Tax Planning
Major Changes to Capital Gains & Negative Gearing from July 2027: What Investors Need to Know
The Budget 2026-27 introduces sweeping reforms to CGT and negative gearing that kick in from 1 July 2027 — including a 30% minimum tax, inflation indexation and limits on established property deductions.
By NomadicTax Research Team • 5-8 min read • June 9, 2026
## Overview of the new reforms
Australia's **Federal Budget 2026-27**, delivered on **12 May 2026**, includes significant changes to the way **capital gains tax (CGT)** and **negative gearing** work, particularly for property investors. These changes take effect from **1 July 2027** and are intended to replace the longstanding 50% CGT discount with an inflation-adjusted cost base and introduce a **30% minimum tax rate** on real capital gains. ([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
Additionally, negative gearing for **established residential properties** will be limited: from 1 July 2027, deductions on losses from such properties will only be allowed against **rental income** or **capital gains** from residential property. Excess rental losses must be carried forward. Properties acquired **before 7:30 pm (AEST) 12 May 2026** will be **grandfathered** and exempt until sold. ([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
## Key features and illustrative examples
- **CGT Discount replaced**: No more simplistic 50% off taxable gains. You’ll need to adjust the cost base for inflation, then apply a 30% floor for real gains. This helps ensure returns are taxed closer to real economic gain rather than inflated values. ([budget.gov.au](https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf?utm_source=openai))
- **Negative gearing limits**: Losses from established property (bought after budget announcement) cannot be offset against wage income. Only rental income or capital gains. Excesses are carried forward. ([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
### Example 1: Shareholder with moderate gain
Sarah holds shares bought in 2010 that have risen significantly. If she sells them in August 2027:
- After indexation, her **real gain** will be calculated (original cost inflated by CPI).
- Suppose her marginal rate is 32%. Under the new rules, she must pay at least **30% tax on the real gain**. If 30% is lower than her marginal rate, she pays her marginal rate instead; if it's higher, she pays 30%. This replaces the former 50% discount method. ([budget.gov.au](https://budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf?utm_source=openai))
### Example 2: Property investor with established property bought after announcement
John purchased a house 6 months ago. From 1 July 2027, if the property incurs a rental loss, he **cannot** deduct that loss against his wage income. He can only offset it against other property income or future capital gains. Excess losses must be carried forward. Losses are preserved for property acquired **before 12 May 2026**. ([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai))
## Implications for investors and planning strategies
- **Deferring Capital Gains Realization**: If you're holding assets with large unrealised gains, timing of sale (post 1 July 2027) will affect your exposure. Consider selling before the reforms if it makes sense.
- **Review property portfolios**: Established residential properties bought after 12 May 2026 need particular attention—negative gearing benefits may no longer offset wages.
- **Account for inflation adjustments**: For all capital assets, correctly indexing cost base will be crucial. Keep documentation of purchase dates and values and CPI measures.
- **Seek expert advice for trusts**: Since discretionary trusts will face new minimum tax rates from 1 July 2028, restructuring may become necessary. Rollovers provide some relief. ([budget.gov.au](https://budget.gov.au/content/factsheets/download/tax-explainers-cgt-trusts-impacts.pdf?utm_source=openai))
## What to do now
- Review all property and investment holdings and assess potential exposure under new rules.
- Capture documentation—purchase contracts, valuations, cost bases, acquisition dates.
- Consult with tax professionals to consider whether selling before reforms or restructuring holdings offers tax savings.
- Update financial models to include the impact of inflation, floor rates, and potential loss carry-forwards.
These changes are fundamental and long-term. Investors who plan ahead will be better positioned to manage tax liabilities, preserve deductions, and maintain compliance under the new rules.