Understanding the changes to CGT and negative gearing
Written and accurate as at: Aug 12, 2026 Current Stats & Facts
Since their announcement the changes to capital gains tax (CGT) and negative gearing have generated plenty of discussion among Aussies of all stripes. Now that the legislation has passed both houses of Parliament, it's worth stepping away from the headlines and looking at how the changes might affect you going forward.
The changes to capital gains tax (CGT)
Since 1999, Australians who held an investment asset for more than 12 months were generally entitled to a 50% reduction in their taxable capital gain.
From 1 July 2027, however, the 50% discount will be replaced by a new indexation system that adjusts an asset's purchase price (known as its cost base) for inflation before calculating any capital gain. That means regardless of how long you've owned an asset, you'll generally have to pay tax on any gains that go beyond what inflation has already delivered.
The reforms also introduce a 30% minimum tax on net capital gains, so your capital gains will generally be taxed at no less than that amount even if your marginal tax rate would otherwise be lower.
Who does it affect?
For assets that are purchased after 1 July 2027, the new rules apply from day one. But if you already own an investment property, shares or other eligible asset, your capital gains will effectively be split into two periods:
- Pre-1 July 2027, in which capital gains up to this point will be treated under the old CGT rules where a 50% discount is applied.
- Post-1 July 2027, in which gains are subject to the new indexation system.
It’s difficult to say whether outcomes for investors will be better or worse under the new system, as it all depends on how inflation behaves during the period an investment is held.
For example, in periods of relatively high inflation, indexing the cost base could reduce the taxable gain, meaning you may end up paying less tax than you would have under the old system. On the other hand, if inflation is low – and an investment delivers strong real growth – you might wind up paying more tax.
As for the 30% CGT floor, this may reduce the tax advantages of selling investments later in life, when your income is lower and you would normally benefit from being taxed at a lower marginal rate.
The changes to negative gearing
Negative gearing isn't disappearing, but it won’t be as widely available in the future. As of 7:30pm 12 May 2026, only investors who purchase newly built residential properties will be able to claim rental losses against their other taxable income.
If you purchase an established residential property, your rental losses will now be ‘quarantined,’ meaning they can’t be deducted against non-residential rental income (such as your salary) or non-residential capital gains (such as profits from shares).
The changes will be grandfathered, however, so if you already owned an established investment property prior to the cut off date (or had one under contract), your existing negative gearing arrangements will generally continue unchanged.
Who does it affect?
Let’s consider the case of two property investors, who both borrow the same amount and make a $12,000 rental loss in their first year. One had bought a newly built apartment, while the other purchased a unit in a red-brick building from the 70s.
The investor who purchased the new build can generally continue claiming that $12,000 loss as a tax deduction. But the same won’t apply for the investor who bought the established property.
Will that stop people investing in established properties? Probably not. Tax is rarely the only reason someone buys an investment property, and things like rental demand, expected capital growth and location will still influence investment decisions.
But a country’s tax settings do shape incentives, and one of the central aims of these reforms is to encourage construction of new housing rather than simply bidding up the price of existing homes.
Of course, the reforms will remain the subject of heated discussion for some time. But regardless of where you stand, understanding how they work is likely to put you in a better position to make informed investment decisions. And if you’d like advice tailored to your situation, it might be worth speaking to a qualified tax professional or financial adviser.