefits on residential property to new builds only
Replace the current 50% CGT discount with an inflation-based indexing method
Introduce a 30% minimum tax rate on capital gains
Existing properties held at 7:30pm AEST on 12 May 2026 will be exempt from the negative gearing changes, and CGT reforms will only apply to gains that accrue from 1 July 2027.
That last point is a big one. For existing investors, the useful question is not simply “are the rules changing?” It is “which part of my current or future gain is actually caught by the new rules?” Small distinction. Big difference.
Will the changes affect property I already own?
This is one of the first questions investors are asking, and thankfully, it has a reasonably clear answer. We’ll take wins where we can get them.
If you held an investment property before the Budget announcement time, the negative gearing changes should not apply to that property.
That grandfathering piece matters. It is the difference between “this could affect future decisions” and “everything I already own has suddenly changed overnight”.
For properties purchased after 7:30pm AEST on 12 May 2026, the treatment depends on whether the property is established housing or a new build.
Established residential property purchased after Budget night
Investors may still claim deductions against residential property income, including future capital gains from residential property.
The main change is that excess losses generally cannot be used to reduce unrelated income such as salary or wages. In other words, the tax benefit may no longer show up in your pay packet quite the same way.
Unused losses can be carried forward, so the deduction may be delayed rather than necessarily gone forever. Not ideal. Not catastrophic either.
New build residential property
New builds remain eligible for existing negative gearing treatment. Investors in new builds may also be able to choose between the current 50% CGT discount and the new inflation-based CGT arrangements.
The policy intent is to steer more investor money into additional housing supply rather than established homes. Whether investors happily follow that breadcrumb trail is another question.
Is the 50% CGT discount being removed?
For individuals, trusts and partnerships, the current 50% CGT discount is being replaced from 1 July 2027 with a different calculation method: cost base indexation plus a 30% minimum tax rate on capital gains.
In plain English, cost base indexation means inflation gets a seat at the table before the taxable gain is calculated.
Instead of automatically halving the capital gain after 12 months, your original cost base is adjusted for inflation. Tax then applies to the remaining “real” gain, subject to the minimum tax rate.
This is why two investors can sell similar assets and end up with very different tax outcomes.
A long-held asset with a meaningful inflation component may produce a different result from a short-term asset with a sharp real gain.
Some investors may pay more tax. Some may pay a similar amount. In some circumstances, the result may be better than the current system.
That is not as punchy as “CGT shock”, but it is far more useful if you are trying to make a sensible decision.
Will I pay more CGT when I sell?
This is the practical question behind most of the concern, and fair enough. Nobody enjoys surprise tax.
The answer depends on factors such as when you bought the asset, how much of the gain accrued before or after 1 July 2027, your taxable income in the year you sell, the inflation rate over your holding period, and whether the asset is residential property, shares, managed funds, a business asset or another CGT asset.
The CGT reforms are broader than property. Negative gearing changes are focused on residential property, but CGT can apply to many asset types, including investment properties, shares, units in managed funds and some business interests.
That makes recordkeeping more important. Future you may be very grateful if current you keeps better notes than “bought sometime around Covid”.
Why business owners and family groups should be careful before restructuring
This is where things get a little more layered, which is tax-speak for “please don’t do anything dramatic after reading one article”.
Business owners and family groups may have investment properties, company structures, trusts, SMSFs, retained earnings, succession plans and estate planning considerations all sitting beside each other.
A tax change in one area can set off a small domino run somewhere else. Sometimes helpful. Sometimes very much not.
Before restructuring, it is worth asking:
Will the change improve the after-tax outcome, or simply move the tax problem somewhere else?
Could it affect asset protection, estate planning, borrowing capacity, succession or future control?
Are there trust, SMSF, company or family group consequences that need proper tax and legal advice?
Have the recordkeeping and valuation implications been thought through?
The right answer for a property investor may not be the right answer for a business owner with broader family wealth arrangements.
For many families, the most valuable planning work is not “how do we outsmart a rule?” but “how do we make sure the structure still supports the people, assets and goals it was built for?” Much less exciting at a barbecue. Much more useful in real life.
For business owners weighing up tax, cash flow, superannuation or succession decisions, our broader financial adviser services can help bring those moving parts into one plan.
Why tax changes should not drive your whole investment strategy
One thing we’ve seen repeatedly over the years:
People sometimes make investment decisions for tax reasons and only later realise they forgot to properly assess the investment itself. Which is a bit like buying a car because the cupholder is excellent.
Tax matters.
Of course it does.
But tax is only one ingredient in successful wealth creation. Important, yes. The whole recipe, no.
The best investments still tend to have characteristics like:
Strong cash flow
Quality underlying assets
Long-term growth potential
A strategy aligned with your goals
Appropriate risk management
Those fundamentals don’t disappear because a tax rule changes. Quality does not pack up and leave the room just because Treasury has changed the furniture.
A great investment rarely becomes a poor investment simply because its tax treatment changes.
Likewise, a poor investment doesn’t magically become attractive because it offers a deduction. A lemon with a tax benefit is still, unfortunately, a lemon.
Three practical steps before changing your investment strategy
1. Understand your exposure
Start with the basics: what do you own, when did you purchase it, what is your cost base, and what parts of any future gain may fall before or after 1 July 2027?
Do not assume the changes affect you just because a headline says they might. Headlines are designed to get attention; your strategy is meant to make sense.
2. Revisit your long-term strategy
Tax policy changes, but your bigger goals usually move much more slowly. Retirement. Family. Lifestyle. The ability to sleep at night. The usual minor details.
Retirement goals, business succession plans, family wealth decisions and lifestyle choices should still sit at the centre of the conversation.
If retirement is part of the reason you're investing, our retirement planning team can help test whether the strategy still fits the life you're working towards.
3. Get advice before making major moves
Selling assets, changing ownership structures or rushing into purchases based on incomplete information can create unintended consequences.
Good decisions usually come from modelling the options, understanding the trade-offs and choosing deliberately - not reacting to the loudest headline or the most confident person at a barbecue.
Keep the plan bigger than the tax rule
Tax rules change. Good planning adapts. Ideally without anyone needing to dramatically overturn their whole life on a Tuesday.
If the proposed CGT and negative gearing changes apply to you, they may influence timing, cash flow, recordkeeping and the way future gains are calculated.
But they should not be the only reason you buy, sell, hold or restructure.
The better question is not “how do I avoid this tax change?”
It is “what decision makes sense for my long-term plan after tax, risk, cash flow and life goals are all considered?”
That is a less dramatic question, admittedly. But it is usually the one that leads to better decisions, fewer regrets and much calmer dinner conversations.
If you're unsure whether these changes should affect your next move, you can start by exploring the ACru Wealth approach to advice and planning.
Common questions about the CGT and negative gearing changes
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The negative gearing changes should not apply to investment properties held before the Budget announcement time. For CGT, the key point is that the new rules are expected to apply to gains accruing from 1 July 2027, so dates and records matter.
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Yes, for individuals, trusts and partnerships, the current 50% CGT discount is being replaced with cost base indexation and a 30% minimum tax rate on capital gains. The end result may be higher, lower or similar depending on the asset and the investor.
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Cost base indexation means inflation is considered before the taxable gain is calculated. Put simply, the tax system recognises that not every dollar of growth is a “real” gain once inflation has had a go at it.
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Maybe. Helpful, we know. It depends on when you bought the asset, how long you held it, your income in the year of sale, inflation over the holding period and the type of asset involved.
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Potentially, yes. Negative gearing changes are focused on residential property, but CGT rules can apply much more broadly, including to investment properties, shares, managed funds and certain business assets.
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Not just because a rule is changing. Selling, buying or restructuring should be based on the full picture: tax, cash flow, risk, investment quality and your long-term goals. Acting early can be smart. Acting in a panic is rarely a great strategy.
Important disclaimer
This article contains general information only and does not constitute financial, tax or legal advice. The proposed measures discussed remain subject to legislation and future amendment. Individual circumstances vary and professional advice should be obtained before making financial decisions.
Sources
Australian Government Budget 2026-27: Negative Gearing and Capital Gains Tax Reform Fact Sheet
Australian Government Budget 2026-27 Tax Reform Package
Australian Taxation Office (ATO) guidance on capital gains tax and investment property taxation
Treasury Budget Papers 2026-27
