Entity Setup
What Property Investors and Trust Holders Must Know: CGT, Negative Gearing & Discretionary Trusts After Budget 2026
If you own investment properties or use discretionary trusts, the 2026 Budget reforms starting 2027-2028 will require strategy shifts— here’s what you need to understand and how to respond.
By NomadicTax Research Team • 5-8 min read • May 18, 2026
## Key tax changes for investors and trusts
The May 2026 Federal Budget introduced important reforms affecting: **capital gains tax (CGT), negative gearing**, and **trust taxation**. These will gradually take effect from July 2027 and onward. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
Here’s a rundown:
| Area | Before reforms | What’s changing |
|---|---|---|
| **Negative gearing** | Losses from most rental property deductible against salary and other income. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai)) | From **1 July 2027**, limited to **new builds only**; existing properties (or contracts entered by Budget night— 12 May 2026) are **grandfathered**— you keep current deduction rules until sale. ([pm.gov.au](https://www.pm.gov.au/media/tax-reform-workers-businesses-and-future-generations?utm_source=openai))
| **CGT discount** | 50% discount on capital gains (for assets held >12 months) applies uniformly. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai)) | From **1 July 2027**, replaced with **inflation-adjusted indexation** and a **minimum 30% tax rate** on gains; however, for **new builds** you may choose either the old 50% discount or new rules. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
| **Discretionary trusts** | Higher flexibility in distributions; trust income taxed based on beneficiaries and elections such as TFN reporting. ([aph.gov.au](https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd2526/26bd056?utm_source=openai)) | From **1 July 2028**, a **minimum 30% tax rate** on discretionary trust income, with some exceptions. Also, new reporting and minimum taxes apply. Roll-over relief for restructuring will be available from **1 July 2027**. ([budget.gov.au](https://budget.gov.au/content/04-tax-reform.htm?utm_source=openai))
## What this means for you
- If you currently own an established rental property, your ability to negatively gear remains—but **avoid purchasing new builds only to exploit negative gearing** after reforms.
- Trust-owners must budget for higher tax from 2028 on trust income (minimum 30%), and plan distribution structures accordingly.
- For CGT-sensitive assets— e.g. shares, investment property— consider selling under current rules if it makes sense, or preferring new builds if investing later.
## Practical compliance tips and strategy shifts
- **Keep documentation**: For existing properties and contracts pre-Budget night (12 May 2026), make sure you have evidence (contracts, settlement dates) to show grandfathered status.
- **Consult on your trust deed**: Many trusts might need amendments, restructuring or elections to reduce exposure to the minimum tax rates.
- **Asset timing matters**: If planning to sell, pay or distribute assets, the timeline (pre- versus post-1 July 2027) determines whether old CGT discount applies.
- **Cash flow planning**: Going forward, higher taxes on trusts and CGT may reduce net flows; plan investment financing accordingly.
## Case example: trust with rental property income
Suppose a family trust distributes rental income from multiple properties, some of which are established homes, others new builds. Under reforms:
- The trust will pay **at least 30% tax** on its net discretionary income (starting 2028).
- Losses on established properties will still be deductible against other income until sold (grandfathered).
- New build rental loss deductions remain available.
## How to prepare now
1. **Map your assets** (which properties are new builds vs existing; when contracts entered; what structures you use).
2. **Get advice** on your specific trust structure.
3. **Adjust investment decisions**: post-Budget, investing in new builds offers more favourable treatment under negative gearing and CGT.
4. **Monitor legislation**— reforms are proposed and need to pass; consult with tax professionals when Bill details emerge.
These changes represent one of the most significant overhauls to property and trust taxation in decades. Thoughtful planning now can protect value and optimize outcomes.