Tax Planning

What the CGT Reforms in the 2026-27 Budget Mean for Foreign Residents and Property Investors

From 1 July 2027, Australia’s 50% CGT discount gives way to inflation-indexed discount, with minimum tax thresholds to level the playing field—especially for foreign residents and property owners.

By NomadicTax Research Team • 5-8 min read • August 11, 2026

## Overview of Budget 2026-27 CGT Changes The Jobmaker Government has announced sweeping reforms to the **Capital Gains Tax (CGT)** framework that take effect from **1 July 2027**. These changes include replacing the long-standing 50% CGT discount for individuals with a new inflation-based discount, and a **minimum CGT rate of 30%**. Certain transactions—particularly disposals made on or after 1 July 2027—will now be taxed under this new model. ([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) For foreign residents, several additional rules are being strengthened: - Proposed measures expanding the type of assets on which foreign residents are subject to CGT. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai)) - Definition amendments (e.g., point-in-time principal asset tests changed to a **365-day testing period**) for determining whether shares or membership interests are caught. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai)) - For high-value transactions (exceeding **$20 million**), foreign resident vendors must **notify the ATO** prior to execution of the deal to ensure oversight. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai)) ## Key impact areas and implications ### For foreign investors and non-residents - Any capital gains accrued **after** 1 July 2025 on affected assets fall under the reform regime. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai)) - Asset classes like shares and membership interests tied to Australian real property are now more clearly defined as taxable in these rules. The expanded scope increases exposure for cross-border wealth. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-b12d922f-3ffe-47a6-a868-289919bcf50a?utm_source=openai)) ### For Australian residents and property owners - Existing property owners whose gains accumulate prior to 1 July 2027 are largely protected from the new regime for those accrued gains; future gains after that date will be captured. ([treasury.gov.au](https://treasury.gov.au/policy-topics/taxation/budget2026-27?utm_source=openai)) - The inflation-indexed discount introduces potential unpredictability, which may affect long-term investment return calculations and portfolio structuring. Investors will need to adjust their expected post-tax outcomes accordingly. ## Actionable tax planning tips - **Accelerate disposals** of assets that will be sold in the near term, in order to realise gains before 1 July 2027 under the current 50% discount rules. - **Lock in cost bases**—keep robust records to track acquisition dates, improvements, and ownership history, especially when dealing with family trusts or business structures. - **Assess consequences of residency status**—foreign residents or those planning changes in status should consult to determine whether their holdings will be captured under the stronger CGT regime. - **Consider negative gearing** and other deductions now—while the reforms don’t immediately impact all areas, they may indirectly affect valuation, holdings, or strategic asset repositioning. ## Case example Tom, a non-resident investor, holds shares in an Australian company that are classified as “indirect Australian real property interests.” Under the new rules, because his holdings exceed $20 million, he must notify the ATO before sale, and his gain will be taxed under new rules post-1 July 2025. For properties he has held since before that date, earlier gains may still avail the former discount, but future growth is subject to inflation-indexed rules and a 30% floor. ## Bottom line The CGT reforms represent a major shift in how capital gains are calculated and taxed—particularly for foreign investors. Whether through residency status, timing of transactions, or choice of assets, investors should review their tax positions now to avoid surprises after **1 July 2027**.