Global Daily Tax News, Australia Tightening Capital Gains Tax Rules, (May 13, 2026)

The Australian Government has announced plans to overhaul the nation's capital gains tax rules and reform the negative gearing rules.

The Government has said it will reform the rules regarding negative gearing – where a taxpayer's expenses associated with an asset (including interest expenses) are greater than the income earned from the asset, creating a loss that is deductible against other income, such as salary and wages.

The rules have in particular encouraged leveraged property investments that can lead to investors receiving greater tax advantages than those available to owner occupiers, the Government noted.

From July 1, 2027, losses related to existing residential investment properties purchased from 19:30pm on May 12, 2026, will be deductible only against other income from residential properties, including capital gains.

Further, negative gearing will be available only for residential property investments in new builds from July 1, 2027.

Where an investor has excess losses, they will be able to carry forward that excess to offset residential property income in future years. Enabling losses to be carried forward ensures investors remain able to claim a deduction in the future for costs such as maintenance, the Government noted.

Real estate properties held before the Budget's announcement (at 19:30 AEST on May 12, 2026) will be exempt from the negative gearing changes. The changes will apply to individuals, partnerships, companies and most trusts. Widely held trusts (for example, most managed investment trusts) and superannuation funds (including SMSFs) will be excluded.

In addition, the Government has announced capital gains tax reforms that will apply to gains accruing after July 1, 2027.

Specifically, the Government is to withdraw the 50 percent CGT discount for individuals, trusts, and partnerships with cost base indexation.

The current 50 percent CGT discount was introduced in 1999, allowing taxpayers to reduce their taxable capital gain by half rather than adjusting for inflation. As a result, the 50 percent discount does not accurately approximate the inflation component of gains, meaning investors are undercompensated or overcompensated depending on their returns.

The Government intends to return to indexation based on the Consumer Price Index (CPI). The changes will apply to all CGT assets (including property and shares) held by individuals, partnerships, and trusts for at least 12 months.

Further, the Government has announced a minimum tax rate of 30 percent will apply to real estate capital gains accruing from July 1, 2027 (with no impact until the income is realised).

The Australian Government said: "The introduction of the minimum tax reduces the benefit of taxpayers deferring capital gains realization to years where their marginal tax rates are low. It ensures their gains are subject to a tax rate closer to the rate they faced during their working life and is commensurate with the tax rate paid by most workers."

Recipients of means-tested income support payments, such as the Age Pension or JobSeeker, will be exempted from the minimum tax if they receive any payment in the financial year in which they realize the capital gain, the Government has said.

The CGT reforms will only apply to gains accruing after July 1, 2027.