The 2026–27 Federal Budget delivered the most significant overhaul to Australian investment taxation in nearly 30 years. Three structural reforms will reshape how everyday investors build, hold, and transfer wealth.
TL;DR
- The 50% CGT discount is proposed to end from 1 July 2027 (announced, not yet legislated). Cost-base indexation and a 30% minimum tax would replace it.
- Negative gearing on established residential properties purchased after Budget night (12 May 2026) would no longer offset wages (announced, not yet legislated).
- Discretionary family trusts would face a 30% minimum tax from 1 July 2028 (announced, not yet legislated) – but SMSFs are explicitly exempt.
- A CGT rollover relief window is proposed to open 1 July 2027, giving trust holders a three-year runway to restructure without triggering tax (announced, not yet legislated).
- New builds retain both full negative gearing and a choice between the old and new CGT regimes on sale.
- Most measures are announced but not yet legislated. Act strategically, with professional guidance – not reactively.
In This Article
01 — Context
The Budget in Context
On 12 May 2026, Treasurer Jim Chalmers handed down what he described as “the most important and ambitious Budget in decades.” Behind the housing headlines and cost-of-living relief sat a suite of tax reforms that will fundamentally change how Australians structure their investments.
For property investors, the 2026–27 Budget is not just another tweak to the rules. It is a structural reset. The 50% Capital Gains Tax (CGT) discount that has shaped wealth-building strategies since 1999 is being replaced. Negative gearing, a cornerstone of residential property investment for a generation, is being restricted. And the family discretionary trust – a structure used by hundreds of thousands of Australian families – faces a minimum tax floor that erodes its core income-splitting advantage.
The good news: there is a window. Transitional rules and rollover relief mean the worst outcomes are avoidable for those who plan ahead. The key is understanding exactly what changed, when it applies, and which structures still work in your favour.
Important: Several of these Budget measures have been announced but are not yet legislated. Division 296 (the additional super tax for balances above $3 million) is already law from 1 July 2026. The CGT, negative gearing, and trust changes are expected to proceed but have not yet passed Parliament. Do not make irreversible decisions based on announced measures alone. This article reflects the framework as at June 2026.
02 — Capital Gains Tax
Capital Gains Tax: The Discount Is Gone
From 1 July 2027, the 50% CGT discount for individuals, trusts, and partnerships will be replaced by two new mechanisms.
How the new system works
Cost-base indexation: the cost base is adjusted upward for CPI inflation. Only the real gain above inflation is included in assessable income. This sounds similar to the pre-1999 indexation method, but with an important addition.
30% minimum tax floor: even after indexation reduces the taxable gain, the net amount is subject to a minimum effective tax rate of 30%. Where an investor’s marginal rate is lower than 30%, the 30% floor applies. Where it is higher, the marginal rate applies.
What this means in practice
For high-income investors – those earning above $135,000 – the change is significant. Consider a hypothetical scenario: an investor in this bracket has a $300,000 gain on a property held for more than 12 months. Under the old system, that gain was halved to $150,000 before being taxed at the top marginal rate of 47%, resulting in $70,500 in CGT. Under the new system, that same real gain (above inflation) is taxed at a minimum of 30%, which could result in a substantially larger bill depending on the holding period and inflation rate during that time. The actual outcome for any individual investor will depend on their specific circumstances.
| Scenario | Old System (pre-1 July 2027) | New System (from 1 July 2027) |
|---|---|---|
| Discount mechanism | 50% flat discount on nominal gain | CPI indexation of cost base |
| Minimum tax rate | None (marginal rate on discounted gain) | 30% floor on real gain |
| Who it applies to | Individuals, trusts, partnerships | Individuals, trusts, partnerships |
| SMSFs | 15% flat rate (one-third discount) | Explicitly exempt – no change |
| Family home | Fully CGT-exempt | Fully CGT-exempt (no change) |
| Assets acquired before 1 July 2027 | Gains to 1 July 2027 protected under old rules | Pre-2027 gain split by formal valuation at that date |
Assets already held are partially protected. Gains accrued up to 1 July 2027 are calculated under the existing 50% discount rules, based on a formal market valuation at that date. Only the gain accruing after 1 July 2027 is subject to the new regime. Getting a formal valuation done now – before 1 July 2027 – is one of the most straightforward protective steps available to current asset holders.
03 — Negative Gearing
Negative Gearing: Established vs. New Builds
From 1 July 2027, the rules on negative gearing split sharply depending on when and what is purchased.
The restriction that changes everything
Rental losses from established residential properties purchased after 7:30pm AEST on 12 May 2026 can no longer be offset against salary or wages. Those losses can still be offset against other rental income or capital gains from property sales, and unused losses can be carried forward to future years. But the salary offset – the main reason most investors use negative gearing – is gone for new purchases of established properties.
What is still fully protected
Properties purchased before 7:30pm on 12 May 2026 are fully grandfathered for as long as they are held. The existing rules apply indefinitely. For an established investment property bought before Budget night, nothing changes for that asset.
New residential builds are also fully exempt. Properties that qualify as new construction retain both full negative gearing and a choice between the old and new CGT regimes when eventually sold.
| Property Type | Negative Gearing | CGT Treatment on Sale | Status |
|---|---|---|---|
| Established – bought before 12 May 2026 | Fully intact (grandfathered) | 50% discount on pre-2027 gain; new rules post-2027 | Protected |
| Established – bought after 12 May 2026 | Losses limited to rental income / cap gains only | New CGT regime (indexation + 30% floor) | Restricted |
| New build / off-the-plan | Fully retained | Choice between old (50%) or new regime | Preferred |
| Commercial property | No change – all existing rules apply | No change | No Change |
| Shares, ETFs, managed funds | No change – gearing rules unaffected | New CGT regime (indexation + 30% floor) | Partial Impact |
The compounding pressure on investors holding negatively geared established properties bought after Budget night should not be underestimated. Higher holding costs (no wage-offset relief) combined with a heavier CGT bill on exit creates a double squeeze that does not appear in simplified summaries of the changes.
04 — Discretionary Trusts
Discretionary Trusts: The 30% Minimum Tax
For many Australian families, the discretionary family trust has been the default vehicle for holding investment properties and business assets for decades. Its core advantage is the ability to distribute income each year to family members at their own marginal rates, reducing the overall tax paid by the family group. That advantage is set to be significantly curtailed.
What changes and when
From 1 July 2028, discretionary trusts will be subject to a 30% minimum tax on taxable income. Beneficiaries – other than corporate beneficiaries – will receive non-refundable credits for tax paid by the trustee at the trust level. The ability to distribute income to lower-earning family members to access their lower marginal rates is materially reduced.
Widely held trusts (including most managed investment trusts) and superannuation funds – including SMSFs – are explicitly excluded from this regime.
The restructuring window
This is where the planning opportunity lies. A CGT rollover relief window opens from 1 July 2027, giving trust holders a three-year period to restructure out of a discretionary trust into a company or fixed trust without triggering an immediate CGT liability on the transfer of assets.
Restructuring prematurely carries risk: acting before 1 July 2027 may trigger CGT and stamp duty costs that the rollover relief is specifically designed to avoid. The window is there for a reason – it is generally worth using deliberately, not in haste. (Seek specific advice on your structure before taking any action.) Trust holders may wish to talk to their adviser about modelling a restructure under the rollover window before committing to any changes.
Who is most affected
Families with discretionary trusts distributing income to adult children, a non-working spouse, or retired parents – where the income-splitting benefit currently reduces total family tax – will feel this most directly. The more the trust relies on distributing to low-income beneficiaries, the greater the impact.
05 — SMSFs
SMSFs: The Structure That Survived
Self-Managed Super Funds come out of the 2026 Budget in a relatively strong position compared to other investment structures. They are explicitly excluded from the new CGT regime changes and from the discretionary trust minimum tax.
Within an SMSF in accumulation phase, the tax rate on income remains 15%, and the CGT discount on assets held for more than 12 months continues to reduce the effective rate on capital gains to 10%. In pension phase, income and capital gains remain tax-free.
The one caveat: Division 296
SMSFs are not entirely untouched. Division 296 – the additional 15% tax on earnings attributable to super balances above $3 million – is already legislated and takes effect from 1 July 2026. Unlike the other Budget measures, this one is law now.
Members with a combined super balance approaching $3 million may wish to review this before 30 June 2026. For most everyday investors, Division 296 will not apply – but for those building wealth in SMSF over decades, it is a planning consideration.
| Phase | Income Tax Rate | CGT Rate (12+ months) | Impacted by New Budget? |
|---|---|---|---|
| Accumulation | 15% | 10% (one-third discount retained) | No – explicitly exempt |
| Pension / Retirement | 0% | 0% | No – exempt |
| Balances above $3 million | +15% additional (Division 296) | Applies to attributed earnings | Yes – already legislated |
06 — Timeline
Key Dates at a Glance
- 12 May 2026
Budget night. Negative gearing restriction applies to established residential properties purchased after 7:30pm AEST from this date.
- 1 July 2026
Division 296 takes effect. Additional 15% super tax on balances above $3 million. Already legislated.
- 1 July 2027
50% CGT discount replaced by indexation and 30% minimum tax. CGT rollover relief window opens for trust restructures.
- 1 July 2028
30% minimum tax on discretionary trust income takes effect.
- 30 June 2030
CGT rollover relief window closes. Three-year window for trust restructuring concludes.
07 — Action
What to Do Next
The Budget changes reward preparation and punish panic. The worst outcomes tend to come from either doing nothing or restructuring prematurely without professional guidance.
Here is what considered preparation may look like:
| If you are… | May wish to consider | Suggested timeframe |
|---|---|---|
| An existing property investor (pre-Budget night) | Obtaining a formal market valuation of assets before 1 July 2027, to help establish the pre-2027 CGT split | Worth planning for |
| Considering buying an established property | Reassessing yield and cash flow assumptions without the salary-offset, and modelling how new builds compare structurally | Time-sensitive |
| A family trust holder | Modelling restructure options (company, fixed trust) ahead of the proposed 2027 rollover window, rather than restructuring immediately | Worth planning for |
| An SMSF investor (balance under $3M) | Reviewing asset allocation to make the most of the tax treatment currently available to SMSFs | Worth monitoring |
| An SMSF investor (balance near $3M) | Reviewing the Division 296 impact before 30 June 2026 with a licensed adviser, given this measure is already law | Time-critical |
| An individual investor (shares, ETFs) | Reviewing CGT strategy for assets held long-term, given the proposed 30% floor could affect exit planning (negative gearing on shares is unaffected) | Worth reviewing |
Every investor’s situation is different. The structural changes announced in the 2026 Budget are complex, and the interaction between them – particularly the compound effect of losing both negative gearing salary offsets and the CGT discount on the same property – can be material. The right path forward starts with a conversation specific to your portfolio, your income, and your goals, with independent professional advice.
That is exactly what the team at AllianceCorp is here for.
If you would like to discuss what the announced Budget changes could mean for your portfolio, your income, and your goals, speak with the AllianceCorp team.
Book a Free ConsultationThis article is intended for general informational purposes only and does not constitute financial, tax, or legal advice. The information reflects publicly announced Budget proposals as at June 2026, several of which are not yet legislated. You should seek independent professional advice tailored to your individual circumstances before making any investment or structural decisions.