Tax Planning
Navigating Australia’s 2026 CGT & Negative Gearing Reforms: What Investors Need to Know
Significant changes to negative gearing and the Capital Gains Tax (CGT) discount are coming in Australia from 1 July 2027. Here’s how these rules will impact you—and what you can do to prepare.
By NomadicTax Research Team • 5-8 min read • May 14, 2026
## Overview of the Reforms
As part of the 2026–27 Budget delivered 12 May 2026, the Australian government introduced major changes affecting **negative gearing**, **capital gains tax (CGT) discounts**, and the treatment of **discretionary trusts**. These changes primarily affect those with investment properties or those using trusts to minimise tax. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
Key changes include:
- **Negative gearing restricted to *new builds*** from **1 July 2027**—existing investment properties remain unaffected if acquired before 12 May 2026. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
- The **50% CGT discount** (for individuals and trusts) will be replaced by **inflation-adjusted indexation plus a minimum 30% tax rate** on realised gains from **1 July 2027**. Existing investments get a choice (use old discount or new system). ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
- **Discretionary trusts** will face a minimum 30% tax rate on distributions from the **2028-29 financial year** onwards, aligning treatment with ordinary income rules. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
## Who Is Affected
These changes impact:
- Rental property investors looking to negative gear newer builds.
- Long-term investors holding assets for CGT but expecting the 50% discount.
- Families or entities using discretionary trusts for income splitting or tax planning.
- Those investing in property, shares or other appreciating assets expecting lower capital gains tax bills.
## Practical Strategies to Prepare
- **Review your investment mix now**: If you're considering negative gearing, acquire qualifying new builds before 1 July 2027 or assess expected returns under the new CGT indexation system.
- **Realise gains before 1 July 2027** (if advantageous): For investments where you expect large gains, selling before the reforms take effect may let you retain the 50% CGT discount. Do the math including transaction costs and tax implications.
- **Trust restructure evaluation**: Discretionary trust distributions will be taxed at 30% minimum. Consider changing trustee arrangements, distributing income earlier or converting trusts to companies if suitable.
- **Stay informed about new builds vs existing properties**: Negative gearing is preserved for existing investments but limited to **new builds** after 1 July 2027 only. Ensure you understand what qualifies.
## Example Case
**Case of Property Investor A**:
- Bought an existing property in 2022. Under the reforms, still fully eligible for negative gearing after 2027.
- Owns a property acquired in 2028: only interest and losses on that asset may be deducted if it is a **new build**. If it’s an older build, the negative gearing benefits disappear.
- Plans to sell a share investment in 2026 with expected large gains: selling before 1 July 2027 allows use of 50% CGT discount. After that, gains taxed using indexation with minimum of 30%.
## Action Plan
| Task | Suggested Timing |
|------|------------------|
| Audit your investment property portfolio | Immediately |
| Decide whether to realise gains before the reforms take effect | By mid-2027 |
| Consult with your tax adviser on trust distributions | 2026–27 year |
| Track spending & financing costs carefully for indexed CGT basis | Ongoing |
These reforms are amongst the most sweeping changes in Australian tax policy in decades—especially affecting wealth and property. Proper planning will help you manage risks and secure the best outcomes.