The 2026-27 Federal Budget announced major changes to capital gains tax and negative gearing. Those measures are now law under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026. Most of the investor changes apply from 1 July 2027.
The reform affects residential property and the CGT calculation for many assets. It does not mean every investor loses every existing deduction or discount on budget night. The acquisition date, asset type, owner and date of a later CGT event all matter.
This dated guide explains the broad position as at September 2026. Use the official Budget tax reform summary for the policy overview and ask a registered tax agent how the enacted transition rules apply to your assets.
Key dates and affected investments
| Date | Investment or event | Practical effect |
|---|---|---|
| Before 7:30 pm ACT time on 12 May 2026 | Ownership interest in a residential dwelling | A major negative-gearing exclusion can apply. Keep the signed contract and acquisition evidence. |
| 30 June 2027 | Shares, property and other CGT assets held across commencement | Preserve parcel costs, adjustments and reliable market values for the transition calculation. |
| From 1 July 2027 | CGT events for Australian resident individuals | New indexation, discount and 30% minimum-tax rules can apply, subject to exceptions. |
| 2027-28 income year onward | Covered established residential property | Excess rental deductions can be quarantined instead of reducing unrelated income. |
Negative gearing is limited for some residential property
From the 2027-28 income year, excess deductions from using or holding residential dwellings can be quarantined. If covered rental expenses exceed covered rental income, the excess generally cannot reduce salary, share income or other unrelated income for that year.
The quarantined amount can be applied within the new statutory calculation for residential capital gains. Any remaining amount can carry forward under the rules.
The legislation excludes several categories from this limit. A major exclusion covers an ownership interest acquired before 7:30 pm ACT time on 12 May 2026. New residential dwellings and any further activities prescribed by legislative instrument can also receive different treatment.
That acquisition-time rule makes the contract and ownership documents important. Do not rely on the settlement date alone when asking whether the exclusion applies.
Example: covered rental loss
Assume an investor buys a covered established residential property after the Budget cutoff. In 2028-29, the property produces $28,000 of rent and $40,000 of otherwise deductible holding costs. The $12,000 excess is quarantined rather than deducted against the investor's salary in that year.
The future use of that $12,000 depends on the enacted calculation and the investor's later rental and capital gain position. A tax agent should model it before the investor estimates cash flow or a sale result.
The CGT system changes from 1 July 2027
The Act introduces a new calculation for capital gains from 1 July 2027. It includes indexation of eligible cost-base amounts for Australian resident individuals and relevant trusts, along with new rules for discount percentages.
For many assets that do not qualify for a specific exception, the post-1 July 2027 component will not receive the former 50% discount. New residential dwellings and qualifying affordable housing can retain at least a 50% discount under the new provisions.
Division 119 also creates a 30% minimum tax for covered capital gains of Australian resident individuals. It compares 30% of the statutory minimum-tax capital gain with the basic income tax already attributable to that amount. Extra tax applies only to a positive gap. Some payment recipients and gains connected with new residential dwellings or qualifying affordable housing receive exceptions.
This is a minimum-tax calculation, not a flat 30% CGT bill on sale proceeds. Capital losses, quarantined residential amounts, indexation, discount rules, small-business concessions and the investor's basic tax calculation can affect the amount that reaches Division 119.
Assets held across 30 June 2027 receive transition treatment. The law can treat an eligible asset as sold just before 1 July 2027 and reacquired at a statutory amount. A gain or loss at that transition point may be deferred until the later realisation event. The calculation has conditions and choices.
For a share investor, preserve the 30 June 2027 position. Keep acquisition documents, cost-base adjustments and reliable market-value evidence. Do not assume that a sale after commencement means the old 50% discount applies to the entire gain.
A share example across the start date
Suppose an Australian resident individual bought 1,000 shares in fictional HBRN.AU for A$10 each in 2025. The parcel cost is A$10,000 before other cost-base adjustments. Its market value just before 1 July 2027 is A$16,000, and the investor sells it in 2029 for A$22,000.
The A$6,000 rise to the transition value and the later A$6,000 rise are separate components in the statutory workpaper. Eligible post-commencement costs may receive indexation. Capital losses and other steps may reduce the components before the net capital gain and minimum-tax calculations.
This does not mean the final taxable gain is automatically A$12,000 or that the tax is A$3,600. The transition method, deemed-sale rules, indexation, available losses, exceptions and the investor's other taxable income determine the final tax.
Record these figures now:
- original acquisition date, price and brokerage
- every return of capital, split or other cost-base adjustment
- the 30 June 2027 market value and its source
- later cost-base expenditure and the date it was incurred
- sale proceeds, brokerage and contract date
The Australian shares CGT tracking guide explains how to keep parcel records. Your tax agent can then apply the new transition and indexation rules.
What property investors should review
Create a one-page summary for each property:
- contract and acquisition time, settlement date and ownership structure
- whether the dwelling may meet the prescribed definition of new residential dwelling
- annual rent and each category of deductible expense
- quarantined amounts carried forward under the new rules
- improvements, ownership costs and other CGT records
- dates when the property was a main residence, rented or unavailable for rent
- expected sale timing and available valuation evidence
The label used by a developer or agent does not settle the tax definition of a new residential dwelling. Check the final legislative instrument and your facts with an adviser.
What share investors should review
The negative gearing measure focuses on residential dwellings, but the CGT reforms extend beyond property. Share and ETF investors should prepare a parcel-level snapshot at 30 June 2027 and retain evidence for later transactions.
If you trade often, keep realised gains and losses separate from unrealised positions. Use the active trader CGT report guide to build a handover that an accountant can trace to broker confirmations.
Active traders and short holds
The old 12-month CGT discount did not apply to a share sold within 12 months. The new minimum-tax calculation can still matter for a covered gain after 1 July 2027, depending on the investor's marginal tax result and statutory exceptions.
Active traders should keep acquisition and disposal parcels precise because losses apply in a statutory order across deferred and post-commencement gain categories. If your activity amounts to a share-trading business, income-account rules may apply instead of the investor CGT treatment described here.
Long-term investors
Long-term investors face the larger transition record task. An asset held on 30 June 2027 may need a reliable value, original cost history and later indexed expenditure. A plan to hold for another decade does not remove the need to capture the transition evidence while it is available.
Questions to ask before changing an investment
- Does the acquisition cutoff or another exception apply to this property?
- How will quarantined rental deductions affect annual cash flow and a later capital gain?
- Does this asset qualify for a 50% CGT discount exception after 1 July 2027?
- Which transition method applies to an asset held on 30 June 2027?
- What market value and cost-base evidence should I preserve before commencement?
- Would selling, transferring or restructuring trigger other tax, duty or borrowing costs?
Budget reform FAQs
Did the law abolish negative gearing?
No. It quarantines excess deductions for covered residential dwellings. Pre-cutoff ownership interests, new residential dwellings and prescribed categories can sit outside that general limit.
Did the law remove the 50% CGT discount for every asset?
No. Timing and statutory exceptions matter. The new rules preserve a pre-commencement component for eligible assets and retain 50% treatment for categories such as qualifying new residential dwellings and affordable housing.
Should I sell before 1 July 2027?
The headline alone cannot answer that. Compare the transition rules, likely gain, transaction costs, portfolio role and any property duty or financing cost with a tax adviser.
Do not make a sale solely from the Budget headline. Compare the after-tax result with transaction costs, financing and the investment case.
Swingfolio can keep share trades, parcel dates, prices, fees and notes together. You can import CSV trades during an active trial and review them before saving. Use the export as an organising record, then reconcile it to broker and tax documents.
Start the 30-day trial and prepare your share history before the 1 July 2027 transition.
This article is general information and not tax advice.