{"id":11831,"date":"2026-10-28T14:00:00","date_gmt":"2026-10-28T03:00:00","guid":{"rendered":"https:\/\/mnygroup.com.au\/?p=11831"},"modified":"2026-10-28T16:08:00","modified_gmt":"2026-10-28T05:08:00","slug":"cgt-negative-gearing-changes-1-july-2027","status":"publish","type":"post","link":"https:\/\/mnygroup.com.au\/en\/cgt-negative-gearing-changes-1-july-2027\/","title":{"rendered":"CGT and negative gearing from 1 July 2027: what has changed and what to do now"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\">The short answer<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">From 1 July 2027, individuals and trusts lose the 50% CGT discount on growth in most assets after that date. Instead, the cost base is indexed, and Australian-resident individuals pay at least 30% tax on capital gains arising after that date. Growth up to 30 June 2027 keeps the 50% discount, but is taxed only when the asset is sold.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From the 2027\u201328 income year, losses on residential rental property acquired after 7.30 pm (Canberra time) on 12 May 2026 can no longer be deducted against salary or business income, unless the property is a new residential dwelling.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These changes are law. They were made mainly by the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026, with further negative gearing changes in the Treasury Laws Amendment (Tax Reform No. 2) Act 2026. Some details are still to be settled, as set out below.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">1. The CGT discount after 1 July 2027<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">For CGT events on or after 1 July 2027, the CGT discount for individuals and trusts falls from 50% to nil, except for:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>new residential dwellings;<\/li>\n\n\n\n<li>affordable housing that meets the existing requirements; and<\/li>\n\n\n\n<li>the part of the gain that built up before 1 July 2027 (see section 2).<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Complying super funds keep their one-third discount. Companies have never had the discount.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For a sale under a contract, the CGT event happens when the contract is entered into. A contract entered into by 30 June 2027 falls under the current rules, even if settlement is later.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">2. Gains built up before 1 July 2027<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">If you are an individual or a trust and you hold an asset on 30 June 2027, the law treats you as having sold it just before 1 July 2027 and bought it back on 1 July 2027. This happens automatically. No election is needed. For an individual, it applies only if the foreign and temporary resident discount rules would not apply to the gain. Broadly, that means you have not been a foreign or temporary resident at any time after 8 May 2012 while holding the asset. If you have, this treatment is not available, and you should get advice before selling.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The deemed sale price is the asset&#8217;s market value just before 1 July 2027. The law also allows an apportioning method set by the Minister to be used instead, but that method has not yet been made.<\/li>\n\n\n\n<li>The gain to that date (the deferred gain) is not taxed when the deemed sale happens. It is taxed in the year you actually sell, and it can still get the 50% discount if it qualifies.<\/li>\n\n\n\n<li>The deemed purchase price on 1 July 2027 becomes the starting cost under the new rules.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Assets acquired before 20 September 1985 (pre-CGT assets) are also affected. Whoever holds them, including a company, they stop being exempt for growth after 30 June 2027.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">3. Indexation instead of the discount<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">For growth after 1 July 2027, individuals and trusts can index the cost base for expenditure incurred on or after 1 July 2027, including the deemed 1 July 2027 purchase price. Conditions apply. For example, the asset must have been held for at least 12 months, and an individual must not have been a foreign or temporary resident during the period.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">4. The 30% minimum tax<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">From 1 July 2027, an individual who is an Australian resident at any time in the income year pays extra tax if the tax on their capital gains from that date, before tax offsets, would otherwise be less than 30% of those gains. It does not apply to the deferred gain, or to gains on new residential dwellings or affordable housing. It also does not apply in a year in which the person receives certain government payments, such as the age pension. In practice it matters most in years when other income is low.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">5. Negative gearing from 2027\u201328<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">From the 2027\u201328 income year, if your deductions for the residential properties caught by the rule exceed the rent from those properties, the excess cannot be deducted against other income such as salary or business income. It can be applied against capital gains on residential property, and any balance carries forward to later years. Amounts denied cannot be added to the property&#8217;s cost base.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The rule does not apply to:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>residential property you acquired before 7.30 pm (Canberra time) on 12 May 2026 \u2014 for a purchase under contract, what counts is when you entered into the contract;<\/li>\n\n\n\n<li>new residential dwellings, once the definition is set; and<\/li>\n\n\n\n<li>complying super funds and widely held unit trusts.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Companies are covered. Moving a property into a family trust or company after 12 May 2026 is a new acquisition by that entity and can lose the grandfathered treatment. The exceptions are narrow: broadly, a surviving spouse or co-owner, and transfers under a relationship breakdown order or agreement. Inheriting from a parent who was not a co-owner is not covered.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">6. SMSF borrowing: already in force<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Since 10 August 2026, an SMSF entering into a new limited recourse borrowing arrangement can use it to buy real property only if the property is business real property. Arrangements entered into before that date, refinancing of those borrowings, and purchases under contracts entered into before that date are not affected.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">7. Small business: a wider 50% active asset reduction<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">From the 2027\u201328 income year, a business with aggregated turnover under $10 million can access the small business 50% active asset reduction, subject to the other conditions. The other small business CGT concessions keep their existing tests: turnover under $2 million, or net assets of no more than $6 million.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Still to be settled<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">As at the date of this article:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>the definition of &#8220;new residential dwelling&#8221; is not yet law. The current Act leaves it to the Minister to set by legislative instrument, and the Tax Reform No. 3 Bill would put a definition into the Act;<\/li>\n\n\n\n<li>the alternative apportioning method for the 30 June 2027 value has not been made; and<\/li>\n\n\n\n<li>further changes are before Parliament in the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, introduced on 14 October 2026, including more exemptions from the negative gearing limits and a proposed 30% minimum tax on discretionary trusts from 1 July 2028. The Bill is not yet law.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">We will update this article as these are finalised.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">A worked example<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Mei has been an Australian resident throughout and was never a temporary resident. In 2015 she bought an investment apartment for $600,000. Its market value just before 1 July 2027 is $900,000. She sells it under a contract entered into in 2030 for $1,000,000. Costs are ignored to keep the example simple.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Deferred gain: $900,000 less $600,000 = $300,000. It is taxed in the income year of the sale, with the 50% discount, so $150,000 is included in her income.<\/li>\n\n\n\n<li>Gain after 1 July 2027: her starting cost is $900,000, indexed from July 2027. For illustration, if the indexation factor to the quarter of sale were 1.08, her indexed cost would be $972,000 and her gain $28,000, with no discount.<\/li>\n\n\n\n<li>The 30% minimum tax looks only at the $28,000. If her tax on it would otherwise be less than 30%, she pays the difference.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">What to do now<\/h2>\n\n\n\n<ol class=\"wp-block-list\">\n<li>List the assets you will hold on 30 June 2027 (property, shares, units and business interests) and plan how you will evidence their market value at that date. For real property and private company shares, a valuation around that date may be worth having.<\/li>\n\n\n\n<li>Look at the timing of planned sales. A contract entered into by 30 June 2027 falls under the current rules. Tax should not be the only reason to sell, but you should know the difference.<\/li>\n\n\n\n<li>Before restructuring, such as moving property into a trust or company or between family members, check the CGT, stamp duty and negative gearing consequences. A transfer after 12 May 2026 can lose grandfathering.<\/li>\n\n\n\n<li>Before buying a property you expect to negatively gear, check whether it will be a new residential dwelling once the definition is made.<\/li>\n\n\n\n<li>If you plan to sell a business, check your eligibility for the small business concessions under both the current rules and the 2027\u201328 rules.<\/li>\n<\/ol>\n\n\n\n<h2 class=\"wp-block-heading\">How we can help<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">MNY Group advises property investors, family groups and business owners in English and Chinese, from offices in Brisbane, Hobart, Melbourne, Perth and Sydney. If you would like us to review your position before 1 July 2027, contact us through our <a href=\"https:\/\/mnygroup.com.au\/en\/our-services\/tax-consulting-planning\/\">Tax Consulting and Planning page<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Sources<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.legislation.gov.au\/C2026A00049\/asmade\" target=\"_blank\" rel=\"noopener\">Treasury Laws Amendment (Tax Reform No. 1) Act 2026<\/a> (No. 49, 2026)<\/li>\n\n\n\n<li><a href=\"https:\/\/www.legislation.gov.au\/C2026A00071\/asmade\" target=\"_blank\" rel=\"noopener\">Treasury Laws Amendment (Tax Reform No. 2) Act 2026<\/a> (No. 71, 2026)<\/li>\n\n\n\n<li><a href=\"https:\/\/www.ato.gov.au\/about-ato\/new-legislation\/in-detail\/individuals\/tax-reform-boosting-home-ownership-reforming-negative-gearing-and-capital-gains-tax\" target=\"_blank\" rel=\"noopener\">ATO: Tax reform \u2014 boosting home ownership, reforming negative gearing and capital gains tax<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/www.ato.gov.au\/individuals-and-families\/investments-and-assets\/capital-gains-tax\/calculating-your-cgt\/cgt-discount\" target=\"_blank\" rel=\"noopener\">ATO: CGT discount<\/a><\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><em>This article is general information only and is not tax advice for your circumstances. It reflects<\/em> <em>the law as at 19 October 2026.<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":11854,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1690],"tags":[1431],"class_list":["post-11831","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taxation-news","tag-rental-property","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-20"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/11831","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/comments?post=11831"}],"version-history":[{"count":6,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/11831\/revisions"}],"predecessor-version":[{"id":11899,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/posts\/11831\/revisions\/11899"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media\/11854"}],"wp:attachment":[{"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/media?parent=11831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/categories?post=11831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mnygroup.com.au\/en\/wp-json\/wp\/v2\/tags?post=11831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}