Budget 2026 Tax Reform – CGT, Negative Gearing, Trust Tax Changes, and SMSF Borrowing Banned

Budget Night 2026 (as of "12 May 2026 at 7.30pm") introduces the most significant tax reforms in decades, targeting capital gains tax (CGT), negative gearing, and discretionary trust taxation. These changes will reshape how Australians invest in property, manage portfolios, and structure family wealth.

This measure is not yet law. However, it is expected

Capital Gains Tax (CGT) Reform – Effective 1 July 2027

Residential Property

Condition	Relevant Timing	Proposed Tax Treatment
Pre-CGT property	Acquired before 20 September 1985	Capital gains accrued before 1 July 2027 remain exempt from CGT. Gains accruing from 1 July 2027 may become subject to the new CGT rules. A valuation as at 1 July 2027 may be required or prudent to support the calculation of post-reform gains, subject to final legislation.
Existing property held before the reform commencement date	Acquired before 7:30 pm AEST on 12 May 2026	The existing 50% CGT discount continues to apply to gains accrued up to 30 June 2027. Gains accruing from 1 July 2027 will be calculated under the proposed indexation and minimum-tax rules.
Established residential property acquired after Budget Night	Acquired from 7:30 pm AEST on 12 May 2026	The existing CGT rules apply to gains accrued up to 30 June 2027. From 1 July 2027, gains accruing after that date will be subject to cost-base indexation for inflation and a minimum 30% tax on net capital gains.
Eligible new residential property	Acquired after Budget Night and qualifies as a new build	Investors may choose between the existing 50% CGT discount and the proposed indexation/minimum-tax method. Final eligibility requirements will be set out in legislation.

A new build generally refers to a newly constructed residential property that adds to Australia’s housing supply. It is not simply a property with modern finishes, cosmetic upgrades or substantial renovations. The key consideration is whether the project creates new additional dwellings. A property may generally be considered a new build where it:

• Is constructed on vacant land, such as a newly built house on an empty block.

• Is purchased off the plan, including a new apartment, townhouse or unit.

• Forms part of a house-and-land package.

• Is part of a redevelopment project that increases the number of dwellings on the site.

• Replaces one existing dwelling with multiple new dwellings, such as demolishing one house and constructing two townhouses.

Commercial Property

Condition	Relevant Timing	Proposed Tax Treatment
Commercial property or other CGT asset	Held before or after 1 July 2027	The proposed CGT changes apply broadly to CGT assets, including commercial property, shares, crypto assets, collectibles and business assets.
Gain accrued before 1 July 2027	Up to 30 June 2027	The existing CGT rules, including the 50% CGT discount where available, continue to apply.
Gain accrued from 1 July 2027	From 1 July 2027	The proposed rules replace the general 50% CGT discount with cost-base indexation for inflation and impose a minimum 30% tax on net capital gains.

Other CGT Assets (Shares, Crypto Assets, Collectibles and Commodities)

Condition	Relevant Timing	Proposed Tax Treatment
CGT asset disposed of before 1 July 2027	Before 1 July 2027	No change. The existing CGT rules, including the 50% CGT discount where available, continue to apply.
CGT asset disposed of after 1 July 2027	From 1 July 2027	The new rules apply only to the portion of the gain accrued from 1 July 2027. The pre-1 July 2027 portion remains subject to the existing CGT rules.
Asset owned before 1 July 2027 and sold later	Held at 1 July 2027	A valuation or other reliable method may be needed to determine the gain accrued before and after 1 July 2027. Final valuation and record-keeping requirements are yet to be confirmed.
Pre-CGT asset	Acquired before 20 September 1985	Gains accrued before 1 July 2027 remain exempt. Gains accruing from 1 July 2027 may be subject to the proposed CGT rules.

Negative Gearing Reform – Proposed from 1 July 2027

Condition	Relevant Timing	Proposed Tax Treatment
Existing residential property	Acquired before 7:30 pm AEST on 12 May 2026, including contracts entered into before that time	Grandfathered. Existing negative-gearing rules continue to apply until the property is disposed of. Rental losses may continue to offset other taxable income, subject to current tax law.
Established residential property acquired after Budget Night	Acquired from 7:30 pm AEST on 12 May 2026	For FY2027, existing negative-gearing rules continue to apply. From 1 July 2027, losses may only offset residential rental income and capital gains from residential property. Unused losses may be carried forward.
Eligible new build	Acquired after Budget Night and qualifies as an eligible new build	Negative gearing remains available. Rental losses may continue to offset other taxable income, subject to the final eligibility rules.
Commercial property	Any time	These proposed negative-gearing changes apply to residential property only. Commercial-property deductions are not proposed to be restricted by this measure.
Certain excluded investors or developments	Subject to final legislation	Widely held trusts, superannuation funds, certain build-to-rent developments and certain government-supported housing arrangements are proposed to be excluded.

Discretionary Trust Minimum Tax – Proposed from 1 July 2028

Beneficiary / Trust Type	Relevant Timing	Proposed Tax Treatment
Discretionary trust income	From 1 July 2028	Trustees will pay a minimum 30% tax on taxable income of discretionary trusts, subject to exclusions and final legislation.
Individual beneficiaries	From 1 July 2028	Individual beneficiaries must still declare their share of trust income. They will receive non-refundable credits for tax paid by the trustee. Additional personal tax may apply where their marginal tax rate exceeds 30%.
Corporate beneficiaries	From 1 July 2028	Corporate beneficiaries will not receive the non-refundable credit available to non-corporate beneficiaries. The final interaction with company tax, franking credits and retained profits remains subject to legislation.
Excluded trusts	From 1 July 2028	The proposed minimum tax does not apply to fixed trusts, widely held trusts, complying superannuation funds, special disability trusts, deceased estates or charitable trusts.
Excluded income	From 1 July 2028	Certain income is proposed to be excluded, including primary production income, certain income of vulnerable minors, income subject to non-resident withholding tax and income from assets held by discretionary testamentary trusts at the announcement date.
Restructuring relief	1 July 2027 to 30 June 2030	Expanded rollover relief is proposed for taxpayers who restructure out of a discretionary trust into another entity type, such as a company or fixed trust.

SMSF Borrowing for Residential Property – Proposed Change

The commencement date is the 45th day after this Act receives Royal Assent (i.e. 26 June 2026), being 10 August 2026 — inserting a new Schedule 5, item 7 into the bill’s commencement table.

Condition	Relevant Timing	Proposed Treatment
Existing SMSF limited recourse borrowing arrangement (LRBA) for residential property	Entered into before the new law receives Royal Assent	No change. Existing SMSF residential-property borrowing arrangements are proposed to be grandfathered.
Residential property purchase already in progress	At the time the legislation receives Royal Assent	A transitional period is proposed for arrangements already underway. The final legislation will confirm the eligibility requirements and timeframe.
New SMSF borrowing to acquire residential property	After the new law commences	SMSFs will no longer be permitted to use a limited recourse borrowing arrangement (LRBA) to acquire residential property.
SMSF purchase using available cash only	After the new law commences	SMSFs may still acquire residential property using available fund cash, subject to the existing superannuation rules, investment strategy requirements and related-party restrictions.
SMSF borrowing to acquire commercial property or other permitted assets	After the new law commences	The announced restriction applies to residential property borrowing only. SMSF borrowing for commercial property may remain available under the existing LRBA rules, subject to final legislation.