Tax Planning
How Australia’s 2026–27 Tax Reforms Could Transform Your CGT, Negative Gearing, & Discretionary Trusts
New Budget 2026-27 laws will significantly reshape how capital gains tax, negative gearing and discretionary trusts are treated — and have real impact from mid-2027 forward.
By NomadicTax Research Team • 5-8 min read • July 26, 2026
## What’s Changing — Key Reforms from Budget 2026-27
The Australian Budget unveiled several sweeping changes to major areas of tax policy. Here are the main reforms affecting investors, trust-holders, and property owners:
- **Capital Gains Tax (CGT) reform**: From 1 July 2027, the 50 % CGT discount for individuals, trusts, and partnerships will be replaced by **indexation of cost base for inflation**, along with a **30 % minimum tax rate** on realised gains accruing from that date.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
- **Negative gearing limitations**: Also from 1 July 2027, the ability to negatively gear residential property will be restricted to **new builds only**. Existing property investments prior to 12 May 2026 are grandfathered under current rules.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
- **Minimum tax rate for discretionary trusts**: Effective 1 July 2028, discretionary trusts will generally be subject to a **30 % minimum tax rate**, though some exceptions and reliefs are built in.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
## Why These Reforms Matter — Implications & Risks
- **Real gains become taxed, not nominal gains**: With CGT discount gone and replaced by inflation indexing, you’ll pay tax only on gains above inflation. However, large capital appreciation over long periods may still attract significant tax, especially with the 30 % floor.
- **Property investment strategies must pivot**: Negative gearing for established property will no longer afford the same deductions. Investors in established properties will see restricted deductions from 2027-28, so new housing supply will become more tax advantaged.
- **Trust restructuring may become urgent**: Discretionary trust users should assess whether their structure can continue under the 30 % minimum rate. Entities holding trusts may benefit from rollover relief provided from 1 July 2027 to 30 June 2030.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
## Who is Affected — Typical Scenarios
| Category | Before Reform | After Reform (from 2027-28+) |
|---|---|---|
| Someone selling long-held shares/property | 50 % discount on gains (after owning >1 year) | Inflation-indexed cost base; still subject to 30 % minimum rate |
| Property investor with existing rental losses | Deducted fully against other income | Loss deductions limited to new builds; carved out for existing properties, but non-residential income no longer offset by residential losses for new property post 2027-28.([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) |
| Discretionary trust with high income distributions | Flexible distributions can reduce tax liability for beneficiaries | Minimum rate applies to undistributed or potentially all distributions, depending on exceptions. Trusts facing tax rate creep. |
## Actionable Steps to Take Now
1. **Review investment holdings**: If you own established residential property or high-appreciation assets, evaluate timing of possible disposals *before* 1 July 2027.
2. **Plan trust distributions ahead of reform dates**: Trustees may wish to finalise distribution strategies for 2026-27 and 2027-28 while current rules still apply.
3. **Assess restructuring options**: In some cases, converting trusts or establishing new entities before reforms kick in could preserve favourable treatment. Be careful to comply with anti-avoidance laws.
4. **Seek professional advice on inflation indexation mechanics**: Knowing how cost base inflation adjustments will be calculated could affect your strategy.
5. **Monitor grandfathering rules carefully**: Holdings and residences as of 7:30pm AEST 12 May 2026 have special treatment — document everything.
## Example Scenarios
- **Alice**, owner of shares bought 5 years ago that have doubled in value. Under current rules, she’d get a 50% discount, paying tax only on half the gain. Under new rules she'd apply inflation indexing (say inflation adds 15% over her holding period), so cost base increases, and then taxable gain subject to 30 % floor.
- **Brian**, who owns an established rental home bought in 2015. After reforms, he can no longer negative-gear that property against his wage income — only for new builds. He needs to assess whether to sell or hold.
- **The Smith Family trust** that has discretionary distributions to beneficiaries. They’ll need new resolutions and distributions strategies before the trust minimum rate kicks in.
## Takeaways
These reforms represent one of the biggest overhauls in Australia’s tax system in decades. The shift from CGT discounts to inflation indexation, limitations on negative gearing, and minimum tax rates for discretionary trusts will materially affect wealth management, investment and trust planning. Acting early — particularly ahead of the 1 July 2027 and 1 July 2028 thresholds — can mean the difference between preserving value and facing greater tax exposure.