Insights

With the dust settling on the 2026–27 Federal Budget, investors, business owners, and property holders face one of the most significant tax reshapes in decades. Between sweeping changes to Capital Gains Tax (CGT), negative gearing restrictions, and proposed minimum taxes on discretionary trusts, the way Australians build and protect wealth is undergoing a fundamental shift.

To help you stay ahead, we have broken down what has passed Parliament, what is still pending, when these rules start, what actions should be taken now versus later, and how different ownership structures will be affected.

Legislative Status Snapshot: What is Law vs. What is Proposed?

Before adjusting your strategies, it is critical to distinguish between enacted law and announcement-stage policy:

• PASSED INTO LAW: The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. This legislation locks in the major overhaul of Capital Gains Tax (including the loss of pre-CGT asset status) and negative gearing restrictions for residential properties.
• STILL PENDING / ANNOUNCEMENT STAGE: The proposed 30% minimum tax on discretionary trust distributions remains in the announcement stage. It has not yet been introduced into Parliament and but is currently targeted for a 1 July 2028 implementation.

1. Capital Gains Tax (CGT) Overhaul

• Status: Passed into law.
• Anticipated Start Date: 1 July 2027

Key Provisions:

• Replacement of 50% CGT Discount: For CGT events on or after 1 July 2027, the standard 50% general CGT discount is removed for individuals and trusts. In its place, cost base indexation (adjusting the cost base for inflation via CPI) returns for assets held for more than 12 months.
• 30% Minimum Tax Rate: Resident individuals face a minimum tax rate of 30% on net capital gains before tax offsets. (Recipients of specific government support payments are exempt).
• End of Pre-CGT Assets: Assets acquired before 20 September 1985 (pre-CGT) will undergo a deemed sale and reacquisition at market value on 30 June 2027. Notional gains accrued prior to 1 July 2027 are disregarded/deferred, but any future growth after 1 July 2027 will be taxable.
• Exceptions: Strategic incentives remain. Investors in new residential builds and affordable housing can choose between the traditional 50% CGT discount or cost base indexation with the minimum tax.

What this means in practice

The CGT changes will materially affect individuals and trusts holding long-term assets. The removal of the 50% discount changes the tax outcome on future disposals, while the reintroduction of indexation shifts the focus to inflation-adjusted cost bases.

For owners of pre-CGT assets, the deemed sale and reacquisition rules mean these assets will no longer enjoy the same treatment going forward. That is a major structural change for long-held family investments and business assets.

What to do now vs later

• Now: Review your current asset base, particularly any pre-CGT holdings, and assess whether holding, restructuring or disposal should be considered before the start date.
• Later: Reassess CGT outcomes for disposals from 1 July 2027 onward and revisit portfolio strategy once the changes are active.

Different structure impacts

• Individuals: Will face the new minimum tax rate and the loss of the general discount.
• Trusts: Will also be affected by the removal of the discount, with trust-held gains treated under the new framework.
• Investors in new residential builds and affordable housing: Have access to the stated exceptions.

2. Negative Gearing Rules

• Status: Passed into law.
• Anticipated Start Date: 1 July 2027 (applies to established properties acquired after 7:30 PM AEST on 12 May 2026)

Key Provisions:

• Restriction to New Builds: From 1 July 2027, net rental losses from established residential properties can no longer be offset against salary, wages, or business income. Losses can only be offset against rental income or capital gains from residential property.
• Quarantining Losses: Excess losses will be carried forward to offset future residential property income or capital gains.
• Grandfathering Protection: Properties acquired prior to 7:30 PM on 12 May 2026 retain existing negative gearing benefits until sold.
• Exemptions: New builds, widely held trusts, superannuation funds, build-to-rent developments, and government-supported housing programs remain exempt.

What this means in practice

The negative gearing changes significantly alter the after-tax economics of residential property investing, particularly for established dwellings. Investors who have relied on rental losses to reduce taxable income from salaries or businesses will no longer be able to do so for affected properties.

The grandfathering rules are important, as they preserve the current treatment for certain existing holdings. However, future acquisitions of established property will not receive the same benefit if they fall within the post-announcement rules.

What to do now vs later

• Now: Review any planned property purchases and determine whether the timing of acquisition matters.
• Now: For existing property investors, identify which properties are grandfathered and which are not.
• Later: Recalculate expected cashflow and tax positions for properties acquired after the relevant cut-off date and from 1 July 2027.

Different structure impacts

• Individuals: Will be most directly affected where rental losses have historically reduced other taxable income.
• Widely held trusts, superannuation funds and exempt vehicles: Remain outside the restriction.
• Build-to-rent and supported housing structures: Continue to benefit from the stated exemptions.

3. Discretionary Trust Minimum Tax

• Status: Announcement stage only (not yet enacted).
• Anticipated Start Date: Targeted for 1 July 2028

Key Provisions:

• 30% Minimum Trustee Tax: Trustees of discretionary trusts will pay a flat minimum tax of 30% on taxable income.
• Individual Beneficiaries: Receive non-refundable tax credits for trustee-paid tax (preventing double taxation, though excess credits are not refunded).
• Corporate Beneficiaries: Distributions to a corporate beneficiary would need to be dealt with through the trust distribution resolutions and the company’s own tax assessment position. The practical effect will depend on how the proposed legislation is drafted, including how any trustee-paid tax is credited or otherwise reconciled against the company’s liability. Further detail is required before the full treatment of corporate beneficiaries can be determined with confidence.

What this means in practice

This proposal, if enacted, would materially affect the tax flexibility of discretionary trusts. At present, discretionary trusts are commonly used for family wealth management, asset protection and income distribution. A 30% minimum trustee tax would change the way income is streamed and may reduce the effectiveness of trusts as a low-tax distribution vehicle.

What to do now vs later

• Now: Monitor the progress of the proposal and review current trust arrangements.
• Later: Once legislation is introduced and passed, review distribution policies, beneficiary profiles and the role of corporate and individual beneficiaries.

Different structure impacts

• Discretionary trusts: Would be directly affected by the minimum tax proposal.
• Individual beneficiaries: Would receive non-refundable tax credits under the proposal.
• Other structures: The impact will depend on whether income is held, distributed, or retained within the trust.

Final Thoughts

The period leading up to 30 June 2027 gives a rare chance to compare the current and future rules side by side.

There is no single “right” strategy. The optimal approach depends on your:

• Investment objectives
• Income profile
• Time horizon
• Existing ownership structures

What is clear, however, is that taking the time to review your position now can make a meaningful difference later. If you’re unsure how these changes apply to your situation, starting that conversation early will help ensure your strategy remains aligned in what is shaping up to be a very different tax landscape. Speak with your Altitude adviser to review your position and map out a plan that works under both the current and proposed rules.