The CGT Overhaul Is Now Law: What the 2026–27 Budget Changes Mean for You

By Blackfox Financial Group

The most significant change to Australia’s capital gains tax system since 1999 is no longer a proposal — it’s law. On 25 June 2026, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed both houses of Parliament, receiving Royal Assent the following day. The legislation gives effect to the headline tax measures announced in the 2026–27 Federal Budget on 12 May, and it will reshape how investors, business owners and family groups think about capital gains from 1 July 2027.

Here’s what’s changed, who’s affected, and what you should be doing now.

The End of the 50% CGT Discount

From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships will be replaced with two new mechanisms:

1. Cost base indexation. Rather than halving your capital gain, the cost base of eligible assets (held for at least 12 months) will be indexed for inflation using CPI — similar to the system that operated between 1985 and 1999. In effect, you’ll only pay tax on your real (above-inflation) gain.

2. A 30% minimum tax on capital gains. Capital gains accruing from 1 July 2027 will be taxed at a minimum rate of 30%, regardless of your marginal rate, with some exemptions (income support recipients, for example, are excluded from the minimum rate).

For assets that grow well above inflation — think shares in a successful company, or property in a strong market — the new system will generally produce a higher tax bill than the old 50% discount. For assets that barely keep pace with inflation, the outcome can be more favourable. Either way, the economics of “buy, hold, and rely on the discount” have fundamentally changed.

Importantly, companies are unaffected by the discount change (they never received it), and superannuation funds retain their existing CGT treatment — the one-third discount in accumulation phase and the pension-phase exemptions are preserved.

Pre-CGT Assets Lose Their Shield

One of the most significant — and least expected — aspects of the reform is that assets acquired before 20 September 1985, which have sat outside the CGT net for four decades, are being brought into the system. Gains accruing on pre-CGT assets from 1 July 2027 onwards will be taxable under the new rules.

If you or your family group hold long-standing pre-CGT assets — farmland, business premises, share portfolios, business goodwill — this change alone warrants a strategic review before mid-2027.

What Happens to Gains You’ve Already Made?

The changes are not retrospective in the traditional sense. Gains accrued before 1 July 2027 remain eligible for the existing 50% discount. When you eventually sell, your gain will be apportioned between the old and new regimes — either using a time-based apportionment method or, alternatively, a market valuation of the asset as at 1 July 2027.

This makes 30 June 2027 valuations critically important. For assets with strong historical growth, a formal valuation at the transition date may lock in a significantly better outcome than time apportionment. Demand for valuers is expected to surge as the date approaches — this is a conversation to have early, not in June next year.

Negative Gearing: New Builds Only

Alongside the CGT reforms, the legislation restricts negative gearing on residential property from 1 July 2027:

• Properties held before 7:30pm on 12 May 2026 (Budget night) are grandfathered. Existing investors can continue to negatively gear until the property is sold.
• Established properties purchased after Budget night will have rental losses quarantined from 1 July 2027 — deductible only against other residential property income (including capital gains), with unused losses carried forward. They can no longer be offset against wages or business income.
• New builds retain full negative gearing and the 50% CGT discount. Investors in qualifying new residential dwellings can choose the old CGT discount or the new arrangements. The precise definition of a “new residential dwelling” will be set by ministerial legislative instrument, which is still to be released — a key detail to watch.

Commercial property and other asset classes such as shares are not affected by the negative gearing changes.

Small Business Wins in the Senate

The Bill was amended during its passage through Parliament, and there’s genuinely good news for small business owners:

• The small business CGT concessions are fully preserved, and the aggregated turnover threshold for the 50% active asset reduction has been increased from $2 million to $10 million — a substantial expansion of eligibility.
• The government has also announced a proposed Innovative Business CGT Concession for genuine start-ups, currently in consultation, designed to preserve 50% CGT relief for early-stage business investment.
• Capital gains subject to the 30% minimum tax can be reduced by deductible gifts and donations.

For many of our business-owner clients, the enhanced concessions may soften — or in some cases eliminate — the impact of losing the general discount on the eventual sale of their business.

The Surprise Amendment: SMSF Borrowing Ban for Residential Property

As the price of Greens support in the Senate, the government agreed to ban self-managed super funds from entering new limited recourse borrowing arrangements (LRBAs) to acquire residential property. From 10 August 2026(45 days after Royal Assent), new SMSF borrowing will be restricted to business real property — commercial, industrial and business premises only.

Key points:

• The ban is prospective. Existing residential LRBAs are unaffected.
• Contracts exchanged before commencement are protected, even if settlement occurs afterwards.
• Commercial property LRBA strategies remain fully available.

If you’re an SMSF trustee midway through a residential property purchase with borrowing, the window is closing fast — lenders are already withdrawing residential LRBA products. Contact us urgently if this affects you.

What’s Still to Come

This Bill is only the first tranche of the reform agenda. Still on the horizon:

• The 30% minimum tax on discretionary trusts from 1 July 2028 — announced in the Budget but yet to be legislated, with exemptions flagged for fixed and widely held trusts, deceased estates, testamentary trusts existing at announcement, primary production income and others. Three years of rollover relief from 1 July 2027 will assist restructuring.
• A second round of legislation later this year to fix known gaps — including preserving grandfathered CGT and negative gearing treatment where jointly owned property transfers on death or relationship breakdown.
• Legislative instruments defining “new residential dwellings” and other critical eligibility criteria.
• Further consultation on start-up concessions, part-year residency, tax consolidation and managed investment trust interactions.

What You Should Do Now

With a 12-month runway to 1 July 2027, this is the planning window:

1. Review assets with large unrealised gains. The interaction between the old and new regimes requires careful modelling — decisions about holding, selling or restructuring before the transition date could have six-figure consequences.
2. Identify pre-CGT assets across your family group and understand their new exposure.
3. Plan for 1 July 2027 valuations on key assets to lock in the transition baseline.
4. Reassess property investment strategy — the new-build carve-out changes the calculus between established and new property.
5. Trust structures need review ahead of the 2028 minimum tax, with the three-year rollover relief window in mind.
6. SMSF trustees considering property should act before 10 August 2026 or pivot to business real property.

Talk to Us Before the Rules Bite

These reforms touch almost every investor, business owner and family group we act for — and the right strategy depends entirely on your circumstances, structures and timeframes. Blanket advice doesn’t work here; modelling does.

At Blackfox Financial Group, we’re already working with clients to map their exposure, model transition outcomes and plan restructures while the full suite of concessions and rollover relief remains available.

Contact our team today or call us on 03 8910 8940 to book a CGT strategy review before the 1 July 2027 transition.

Mike Carter
Managing Director
BLACKFOX Financial Group

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This article contains general information only and does not constitute financial or tax advice. Legislation and ATO guidance in this area is continuing to evolve. Please contact Blackfox Financial Group for advice tailored to your circumstances.