INSIGHTS · 12 MAY 2026 · 10 MIN READ
Budget 2026-27: CGT, Negative Gearing and Trust Changes
Four major tax changes were announced in the Federal Budget on 12 May 2026: CGT replaced, negative gearing restricted, trust minimum tax, and new worker tax cuts. Here is exactly what changed, who is affected, and what actions to consider.
By Adrian · 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, gains accruing after that date are taxed under the new inflation-indexed method, regardless of when the asset was purchased. Your cost base for the post-2027 slice 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. For assets already held on 1 July 2027, the gain is split at the asset's market value at that date: the pre-2027 portion retains the 50% discount.
How are assets I already own treated?
There is no blanket grandfathering for CGT. If you sell any CGT asset (shares, ETFs, crypto, or property) on or after 1 July 2027, the new rules apply to the portion of the gain that accrued after that date.
▶Source: Budget Paper No. 1, Statement 4: “Returning to indexation of capital gains”
“For assets held prior to 1 July 2027, but sold thereafter, the 50 per cent CGT discount will apply to the difference between the asset's value at 1 July 2027 and its cost base, while indexation and the minimum tax will be used to calculate the CGT on gains accruing from 1 July 2027 (the asset's value at that date will form its cost base). To determine the asset's value at this date, taxpayers can either seek a valuation or use a specified apportionment formula that estimates the asset's value based on its average return over the holding period (supported by ATO tools).”
Budget Paper No. 1 (2026-27), Statement 4: Revenue, p. 4-21
In plain English: sell before 1 July 2027 and the old 50% discount applies in full. Sell after 1 July 2027 and you need a market value at that date, either a formal valuation or the ATO's average-return apportionment formula, to split the gain correctly. The formula works by compounding your purchase price forward at the CAGR implied by your actual purchase and sale prices — for example, $600k bought in 2018 sold for $1.2M in 2030 implies a ~5.95%/yr return, giving an estimated market value of ~$1.009M at 1 July 2027. The 12 May 2026 Budget night date is only relevant for negative gearing on established property, not for CGT.
What about new builds?
Investors who buy new residential builds can choose whichever method gives lower CGT at the time of sale: the 50% discount on the full nominal gain, or the new inflation-indexed method. This is a deliberate incentive to encourage new housing supply.
Worked example: $500k property bought 2030, sold 2035
Old 50% Discount
Gain: $200,000
50% discount: −$100,000
Taxable gain: $100,000
CGT at 37% bracket: ~$37,000
New Inflation-Indexed
Gain: $200,000
CPI adjustment: −$52,040
$500k × (1.02⁵ − 1) = $52,040 over 5 yrs at 2% p.a.
Real gain: $147,960
CGT at 30% min: ~$44,388
Illustrative only. Assumes no other income and 2% annual CPI compounded over 5-year hold. Actual ABS CPI data may differ.
Transitional example: bought 2018, sold 2030
Property already owned — gain splits at 1 July 2027
Pre-2027 slice (50% discount)
Gain: $1,009k − $600k = $409,000
50% discount → taxable: $204,500
Tax (marginal rate + Medicare): ~$86,500
Post-2027 slice (indexed + 30% min)
Nominal gain: $1,200k − $1,009k = $191,000
CPI indexed cost base from Jul 2027 to 2030 (~3 yrs at 2.5%) ≈ $1,087k
Real gain: ~$113,000
Tax (marginal rate, exceeds 30% floor): ~$53,300
Combined
Total CGT: ~$140,000
vs ~$175,000 under full new regime on entire $600k gain
Illustrative only. Assumes $100k other income, 2.5% CPI post-2027. Use the calculator for your actual numbers.
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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) and can ultimately offset capital gains on sale.
▶Source: Budget Paper No. 2: “Reforming Negative Gearing to Support New Housing Supply”
“From 1 July 2027, interest deductions for new borrowings for established residential property will only be deductible against income from that property. Net losses from negatively geared established residential properties acquired after 7:30PM (AEST) on 12 May 2026 will be quarantined to be offset against future income from that property, including any capital gain on sale. These changes will apply to established residential properties acquired from 7:30PM (AEST) on 12 May 2026.”
Budget Paper No. 2 (2026-27): Budget Measures, p. 2-13
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)
At a glance
Negative Gearing Visualiser
See your before-and-after cash flow with carry-forward logic built in. Try it →
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.
▶Source: Budget Paper No. 1, Statement 4: “Addressing Discretionary Trust Tax Concessions”
“From 1 July 2028, the Government will introduce a minimum tax rate of 30 per cent on distributions from closely held trusts to individuals. Where a beneficiary has a combined marginal tax rate lower than 30 per cent on their trust distribution, a top-up tax will apply to bring the effective tax rate on the distribution to 30 per cent. Rollover relief will be provided for three years from 1 July 2027 to support individuals and families to restructure their affairs without triggering CGT.”
Budget Paper No. 1 (2026-27), Statement 4: Revenue, p. 4-24
In plain English: if you currently distribute trust income to a family member paying little or no tax to lower the family's overall bill, that strategy will face a 30% floor from 1 July 2028. The three-year rollover window (starting 1 July 2027) gives you time to restructure without triggering CGT.
Exceptions
- •Distributions to individuals genuinely on low income (specific conditions apply per the exposure draft)
- •Small business concessions may still provide relief in some cases
- •Rollover relief: 3 years from 1 July 2027 to restructure without immediate tax penalties
Key dates
Consider early restructuring
If you operate through a discretionary trust, the 3-year rollover relief period is your window to restructure without triggering CGT. Speak with a registered tax agent. This is educational information only.
4. Tax Cuts for Workers: WATO and the $1,000 Instant Deduction
The Budget package is not only about closing investor tax advantages. Two worker-focused measures provide direct tax relief: one available immediately for the upcoming income year (FY2026-27), and one commencing in FY2027-28.
$250 Working Australians Tax Offset (WATO) from 1 July 2027
From 1 July 2027, the Government introduces a new $250 Working Australians Tax Offset (WATO) delivering a tax cut to more than 13 million Australian workers. The offset reduces the amount of income tax payable by $250 each year and applies from the 2027-28 income year onwards.
$1,000 Instant Tax Deduction for FY2026-27 (from 1 July 2026)
For the upcoming income year (2026-27, starting 1 July 2026), Australians can claim a $1,000 instant tax deduction for work-related expenses without keeping receipts. This simplifies tax time and further reduces tax for approximately 6.2 million Australians. The deduction reduces your taxable income by $1,000, worth approximately $325 to someone in the 32.5% tax bracket.
▶Source: Budget Paper No. 1, Statement 4: “Tax Relief for Workers”
“From 1 July 2027, the Government will introduce a $250 Working Australians Tax Offset (WATO), delivering a new tax cut for more than 13 million Australian workers for the 2027-28 income year. This is complemented by the introduction of a $1,000 instant tax deduction, making tax time easier and further reducing taxes for 6.2 million Australians for the 2026-27 income year.”
Budget Paper No. 1 (2026-27), Statement 4: Revenue, p. 4-8
$250 WATO
From 1 July 2027 · FY2027-28 onwards
Direct tax offset for 13M+ workers. Reduces tax payable by $250 each year.
$1,000 Instant Deduction
FY2026-27 · Claim on your 2027 tax return
No receipts required for work-related expenses up to $1,000. Saves ~$325 at the 32.5% bracket.
Educational context only
Speak with a registered tax agent about how these interact with your specific deductions, offsets, and income situation.
Frequently Asked Questions
When does the new CGT regime start in Australia?
The new inflation-indexed CGT regime applies to gains arising on or after 1 July 2027, for ALL CGT assets (shares, ETFs, crypto, property, even pre-1985 assets), regardless of when they were purchased. If you sell after 1 July 2027, your gain is split at the asset's market value at that date. The pre-2027 portion retains the 50% CGT discount; the post-2027 portion uses CPI indexation plus a 30% minimum tax. The 12 May 2026 Budget night date applies only to negative gearing on established residential property. It has no effect on CGT.
How are assets I already own treated under the new CGT rules?
If you sell an asset you already own after 1 July 2027, the transitional arrangements split the gain at the asset's market value on 1 July 2027. The pre-2027 slice (cost base to market value at 1 July 2027) is taxed under the old 50% discount. The post-2027 slice (market value at 1 July 2027 to your actual sale price) is taxed under the new inflation-indexed method with a 30% minimum tax. You can obtain a formal valuation or use the ATO's apportionment formula, which estimates the 1 July 2027 value by compounding your purchase price forward at the CAGR implied by your actual purchase and sale prices (the average return over your holding period). This applies to all CGT assets, shares, ETFs, crypto, and property, not just recent purchases.
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 for the post-2027 slice is adjusted for CPI inflation using ABS data. You only pay tax on the real gain above inflation, with a 30% minimum tax rate applying to that real gain. For assets held before 1 July 2027, the cost base for the post-2027 slice is the asset's market value at 1 July 2027, not the original purchase price. This ensures investors are only taxed on real economic gains, not returns that merely kept pace with inflation.
Who qualifies for the $1,000 instant tax deduction in 2026-27?
From the 2026-27 income year (starting 1 July 2026), Australian individuals who earn income from employment or business can claim a standard $1,000 instant deduction without needing to keep receipts for work-related expenses up to that amount. The deduction reduces your taxable income by $1,000. It applies for FY2026-27 and is complementary to the $250 Working Australians Tax Offset (WATO) that commences from 1 July 2027. Speak with your tax agent about how these interact with itemised deductions you currently claim.
Use Our Updated Calculators
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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.