Welcome to our guide on Australia’s 2026 CGT reform and its consequences.
Our editorial team at Australian Business Magazine has been tracking the proposed changes, Senate hearings, and industry reactions since budget night. We’ve broken down what you actually need to know.
In this guide, we’ll cover:
- What changed under the 2026 Capital Gains Tax (CGT) reform
- How the changes affect housing prices and rents
- Risks for small business owners and startups
- Impact on non-residents and foreign investors
- What happens to trusts under the new rules
- Broader economic consequences and the inequality question
Read on to find out how these changes could affect your investments, your business, and your next property decision.
What Changed Under Australia’s 2026 CGT Reform?
Australia’s 2026 CGT reform introduces major changes to the taxation of capital gains. The reform replaces the long-standing 50% CGT discount with a new framework based on cost base indexation and a minimum tax rate. It also changed the treatment of negative gearing and pre-1985 assets.
Here’s a breakdown of the changes at the centre of this tax reform:
- CGT Discount Removed: The existing 50% discount for individuals, trusts, and partnerships won’t apply to gains arising after 1 July 2027. If you sell an asset after that date, you’ll need to calculate your tax differently.
- Cost Base Indexation Introduced: Instead of a flat discount, your cost base will now be adjusted using the consumer price index. That means you’ll only pay tax on the real gain above inflation, instead of the nominal figure.
- 30 Per Cent Minimum Tax: Even after indexation, your net capital gain can’t be taxed below 30%. So if your marginal rate sits lower than that, the minimum still applies.
- Negative Gearing Limited: From 1 July 2027, rental losses on established residential property can only offset other rental income or property gains. The negative gearing changes are designed to direct more investment toward new housing supply.
- Pre-1985 Assets Now Included: Assets bought before September 1985 were completely outside the CGT regime until now. But from 1 July 2027, any gains on those assets will be taxable for the first time, which means decades of exemption come to an end.
- Transitional Rules for Existing Assets: If you already hold investments, gains accrued before 1 July 2027 still qualify for the existing 50% CGT discount. Only the portion of the gain after that date falls under the new rules.
On paper, these proposed changes sound like a cleaner system. But the effects become clearer when looking at tax examples across housing, small business, and foreign investment.
How Does the CGT Reform Impact Housing Prices?
The CGT reform impact on housing prices includes lower investor demand, reduced market turnover, and upward pressure on rents across capital cities. The federal government framed these changes as a path to affordable housing.
Though in reality, the housing market rarely responds the way policymakers expect.
We’ll have a look at how the reform is likely to affect property from different angles.
Reduced Investor Demand for Established Homes
According to ABS data, investment loans accounted for about 40% of new housing loan commitments in the September quarter of 2025 (one of the highest shares on record). And with the CGT discount removed and negative gearing restricted, the after-tax return on established residential property is expected to fall.
What’s more, Commonwealth Bank modelling suggests the capital gains tax reforms could lead to a modest decline in established dwelling prices over time, compared with the baseline. The impact is expected to be larger under a downside scenario.
That’s not a small correction for investors who’ve built strategies around capital gains.
The “Never Sell” Lock-In Effect
Grandfathering protects the tax position of existing investors, but the arrangement may also discourage some owners from selling. Investors who benefit from more favourable tax treatment are more likely to hold onto their properties rather than sell them and pay tax on any gains.
The result could be a less liquid housing market, with fewer established properties changing hands. While a reduction in turnover wouldn’t affect the number of homes that exist, it could limit the availability of properties for prospective buyers.
Pressure on Rental Supply and Rents
Two very different rent forecasts have come out of this reform, and the gap between them is worth paying attention to.
Master Builders Australia estimates rents could climb by up to $9 per week as investor activity slows and new housing supply drops. The Treasury’s own figure is far more conservative, at around $2 per week for median households.
Either way, if investors retreat from established housing, the supply of rental accommodation may come under pressure over time.
Housing Insight: The reform targets investor incentives, but tenants will ultimately feel the effects through changes in rental availability.
Fewer Listings and Less Competition for Buyers
First home buyers will face less competition from investors for established homes. That’s the intended benefit of the reform, and it should help in suburbs where investors previously dominated auction rooms.
But the lock-in effect from earlier works against this. If existing investors aren’t selling, there are simply fewer properties on the market, which could limit any affordability gains for first home buyers.
What Are the Risks for Small Business Owners?
The CGT reform could create several challenges for small business owners. Businesses with low historical cost bases may face higher tax liabilities when owners decide to sell.
In some cases, an indexation-based system may even provide less favourable outcomes than the current CGT discount.
Small business and startup owners have the following concerns right now:
- Low Cost Base Problem: A founder who builds a company from scratch has little or no cost base to index. When they sell, almost the entire sale price becomes a taxable capital gain. Under the new rules, that gain gets hit with a 30% minimum tax.
- Employee Share Scheme Impact: Without the 50% CGT discount, the after-tax reward for employees holding company shares shrinks. Startups that relied on equity to attract talent now have a less competitive offer compared to pre-reform conditions.
- Startup Exodus Risk: Singapore doesn’t impose a capital gains tax, while New Zealand generally doesn’t tax investment share gains. Those differences could influence how founders, investors, and employees assess the attractiveness of equity ownership in Australia.
- Small Business Threshold Gaps: The federal government raised the active asset CGT concession threshold from $2 million to $10 million in turnover. That’s a welcome move, but it only covers one of the four existing small business CGT concessions.
- Government Concessions Still Pending: The government has proposed a new CGT concession for startup founders and early-stage investors. The concession hasn’t been passed into law yet, so businesses can only plan based on the proposal.
That said, the consultation process is still underway, and the final details could shift before the legislation passes. For now, small business owners are stuck making decisions without a complete picture.
How Are Non-Residents and Foreign Investors Affected?
Non-residents and foreign investors face an expanded definition of real property, retrospective tax obligations dating back to 2006, and reduced confidence in Australia’s tax stability. While these changes sit in separate legislation from the main CGT reform, they’ve drawn some of the sharpest criticism from legal and investment circles.
Let’s get into more detail about what’s changed for foreign investors:
Expanded Definition of Real Property
The federal government changed what counts as taxable property in the first place. In particular, the new legislation broadens the definition of real property well beyond its previous scope.
For instance, fixed assets on land, like infrastructure or equipment installed for the majority of their useful life, now fall inside the CGT net regardless of how state law classifies them. That catches a much wider range of foreign investments under Australian CGT rules than before.
Retrospective Application Since 2006
The proposed changes apply retrospectively to CGT events going back to December 2006 (twenty years for real, that’s not a typo). That’s why foreign investors who completed transactions years ago, under completely different legislation, could now face tax obligations on those past deals.
And there’s no transitional relief on the table. Assets that were bought, restructured, and sold under the old rules don’t get a reset or a grace period.
Damage to Australia’s Investment Reputation
There’s a broader reputational cost that Australia may pay for years. For one, retrospective tax changes raise serious sovereign risk concerns for anyone considering putting international capital into the country.
Clayton Utz already flagged the risk of capital flight and re-domiciling offshore as a direct consequence. Regulatory uncertainty can make a market less attractive to foreign investors, particularly when alternative destinations offer more stable tax settings.
The reputational impact of a policy change can outlast the policy itself.
What Happens to Trusts Under the New CGT Rules?
Different trust types face different outcomes under the new CGT rules. Inter vivos discretionary trusts are subject to a 30% minimum tax from 1 July 2028, while testamentary trusts, widely held unit trusts, MITs, and superannuation funds are either exempt or largely unaffected.
The government made several changes to its original trust proposals after major backlash. That’s why the final framework looks much different from the version announced on budget night.
The table below shows how each trust type is affected:
| Trust Type | Minimum Tax | Negative Gearing Access | Rollover Relief |
| Discretionary (inter vivos) | 30% from 1 July 2028 | Restricted for established property | 3-year window from 1 July 2027 |
| Testamentary | Exempt (confirmed June 2026) | Standard rules apply | Available |
| Widely held unit trusts / MITs | Not affected | Exempt from restrictions | Not required |
| Superannuation funds | No change to CGT discount | Exempt from restrictions | Not required |
As you can see, inter vivos discretionary trusts face the most serious changes under the new framework. The minimum tax requirement represents a major departure from the current approach, where trust income can be distributed to beneficiaries and taxed at their individual marginal rates.
The government has also opened a three-year rollover relief window starting 1 July 2027. That gives trustees time to restructure into a company or fixed trust without triggering a CGT event.
Testamentary trusts, on the other hand, came out of this in much better shape. The government originally planned to apply the 30% minimum to them as well. However, the proposal attracted strong political opposition, with Coalition figures labelling it a “death tax“.
What Are the Broader Economic Consequences?
The broader economic consequences include higher compliance costs, changes in investment behaviour, and uncertainty for businesses. These effects could influence asset valuations, investment decisions, business confidence, and the way capital moves through the economy.
Now let’s break these effects down a bit more.
Mass Valuation Rush Before July 2027
Every Australian holding a CGT asset on 30 June 2027 will need a market valuation, and the accounting industry isn’t ready for it. Under the new rules, many existing investments will effectively receive a new tax starting point based on their market value as at 1 July 2027.
That means millions of taxpayers will require professional valuations for property, shares, and other assets, all within the same window.
If a large number of taxpayers seek professional advice during the transition period, compliance costs could rise substantially, too.
Risk Alert: Taxpayers who rely on informal estimates rather than defensible valuations could face scrutiny years later if an asset is sold.
Shift Toward Commercial and Alternative Assets
What happens when one part of the property market receives less favourable tax treatment than another? Some investors may start looking beyond residential property, particularly if other asset classes offer stronger after-tax returns or higher income yields.
Over time, that change in investor preferences could influence demand across the broader property market.
Impact on Business Confidence Across Sectors
Business confidence has already taken a hit from the uncertainty around the final legislation. The Australian Industry Group said that the reform will damage confidence, investment, and aspiration.
And they’re not alone. The Senate inquiry into the legislation heard submissions from builders, property groups, and startup founders. All of them raised concerns about the same thing.
Until the final details are locked in, many businesses are choosing to sit on their hands rather than commit capital (the wait-and-see approach is common during major reforms).
Could This Reform Actually Widen Inequality?
The reform could widen inequality by protecting older, wealthier investors through grandfathering, while younger Australians entering the market face the full weight of the new CGT rules.
For example, if an investor bought three properties before budget night, they’ll keep full negative gearing access and the 50% CGT discount on gains accrued before 1 July 2027. Their tax position will barely change.
But a 28-year-old buying their first investment property in 2028 will get none of that. They’ll pay the 30% minimum tax on gains, and they can’t offset rental losses against their salary.
The federal government has framed the reforms as a response to intergenerational inequality in the housing market. Home ownership among 30 to 34-year-olds fell from 57% in 2001 to 50% in 2021, according to census-based analysis.
Investors also accounted for a record share of new housing loans in 2025. Those trends help explain why the government pursued reform.
However, grandfathering means existing asset owners keep the tax advantages of the old system, while new investors face the new rules. The result is a two-tier framework that treats otherwise similar investors differently based on when they entered the market.
How Should You Prepare for the CGT Changes?
The CGT reform affects small business owners, foreign investors, trust structures, and anyone planning to sell assets after 1 July 2027. The changes also raise questions about investment incentives, housing affordability, and the long-term competitiveness of Australia’s tax system.
So if you own investment property, shares, or business assets, now’s the time to review your position. Get a valuation done early, and talk to your accountant about how the transitional rules apply to your situation. And don’t wait for the final legislation to start planning.
For more coverage on tax reform, business strategy, and what’s changing for Australian investors, browse our other guides.
Frequently Asked Questions (FAQs)
The proposed reforms have raised a lot of questions from property investors, business owners, and everyday taxpayers. Here are answers to some of the most common questions about how the changes could affect different assets, investment strategies, and tax outcomes.
Does the CGT Reform Affect Your Family Home?
No, the main residence exemption hasn’t changed. If you live in your home and it’s your primary residence, you won’t pay any capital gains tax when you sell it. This applies regardless of when you bought the property.
Can You Still Negatively Gear a New Build After July 2027?
Yes. New builds are exempt from the negative gearing restrictions. If you buy a newly constructed property that genuinely adds to housing supply, you can still deduct rental losses against your salary and other income.
How Does Cost-Base Indexation Work Under the New Rules?
Your asset’s cost base gets adjusted using the consumer price index to account for inflation. You only pay tax on the real gain above inflation, not the full nominal increase. This replaces the flat 50% CGT discount from 1 July 2027.
Are Superannuation Funds Affected by the Capital Gains Tax Changes?
No. Superannuation funds, including SMSFs, aren’t affected by the removal of the CGT discount or the new 30% minimum tax. They’ll continue to operate under existing CGT arrangements.
Could Capital Losses Become More Valuable Under the New Rules?
Potentially. The removal of the existing discount may increase the importance of capital losses when calculating future tax obligations. Investors may pay closer attention to how gains and losses interact across different assets.
Do Temporary Residents and Non-Residents Follow the Same CGT Rules?
No. Temporary residents and non-residents can face different tax outcomes depending on the asset type and their residency status. The proposed legislation doesn’t apply identical rules to all foreign taxpayers.
Could Interest Rates Have a Bigger Impact Than the CGT Reform?
Yes. Low interest rates helped support property prices for years, while higher interest rates have had the opposite effect. In some situations, borrowing costs and mortgage affordability may influence investment decisions more than tax changes.
Has the Government Announced Any Other Measures Alongside the Reform?
The government announced several related measures, but the CGT package doesn’t directly address jobs, finance, debt, loan applications, or broader economic security. Those areas remain part of separate policy discussions.
