The 2026–27 Federal Budget: What the CGT and Negative Gearing Changes Mean for You

Budget night just rewrote the rules for long-term investors

At 7:30pm AEST on Tuesday 12 May 2026, Treasurer Jim Chalmers handed down the 2026–27 Federal Budget — and inside it is the biggest change to how Australians are taxed on investment gains in 25 years. From 1 July 2027, the 50% capital gains tax discount is being replaced. Negative gearing on established homes is being quarantined. And there's a new 30% minimum effective tax rate on real capital gains that lands hardest on people you might not expect.

If you trade shares, hold an ETF sleeve, run an SMSF, or own an investment property, some of this touches you and some of it genuinely doesn't. This article walks through which is which. It is general information only, not personal tax or financial advice, and none of it is law yet.

What actually changed

Two big-ticket items, both starting 1 July 2027, plus a few smaller ones.

1. The 50% CGT discount is replaced

Today, if you're an individual (or a trust or partnership) and you hold a CGT asset for at least 12 months, only half the capital gain is included in your assessable income. That discount is going. In its place, two things happen when you sell:

1. CPI indexation of the cost base — your purchase price is uplifted for inflation, so you're only taxed on the real (above-inflation) gain.
2. A 30% minimum effective tax rate on that real gain — regardless of how low your marginal tax rate is.

The scope is broad: shares, ETFs, managed funds, crypto, investment property, and most CGT assets. This is not a housing-only measure.

A few things are explicitly kept:

• The main residence exemption — your home stays CGT-free.
• Small business CGT concessions and the 60% affordable-housing CGT discount.
• The 12-month holding rule itself — it still draws the line between short-term and long-term.
• Superannuation funds, including SMSFs, keep their existing one-third (about 33%) CGT discount. That's a meaningful carve-out, and we'll come back to it.

Crucially, the change is prospective — it applies to gains that accrue after 1 July 2027. If you already hold an asset on that date and sell it later, the gain is split:

• Growth up to 1 July 2027 keeps the 50% discount.
• Growth from 1 July 2027 onward uses the new indexation + 30% minimum.

The ATO will publish an apportionment formula, or you'll be able to use a market valuation at 1 July 2027 to draw the line precisely.

There's also a change for very old holdings. Pre-CGT assets — acquired before 20 September 1985, currently fully CGT-exempt — get brought into the net. Gains accrued before 1 July 2027 stay exempt; growth from 1 July 2027 becomes taxable on eventual sale, with the cost base effectively reset to market value at that date.

One more carve-out: income-support recipients — for example people on the Age Pension or JobSeeker — are exempt from the 30% minimum in any year they realise a gain.

A worked example

Pitcher Partners published a transitional example worth borrowing. "Max" buys an asset on 1 July 2025 for $4,000. On 1 July 2027 it's worth $14,000. He sells on 30 June 2028 for $35,000, and that year he also earns $10,000 in interest income.

• The growth to 1 July 2027 — $10,000 — gets the old 50% discount, so $5,000 is included in his income.
• The growth after 1 July 2027 — $21,000 — is reduced by, say, around $1,000 of cost-base indexation, leaving roughly $20,000 included in his income, and that slice is subject to the 30% minimum effective rate.

The indexation figure is illustrative — the mechanics are still being finalised. But the shape is the point: the pre-2027 slice is taxed gently; the post-2027 slice is taxed at full marginal rate, with a floor underneath it.

The plain-English takeaway on CGT

For typical share returns — where real gains usually run well above inflation — indexation is less generous than halving the gain. So in practice this is a higher tax on long-held share gains for most investors.

And the 30% minimum effective rate matters most for investors on low marginal tax rates: retirees living off a small income, part-time and low-income earners, students with a brokerage account. Someone in the 16% bracket today pays an effective ~8% on a long-term gain (16% × 50%). A 30% floor is roughly three to four times that. Investors in the 37% or 45% brackets are barely touched by the minimum — but they still lose the 50% haircut, so their bill on a long-held gain goes up too.

2. Negative gearing — quarantined for established homes

The second big change targets property, not shares.

Established residential property acquired after 7:30pm AEST on 12 May 2026 — Budget night, measured by contract date — gets new rules from 1 July 2027. If that property runs a net rental loss, you can deduct the loss only against rental income, or against capital gains on residential property. You cannot deduct it against your wages, salary, business income, or trading income the way you can today. Losses you can't use carry forward to future years, against future residential rental income or gains.

What's not affected:

• New builds. Full negative gearing is retained — losses stay deductible against any income. New-build investors also get a choice when they sell: the old 50% CGT discount, or the new indexation regime.
• Anything you already own. Property held before 7:30pm AEST on 12 May 2026 is completely grandfathered — current rules apply right through until you sell it. Again, by contract date.

There's a short transitional window: property acquired between 12 May 2026 and 30 June 2027 can offset losses against any income up to 30 June 2027, then becomes residential-income-only from 1 July 2027.

Out of scope entirely: commercial property, shares and ETFs, widely-held trusts, super funds and SMSFs, build-to-rent, and government housing programs.

Treasury modelling expects house-price growth to moderate to about 4% per year (versus roughly 6%) for several years, projects around 75,000 additional owner-occupied homes over a decade, and commits $2 billion over four years for enabling infrastructure ($500 million of it quarantined for regional Australia). Crossbench critics call the grandfathering "tinkering"; the Opposition calls it a broken election promise. Where it lands depends on the Senate.

If you're an active swing trader

The honest answer: the CGT-discount change is largely a non-event for you. If you're carrying on a share-trading business — or you simply turn positions over in days or weeks — you rarely hold anything for 12 months, so you weren't getting the 50% discount in the first place. Your gains are already taxed as ordinary income at your full marginal rate. Removing a discount you don't use doesn't change your bill. And negative gearing has never applied to shares, so that change doesn't touch you either.

A few things in this Budget could still matter to traders:

• If you trade through a family (discretionary) trust — for income-splitting or asset protection — note the separate measure introducing a 30% minimum tax on discretionary trust income from 1 July 2028, with three-year rollover relief (1 July 2027 to 30 June 2030) to restructure if you need to. Fixed trusts, widely-held trusts, super, deceased estates and charitable trusts are excluded. Worth asking your accountant whether the structure still does what you set it up to do.
• If you're a sole trader carrying on a trading business, the new $1,000 instant deduction for work-related expenses without receipts (more below) applies to you. It does not help ordinary share investors — that distinction matters.
• The general direction of travel. Long-term investment gains are being taxed more heavily; trust income is being tightened. None of it changes a short-hold strategy mechanically, but it's the backdrop your planning sits against.

If you also hold long-term positions or a buy-and-hold sleeve

This is where your tax bill actually changes — from 1 July 2027.

• On long-held shares, ETFs, or managed funds, you lose the 50% haircut and instead get indexation plus a 30% minimum effective rate on the real gain. For most share returns, that's a net increase in tax.
• On anything you already hold at 1 July 2027, the gain is split: pre-2027 growth keeps the 50% discount, post-2027 growth uses the new rules. The 1 July 2027 valuation — whether via the ATO's formula or a market valuation — becomes the hinge point for every long-term position you carry across that date.
• If you hold anything acquired before 20 September 1985, it stops being fully CGT-exempt. Growth from 1 July 2027 onward becomes taxable on sale.
• If you're on a low marginal rate — a retiree, a part-time earner, a student — the 30% floor is where you feel it most. The 50%-discount removal hits everyone equally; the minimum bites the bottom brackets hardest.
• Super and SMSFs keep their one-third CGT discount. Relative to taxing long-term gains in your own name under the new regime, holding genuinely long-term assets inside super becomes comparatively more favourable than it is today. Whether that's right for you is exactly the kind of thing to put to a licensed adviser — it's not a free lunch, and super has its own constraints.

If you hold or are eyeing investment property

The line in the sand is 7:30pm AEST, 12 May 2026 — by contract date.

• Owned before that moment? Nothing changes for you. Current negative-gearing and CGT-discount rules apply until you sell. (Note: if you hold an investment property across 1 July 2027, the CGT change still affects the gain on it like any other asset — it's the negative-gearing rules that are fully grandfathered.)
• Buying an established home after Budget night? From 1 July 2027, rental losses on it offset only rental income or residential capital gains — not your salary. Losses you can't use carry forward. In practice, "rental-income-only deductibility" means a property running at a cash-flow loss no longer trims the tax on your day job; the benefit is deferred until the property earns enough, or you sell, to absorb it.
• Buying or building a new home? Full negative gearing stays, and you get to choose the old 50% CGT discount or the new indexation regime when you sell.
• Treasury expects house-price growth to ease to roughly 4% a year for a while — a modelling assumption, not a guarantee, but the government's stated expectation.

Questions to take to your accountant

Nothing here requires action today, because none of it is law yet. But these are the kinds of questions people in different situations might reasonably raise with a registered tax agent between now and 1 July 2027:

• "I hold long-term positions — does it change how I should think about my cost base at 1 July 2027? Is a market valuation worth getting, or is the ATO formula fine for me?"
• "I've got a buy-and-hold sleeve in my own name and also contribute to super — does the relative tax treatment of long-term assets change the conversation?" (One for a licensed financial adviser, not a DIY decision.)
• "I'm on a low marginal rate — how much does the 30% minimum actually change my position on long-held shares?"
• "I was thinking about an investment property — does established versus new build need to be weighed differently now?"
• "I trade or invest through a family trust — with the 2028 trust change and the rollover-relief window, does the structure still make sense?"

These are questions, not recommendations. Everyone's circumstances differ, and the detail that matters most — the apportionment formula, the indexation mechanics, the trust rules — will be settled in legislation, not the Budget papers.

This isn't law yet

Keep this front of mind: these are Budget announcements, not enacted law. The CGT and negative-gearing changes don't start until 1 July 2027, the trust change until 1 July 2028, and all of it has to pass Parliament first.

The government will likely need Greens or crossbench support in the Senate to get it through — and the Greens have already signalled they think the property grandfathering doesn't go far enough, while the Opposition opposes the negative-gearing change outright. That means amendments are entirely possible: thresholds, transitional dates, the scope of carve-outs. The Treasury fact sheets set the direction; the legislation will set the detail. Until then, the current rules — including the 50% CGT discount on assets held 12 months or more — still apply.

The smaller measures, briefly

• $1,000 instant tax deduction for work-related expenses without receipts, from the 2026–27 income year — for employees and sole traders, around 6.2 million workers, average saving roughly $205. It does not cover ordinary share investors' costs.
• $250 Working Australians Tax Offset — permanent, on income from work, from 2027–28.
• 30% minimum tax on discretionary (family) trust income from 1 July 2028, with three-year rollover relief to restructure. Fixed trusts, widely-held trusts, super, deceased estates and charitable trusts are excluded.
• Superannuation: no new caps this Budget. Division 296 — the extra 15% on earnings attributable to balances over $3 million — still commences 1 July 2026 as already legislated.
• No changes to franking credits, the $18,200 tax-free threshold, the top 45% rate, the 12% super guarantee, or GST. (A temporary fuel-excise cut of about 32¢ a litre runs for three months from 1 April 2026 — cost-of-living, not investing.)

How SwingFolio handles this

SwingFolio's tax and CGT reporting currently applies the rules as they stand, including the 50% discount on holdings of 12 months or more. If and when the new regime is legislated, we'll update the reporting so your figures stay accurate either way. The practical thing the 1 July 2027 split rewards is careful record-keeping — knowing your exact acquisition dates and cost base for every position matters more than ever, because that's what an apportionment calculation will lean on. SwingFolio tracks both for you as you log trades.

Disclaimer

This article is general information only and does not take into account your personal circumstances. It is not personal tax, financial, or investment advice. The measures described are Budget announcements that have not yet been legislated — they require passage through Parliament, and the government likely needs Greens or crossbench support in the Senate, so details may change. Before acting on anything here, consult a registered tax agent or licensed financial adviser.

Sources

• budget.gov.au — 2026–27 Federal Budget, Tax reform fact sheet
• The Treasurer's 2026–27 Budget speech (Jim Chalmers, 12 May 2026)
• Published analyses from Baker McKenzie, Pitcher Partners, and the Australian Shareholders Association