A new era for capital gains, gearing & trusts.
The 2026–27 Federal Budget reshapes how investment income and gains are taxed in Australia. With most measures starting from 1 July 2027, here's what's changing — and what to do about it.
Capital Gains Tax returns to indexation.
From 1 July 2027, the existing 50% CGT discount that has applied since 1999 will be replaced by inflation-adjusted indexation and a new 30% minimum tax on real gains — a significant rewrite of how Australians are taxed when they sell investments.
How the new method works
For CGT assets held more than 12 months, the cost base will be uplifted by Consumer Price Index movements (similar to the indexation regime that operated between 1985 and 1999). The resulting real capital gain is then taxed at the greater of the taxpayer's marginal rate or a new 30% minimum.
The ATO will publish indexation tools and guidance to support calculations. The changes apply to individuals, trusts and partnerships — including holdings of shares, residential and commercial property, and pre-1985 assets.
- Individuals
- Trusts and partnerships
- Most asset classes (shares, property, etc.)
- Pre-1985 assets (gains from 1 July 2027 onward)
- Companies (existing rules continue)
- Superannuation funds (1/3 discount continues)
- Insurance bonds (no CGT discount currently)
- Income-support recipients exempt from minimum tax
Transitional rules for existing assets
For CGT assets purchased before 1 July 2027 and sold afterwards, the gain is split:
- The growth up to 1 July 2027 is taxed under the current 50% discount rules
- The growth from 1 July 2027 onward is taxed under the new indexation + 30% minimum tax regime
To determine the asset's value at 1 July 2027, taxpayers may either commission a valuation (or use quoted share prices for listed securities) or apply a specified ATO apportionment formula based on the asset's growth over the holding period.
An investor sells a property held for 10 years
Michael buys an investment property on 1 July 2022 for $500,000 and sells it on 1 July 2032 for $1,000,000 — doubling in value over 10 years (a 7.18% annual return). Using ATO tools, the property's value at 1 July 2027 is calculated as $707,107.
Under the transitional rules, his taxable gain becomes $303,576 — the sum of $103,554 pre-commencement (with the 50% discount) and $200,022 post-commencement (after indexation). Assuming a 47% marginal rate:
A choice for new-build property investors
To maintain incentives for new housing supply, investors who acquire eligible new build residential properties may elect either the 50% discount or the new indexation + minimum tax method when they sell. The choice is not available for subsequent purchasers of the same dwelling, and knock-down renovations that do not increase dwelling numbers do not qualify.
Interaction with small business CGT concessions
The small business CGT concessions — the 15-year exemption, 50% active asset reduction, $500,000 retirement exemption and rollover relief — continue unchanged. However, because the small business retirement exemption is applied after the general 50% discount in the current ordering, the removal of that discount can affect the amount ultimately exempted. Existing concessions remain a powerful exit pathway for genuine owner-operator sales, but the maths needs reworking case by case.
The strategy of selling CGT assets in a low-income year — say after retirement — is materially weakened by the 30% minimum, unless the seller also qualifies for an income support payment such as a part Age Pension. — Implication for retirement planning
- If you hold long-term assets (shares, investment property, business interests), a 1 July 2027 valuation may be worth obtaining — particularly for assets without quoted market prices
- Realisation timing matters more than ever; the minimum tax acts as a floor, not just a cap
- Retirement-year disposal planning needs revisiting — the post-retirement "low-bracket sale" strategy is largely neutralised
- Concessional super contributions still help reduce CGT for those on 37%+ marginal rates, but offer little CGT relief for those already in the 30% bracket
Negative gearing, restricted to new builds.
From 1 July 2027, net rental losses from established residential property can no longer offset other income such as salary or wages. The change applies to properties acquired after Budget night — earlier acquisitions are grandfathered.
What's changing
Losses from established residential properties acquired after the announcement will only be deductible against rental income or capital gains from residential property. Excess losses carry forward and can offset residential property income in future years.
The budget papers suggest that where unused losses remain at the time of disposal, they may be included in the property's cost base — reducing the gross capital gain on sale. The rules apply to individuals, partnerships, companies and most trusts.
What is not affected
- Established residential property acquired after 12 May 2026 by individuals, partnerships, companies and most trusts
- Share portfolios and margin loans
- Commercial property
- New build residential property
- Widely held trusts & managed investment trusts
- Superannuation funds — including SMSFs under an LRBA
The definition of a "new build"
A new build means a dwelling constructed on vacant land, or where existing properties are demolished and replaced with a greater number of dwellings. Knock-down renovations or substantial refurbishments that don't add to supply do not qualify. A new build cannot have been previously sold (other than by the original builder if unoccupied for less than 12 months), and subsequent purchasers cannot access the negative gearing concession.
- If you already own residential investment property, your existing arrangements are protected — no action required
- If you're considering buying another established property, the 12 May 2026 cutoff matters; settlement of pre-existing contracts is preserved
- If you're in the planning stage, new-build property remains negatively geared and gets the choice on CGT method — a structural advantage worth considering
- Geared share investing continues under existing rules — no change to deductibility of margin loan interest or other borrowing costs
Discretionary trusts face a 30% floor.
From 1 July 2028, the taxable income of discretionary trusts will be subject to a 30% minimum tax, paid by the trustee. Beneficiaries (other than corporates) receive non-refundable credits to offset their personal tax
How the new tax works
The trustee calculates and pays the 30% minimum tax on trust income (broadly, assessable income less allowable deductions). Beneficiaries then declare their distributions and receive a non-refundable credit for the trustee's tax. This neutralises the historical advantage of distributing to low-bracket beneficiaries.
To prevent franking credit refunds undermining the regime, the rules require trustees that receive franked dividends to use those credits against the minimum tax. Corporate beneficiaries are excluded from receiving non-refundable credits — preventing conversion into refundable franking credits.
What is excluded
- Discretionary (family) trusts
- Fixed and widely held trusts (including fixed testamentary trusts)
- Complying superannuation funds
- Special disability trusts
- Deceased estates & charitable trusts
- Existing discretionary testamentary trusts
Excluded income types
The minimum tax also does not apply to certain types of income: primary production (farming) income, certain income relating to vulnerable minors, amounts subject to non-resident withholding tax, and income from assets of pre-existing discretionary testamentary trusts. Where a trust accesses a small business CGT concession, tax-exempt capital gains are not included in trust income and so should fall outside the minimum tax.
Three years of rollover relief
The Government has confirmed expanded rollover relief for the three years from 1 July 2027 to support trustees who wish to restructure out of a discretionary trust — for example, into a company or fixed trust — without triggering immediate income tax or CGT consequences.
- If you operate through a discretionary trust, a structural review is warranted — particularly for trusts whose primary purpose is income splitting
- The three-year rollover window (1 July 2027 to 30 June 2030) is a one-off opportunity to restructure without tax cost
- Trusts holding farming or primary production assets retain favourable treatment on that income
Super, largely unchanged.
No new measures were announced for superannuation. The major super reforms from earlier in the year are now law and proceed as scheduled.
Already legislated & commencing 1 July 2026
Division 296 — $3 million super tax
An extra 15% tax applies to the portion of investment earnings attributable to a member's total super balance above $3 million, with a further 10% (total 25% extra) on the portion above $10 million. The tax is assessed to the individual and only applies to realised gains accrued from 1 July 2026. First assessments will issue after 30 June 2027.
Payday Super
Employers will be required to pay Super Guarantee contributions at the same time as wages, rather than quarterly. The rules also adjust the SG earnings base and Maximum Contributions Base calculations.
Low Income Super Tax Offset boost
The increase to LISTO — benefiting around 1.3 million Australians — also passed in March 2026.
Under consultation
The Government is publicly consulting on the superannuation performance test, with the goal of removing unintended barriers to investment in capital-intensive sectors such as biotech, clean energy and AI.
- Contribution strategies remain unchanged; concessional and non-concessional caps continue to apply as scheduled
- If your super balance is approaching $3 million, planning for Division 296 (particularly around realisation of unrealised gains) is now front-of-mind
- Employers should be ready for Payday Super from 1 July 2026 — including reviewing payroll systems
Tax cuts, offsets & an instant deduction.
A package of personal tax relief — some legislated, some new — lifts effective tax-free thresholds and simplifies work-related deductions for most workers.
The legislated tax cuts
The lowest marginal rate, currently 16%, falls to 15% from 1 July 2026 and to 14% from 1 July 2027. This delivers tax relief of up to $268 in 2026–27 and $536 in 2027–28 relative to 2024–25 settings. Other thresholds — including the Seniors and Pensioners Tax Offset and effective tax-free thresholds for LITO recipients — adjust accordingly.
Working Australians Tax Offset
A new permanent $250 non-refundable tax offset (WATO) applies from the 2027–28 income year on income earned from work — wages, salaries and sole trader income. The offset is automatic, applied after lodgement (similar to LITO), and raises the effective tax-free threshold for workers by around $1,800 to $19,985 (or up to $24,985 for those also eligible for LITO).
$1,000 instant tax deduction
From the 2026–27 income year, Australian tax residents who earn income from work can claim an instant deduction of up to $1,000 for work-related expenses without itemising or keeping receipts. Those with higher work-related expenses may continue to claim under existing rules. Income protection insurance premiums and union or professional association fees can be claimed in addition to the $1,000 instant deduction.
Other measures of note.
Beyond the headline reforms, the Budget contains a number of smaller but practically significant changes for small business, social security recipients and aged care.
$20,000 instant asset write-off — permanent
The $20,000 instant asset write-off for small businesses with turnover under $10 million is made permanent. Assets above the threshold can continue to be pooled into the simplified depreciation regime.
Loss carry-back reforms
Companies with aggregated global turnover under $1 billion can carry back revenue losses to offset tax paid up to two years earlier, limited by the company's franking account balance.
Loss refundability for start-ups
Start-ups with turnover under $10 million can convert losses in their first two years into a refundable tax offset, capped at FBT and withholding tax paid on Australian employees in that year.
Private Health Insurance Rebate
The age-based uplift to the PHI rebate is removed, saving $3.0 billion over four years. Older policyholders will no longer receive a higher rebate percentage than younger policyholders at the same income level.
Aged care — more places, more support
Funding for an additional 5,000 aged care beds annually (principally for those with limited financial means), plus expanded dementia support and faster access to Support at Home places.
Pension supplement & overseas absence
The full rate of pension supplement is now payable for 12 weeks (up from 6) during a temporary absence, but ceases entirely after 12 weeks or upon permanent departure from Australia.
What to think about now.
These measures are announcements, not law. They still need to pass Parliament — and detail will continue to emerge through exposure draft legislation. That said, the announced commencement dates should be treated as live for planning purposes.
If you hold investment property
- Existing portfolios are protected — no immediate action is needed for property owned before 12 May 2026
- It is ever so important to plan which structure to hold your investment properties through
If you hold long-term investments
- Speak to us about whether a 1 July 2027 valuation is worth obtaining
- Reconsider any plans to defer realisations until a low-income year — the 30% floor may neutralise the benefit
- Concessional super contributions remain a useful CGT planning lever for those above the 30% bracket
If you operate through a discretionary trust
- Review whether the structure remains the right fit for your purposes
- The 1 July 2027 to 30 June 2030 rollover window is a one-off opportunity to restructure tax-free
If you're a small business owner
- The small business CGT concessions and 15-year exemption continue unchanged — confirm eligibility well ahead of any sale
- The $20,000 instant asset write-off is now permanent — useful for cash-flow planning
- The 25% small business company tax rate remains an option if restructuring out of a trust