[Tax Reform]CGT and negative gearing tax reform Bills are now law

Two important Bills, including the significant CGT and negative gearing tax reform, announced in the 2026-27 Australian Budget, are now laws.

They have been passed through Parliament and received assent on Friday, 26 June 2026 (following Senate approval on 25 June 2026 and Royal Assent shortly afterwards).

These reforms represent the most significant changes to Australia's investment property taxation since the introduction of the 50% CGT discount in 1999.

No.1

Key changes

1. Small Business CGT Concession

• Current law: $2 million turnover threshold

• New law: Importantly, owners of small businesses are winners of this reform as the $2 million turnover threshold for the existing small business active asset 50% CGT reduction has been increased to $10 million. This means the eligibility for the owners to enjoy such a small business CGT concession is significantly expanded.

  
  

2. Negative gearing

• Current law: Rental losses may offset salary, business and other income

• New law: For affected properties, rental losses can only offset residential property income and future residential capital gains. Existing investments are largely protected under grandfathering. Investment properties owned before 7:30 pm AEST on 12 May 2026 retain existing negative gearing treatment.

  
  

3. CGT discount

• Current law: 50% discount after holding assets for >12 months

• New law: Replaced by cost-base indexation plus a minimum 30% tax on real capital gains. Existing investments are largely protected under grandfathering. The CGT changes apply only to gains accruing after 1 July 2027, rather than taxing historical gains retrospectively.

  
  

4. SMSF borrowing changes

• Current law: SMSF can have borrowing arrangements to purchase residential property despite the fact that interest rates are higher than usual compared to non-SMSF purchasers.

• New law: New SMSF borrowing arrangements will no longer be available for acquiring residential property after commencement (existing arrangements are grandfathered). Commercial property borrowing remains available.

5.Benefits to the general working forces

Starting from 2026-27 income year, all Australian tax residents earning labour income are entitled to claim a $1,000 standard deduction for work related expenses, starting from the 2026–27 income year.

No.2

What happened?

The Act is to replace the 50% CGT discount with cost base indexation and introduce a 30% minimum tax on capital gains. They will apply to all capital gains accruing on or after 1 July 2027, including gains from pre-CGT assets.

The full names of the Bill and the Act are the Treasury Laws Amendment (Tax Reform No 1) Bill 2026 (Reform No 1 Bill) (No 1 Reform Bill), the Treasury Laws Amendment (Tax Reform No 1) Act 2026 (the Act), and the Income Tax Rates Amendment (Tax Reform No 1) Bill 2026.

From 1 July 2027, negative gearing for investments in residential properties will be restricted to new builds, generally applying to interests in properties acquired on or after 7:30pm AEST 12 May 2026.

Source: https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r7493