What you really need to know about the CGT & Negative Gearing changes from the 2026 Budget

Introduction

The 2026 Budget has given us plenty to digest. The CGT changes are dominating the headlines — here's what actually matters beyond the noise.

1. End of 50% CGT Discount from 1 July 2027  

The discount is being phased out across all asset classes, with a carve-out for new residential builds. The transition works as follows:

• Gains accrued up to 30 June 2027 retain the current 50% discount.
• Gains from 1 July 2027 onwards are taxed under the new regime using an indexed cost base — the aim being to tax only the real (post-inflation) gain (but tax it in full).
• A minimum 30% tax will apply togains accruing after 1 July 2027.

In short, you will have a hybrid system that locks in the current benefits of the 50% discount to 30 June 2027 and taxes at the new higher level after that.

Action point: The cost base value at 1 July 2027 becomes critical — it sets the indexed base for all future gains. Existing asset holders should consider obtaining a contemporaneous valuation at that date and obtaining advice on their market value options.

2. End of pre-CGT asset status

Less publicised, but significant: assets acquired on or before 19 September 1985 have always been exempt from CGT. From 1 July 2027, gains accruing after that date on those assets will be brought within the CGT net.

This matters most for older taxpayers approaching retirement and long-term corporate or other asset holders contemplating restructures. Whether pre or shortly post 1 July 2027 restructures may now be more attractive, since triggering a CGT event no longer risks losing pre-CGT status as a consequence (as that outcome will soon disappear anyway). As with the discount changes, the asset's value at 1 July2027 will be pivotal.

Away from CGT, negative gearinghas been stripped back:-

3. End of negative gearing (except for new residential builds)

The headline grabber on budget night given how central negatively geared property investment has been to many Australians wealth-building. Unlike the changes above, this one is immediate: it applies to any rental investment property (other than a new build) acquired after 7:30 PM on 12 May 2026.

Properties acquired before then keep the ability to negative gear, so you need to ensure you maintain your acquisition records to access your entitlements going forward.

Negative gearing allowed investors whose rental income fell short of property costs to deduct the shortfall against other taxable income (including wage income), reducing overall tax. That deduction is no longer available unless the property is a new residential build. The flow-on effects for housing supply and the rental market remain to be seen as people adjust their investment settings in a higher interest rate environment.

The bottom line

Death and taxes remain unavoidable. These measures undeniably increase the tax burden on asset and property owners, but CGT is only payable where there has been a gain — investors should still come out ahead of those who never invested at all. You need to ensure that the fundamentals of your investment are sound given the new tax settings and get advice to avoid being caught out.

How Sharrock Pitman Legal can assist?

As far as taxation is concerned, the landscape for owning and investing in real estate in Australia has changed. The changes are significant, especially for long-held property assets. To ensure your compliance with these changes, seek financial and legal advice.  As Accredited Specialists in Property Law, we can advise you on the best way forward.

Please do not hesitate to contact us on 1300 205 506 or email sp@sharrockpitman.com.au.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. For advice tailored to your specific circumstances, please consult one of our qualified lawyers.

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