Major Changes for Property and Investment Regimes
The 2026 Budget introduces three significant reforms affecting investors, especially in residential property and trusts:
- Negative Gearing limited to new builds only from 1 July 2027; existing property investments held before budget night (13 May 2026) are grandfathered. (pm.gov.au)
- Removal of 50% CGT discount, replacing it with a system using indexation and a minimum 30% tax on net capital gains for assets held post 1 July 2027. Assets acquired before that date can choose between old or new arrangements if they’re new builds. (pm.gov.au)
- Minimum 30% tax on discretionary trust income starting 2028-29 to better align tax paid by trusts with that paid by individuals on accruing income. (pm.gov.au)
Implications for Existing Owners and Future Investors
| Scenario | Effect Before Changes | After Reforms |
|---|---|---|
| Properties held before Budget Night (existing) | Negative gearing and full CGT discount still apply under old rules, unless property.classified as “new builds” and you opt in. (pm.gov.au) | Continued grandfathering, so no retroactive loss of existing tax benefits. Planning needed for revaluing cost bases. |
| New property acquisitions post-1 July 2027 | Negative gearing still broadly available | Only negative gearing for new builds is allowed; established homes loses that arrangement. |
| Discretionary Trusts | Trust income taxed per current trust distribution rules | Minimum 30% tax from 2028-29; could reduce ability to shift income to low-rate beneficiaries or minor family trusts. |
Actionable Advice for Investors and Advisors
- Review your portfolio now: Assess which investments might be affected—assets acquired recently vs. long-held properties to plan transitions or dispositions before 1 July 2027.
- New build investment planning: If you intend to invest in property and want negative gearing, ensure contracts are signed for “new builds” to retain eligibility.
- Trust structuring: Trustees should revisit distributions, beneficiary tax rates, and holding patterns. Where possible, consider income splitting earlier or reverting to individual ownership for future investments.
- Label gains and track cost bases carefully: With the shift to indexation and new minimum tax regimes, accurate records of asset acquisition dates and values as of 1 July 2027 will be essential. Consult tax valuations if needed.
Example Case
Imagine Sarah bought a rental house in 2020 and has been using negative gearing since then. She also expects to sell in 2028.
- Under current rules, she enjoys unlimited negative gearing and the 50% CGT discount on gains.
- If she sells in August 2028: • Her loss deductions (negative gearing) will no longer apply for any loss from new property holdings after 1 July 2027, unless it’s a “new build”. • For CGT, she will need to separate gains accrued up to 1 July 2027 (eligible for discount) and gains after that date (subject to indexation/minimum tax). Fractional calculations will matter.
Final Thoughts
These reforms represent a fundamental shift in how Australia taxes returns from property and trust income. If you’re an investor or involved in property, now’s the time to plan:
- Take action before the 2026-27 year ends, especially if making investment or selling decisions — to maximise grandfathered benefits.
- Use professional advice to model post-reform taxation under multiple scenarios.
- Keep abreast of ATO guidance as draft rules are fleshed out—transitional options may open up.