INSIGHTS · 12 MAY 2026 · 8 MIN READ
Budget 2026-27: CGT, Negative Gearing and Trust Changes
Three major tax changes affecting Australian investors were announced in the Federal Budget on 12 May 2026. Here is exactly what changed, who is affected, and what actions to consider.
By Adrian Kepler · Ripper Wealth · Published 12 May 2026 · Educational analysis only, not personal financial advice.
Quick Summary
1. Capital Gains Tax: The 50% Discount Is Being Replaced
What was the old rule?
Under the old CGT rules introduced in 1999, Australian investors who held an asset for more than 12 months received a 50% discount on their taxable capital gain. A $100,000 gain on an asset held over 12 months meant only $50,000 was added to taxable income.
What is the new rule?
From 1 July 2027, the 50% discount is replaced for assets purchased after Budget night (12 May 2026). Instead, your cost base is adjusted for inflation (using ABS CPI data), and you only pay tax on the real gain above inflation. A 30% minimum tax rate applies to this real gain.
Example: $500,000 property bought in 2030, sold in 2035
Old 50% Discount (pre-budget assets only)
Gain: $200,000
Discount applied: $100,000
Taxable gain: $100,000
CGT at 37% bracket: ~$37,000
New Inflation-Indexed (post-budget established)
Gain: $200,000
CPI adjustment: ~$40,000 (est. 2% p.a.)
Real gain: $160,000
CGT at 30% minimum: $48,000
Illustrative example only. Actual CPI adjustments vary.
Who is grandfathered?
All assets purchased before 12 May 2026 (Budget night) retain the legacy 50% CGT discount, forever, regardless of when you sell.
What about new builds?
Investors who buy new residential builds after Budget night can choose whichever method gives lower CGT. This is a deliberate incentive to encourage new housing supply.
Use our CGT Calculator
See your exact tax bill under both regimes side-by-side for your numbers. Try the CGT Calculator →
2. Negative Gearing: Restricted to New Builds from 1 July 2027
What was the old rule?
Under the old rules, if your investment property costs more to hold than it earns in rent (negative gearing), you could deduct the loss from your other income, including your salary. This reduced your tax bill immediately each year.
What is changing?
For established residential properties purchased after 12 May 2026, from 1 July 2027:
- •Losses can only be offset against rental income, not wages or other income
- •Excess losses carry forward to future years (not lost, just delayed)
- •You still benefit from the deduction, but the tax saving arrives later rather than immediately
Who is not affected?
- •Properties bought before 12 May 2026: fully grandfathered, full deduction against all income continues
- •New residential builds bought after Budget night: full deduction against all income retained (incentive for new supply)
Use our Negative Gearing Visualiser
See your before-and-after cash flow with the carry-forward logic built in. Try the Negative Gearing Calculator →
3. Discretionary Trusts: 30% Minimum Tax from 1 July 2028
From 1 July 2028, distributions from discretionary (family) trusts will be subject to a 30% minimum tax rate. This closes the long-standing strategy of distributing trust income to lower-taxed beneficiaries (such as adult children or spouses) to reduce overall tax.
Exceptions
- •Distributions to individuals who are genuinely on low income (specific conditions apply)
- •Small business concessions may still provide relief in some cases
- •Rollover relief: 3 years from 1 July 2027 to restructure without immediate tax penalties
Consider early restructuring
If you operate through a discretionary trust, the 3-year rollover relief period (starting 1 July 2027) is your window to restructure without triggering CGT or other tax consequences. Speak with a registered tax agent about your options. This is educational information only.
Frequently Asked Questions
When does the new CGT regime start in Australia?
The new inflation-indexed CGT regime applies to capital gains arising after 1 July 2027, and only for assets purchased after Budget night (12 May 2026). Assets bought before 12 May 2026 are grandfathered under the old 50% discount.
What does grandfathered mean for the CGT discount?
If you purchased an asset before 12 May 2026, the legacy 50% CGT discount still applies when you sell, regardless of when the sale happens. The new rules do not apply to these assets.
Can I still negatively gear a property I already own?
Yes. Properties bought before Budget night (12 May 2026) are fully grandfathered. You can deduct losses against all income, including wages, for as long as you hold the property.
Are new residential builds affected by the negative gearing changes?
No. New builds purchased after Budget night retain full negative gearing deductibility. You can still deduct losses against wages and other income. The restriction only applies to established properties bought after 12 May 2026.
What is the 30% minimum tax on discretionary trusts?
From 1 July 2028, distributions from discretionary (family) trusts will be taxed at a minimum of 30%. Exceptions apply for certain individuals. Three years of rollover relief (from 1 July 2027) allow restructuring without immediate tax consequences.
What is the inflation-indexed CGT method?
Under the new method, your cost base is adjusted for CPI (inflation) using ABS data. You only pay tax on the real gain above inflation. A 30% minimum tax rate applies to this real gain. This is designed to ensure investors only pay tax on real gains, not inflation.
Use Our Updated Calculators
All three Budget 2026-27 changes are now reflected in our free calculators. No sign-in required.
This article is for general educational purposes only and does not constitute financial, tax, or legal advice. Ripper Wealth is not a licensed financial adviser. Always consult a registered tax agent or financial adviser for advice specific to your situation. Source: Australian Federal Budget 2026-27, budget.gov.au.