Australia locks in property and CGT changes ahead of July 2027.
The negative gearing and capital gains tax (CGT) changes outlined in Australia’s 2026–27 Federal Budget have moved from proposal to law. The Treasury Laws Amendment (Tax Reform No. 1) Act and its companion Act received royal assent on 26 June 2026, confirming that both measures will take effect from 1 July 2027.
For businesses and individuals who have been planning around the Budget announcement since May, the settings are now confirmed. Two changes were added during the Senate process that were not part of the original announcement.
Negative gearing and CGT discount changes from 2027
From 1 July 2027, negative gearing on residential property will be limited to new builds, while the 50% CGT discount for individuals, trusts and partnerships will be replaced with cost base indexation and a 30% minimum tax on realised gains.
Properties held before 7:30pm AEST on 12 May 2026, including contracts entered into but not yet settled, remain exempt from the negative gearing changes. Capital gains that accrue up to 1 July 2027 will still be eligible for the existing 50% discount, regardless of when the asset is eventually sold.
Two additions from the Senate
During its passage, the Senate added measures that were not in the original Budget package.
- Self managed superannuation funds (SMSF) will no longer be able to take on new borrowing arrangements for residential property
- The turnover threshold for the small business active asset reduction has also increased, from AUD 2 million to AUD 10 million
The SMSF borrowing ban applies alongside the existing exemption for property already held in superannuation funds, which remains unaffected by the negative gearing changes. Meanwhile, the higher threshold brings more businesses within reach of the CGT concession when selling active business assets.
Foreign investors and business owners holding Australian residential property through trusts, companies or SMSFs are the group most directly affected. So are individuals and trusts holding shares or other CGT assets for the long term, since the shift to indexation changes how tax is calculated on gains that accrue after 1 July 2027.
Business owners considering the sale of active assets should also note the higher turnover threshold, which may bring transactions into scope for concessional treatment that would not have qualified under the previous AUD 2 million limit.
The 1 July 2027 start date gives affected clients over a year to review existing structures, but the measures are now settled law rather than a Budget announcement subject to change. This makes it a practical time to revisit property holding structures, superannuation borrowing arrangements and the timing of any planned asset disposals.
Anyone with Australian property, shares or business assets held through a trust, company or SMSF should speak with a tax adviser to understand how these changes apply to their specific structure and timing.
