Tax Planning
How CGT & Negative Gearing Changes Will Reshape Your Investment Strategy
Australia’s Budget 2026 introduces sweeping reforms to Capital Gains Tax and negative gearing—learn how these will affect your property and investment choices from July 1, 2027.
By NomadicTax Research Team • 5-8 min read • May 24, 2026
## Introduction
Australia’s 2026–27 Federal Budget brought in some of the most significant tax reforms in decades, particularly for property investors and those using negative gearing. These changes are designed to balance housing affordability, close loopholes, and reshape investment incentives. Effective dates mostly fall from **1 July 2027**, giving individuals and businesses time to plan ahead. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
## Key Changes Explained
| Measure | What Used To Be | What's Changing | Effective Date |
|---|---|---|---|
| **CGT (Capital Gains Tax)** | Individuals and trusts received a **50% discount** on taxable capital gains for assets held ≥12 months. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai)) | The discount will be replaced by cost-base **indexation** (accounting for inflation), paired with a **30% minimum tax floor** on real gains. For new residential builds, taxpayers will be able to **choose** between the old 50% discount or the new model. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai)) | 1 July 2027 — gains arising after this date. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai)) |
| **Negative gearing** | Losses from any investment property could offset income broadly. ([pwc.com.au](https://www.pwc.com.au/federal-budget?icid=FB19-&utm_source=openai)) | New restrictions: from 1 July 2027, negative gearing will only apply to **new residential buildings**. Existing investments will be protected under grandfathering provisions. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai)) | 1 July 2027, with “budget night” qualifying existing builds being grandfathered. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai)) |
| **Discretionary trusts** | No minimum tax rate; trust income often distributed to low-income beneficiaries. ([pwc.com.au](https://www.pwc.com.au/federal-budget?icid=FB19-&utm_source=openai)) | Introduced a **30% minimum tax rate** on distributions from discretionary trusts. Relief via rollover restructuring provided via a three-year transition from 1 July 2027. ([austax.tools](https://austax.tools/budget-2026-27/?utm_source=openai)) | From the 2028-29 income year (i.e. after 1 July 2028). ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai)) |
## Implications & Strategic Actions
**For property investors:**
- If you own an existing investment property, it will be grandfathered, so no immediate action—but decision to sell may be influenced by different gains treatment after July 2027.
- **Buying new builds** becomes more attractive if you want to retain full negative gearing deductions post-2027.
- Evaluate whether expected gains (holding period, anticipated inflation) favour the indexation model vs the 50% discount where available.
**For trust-based structures:**
- Discretionary trusts lose their flexibility to distribute income to low bracket beneficiaries.
- Consider moving towards **fixed trusts** or company structures during the transition period (from 1 July 2027) to manage taxable outcomes.
- Seek advice: restructuring has compliance and legal costs; make sure changes align with long-term ownership and succession plans.
**For tax-planning more broadly:**
- Use the transition window (before 1 July 2027 or 2028 depending on measure) for **harvesting gains** under the current rules where favorable.
- Estimate real vs nominal returns carefully: inflation matters under the indexation regime.
- Update cash-flow projections: higher taxes may reduce net proceeds or require higher buffer on investment exits.
## Example Scenario
Imagine Jane bought a rental property in 2022 for \$500,000, which she plans to sell in 2028 for \$800,000. Under the current 50% CGT discount, taxed on half of the \$300,000 gain. Under the new system, assume inflation accumulates to \$60,000 over the period; the indexed cost base becomes \$560,000, giving a real gain of \$240,000, taxed with a **30% floor minimum**. If Jane had multiple properties, income levels, trust distributions and deductions will all affect her net outcome—and could be higher than under the old discount unless inflation is low.
## Conclusion
Budget changes from May 2026 introduce a paradigm shift in how Australia treats investment returns, property losses and trust distributions. **Effective dates**—mostly mid-2027 and mid-2028—offer you a transition period to adapt. Whether you own, plan to invest, use a trust, or structure income around investments, now is the time to engage your tax adviser, assess your portfolio, and implement changes proactively to cushion the impact.