Property Investor Strategy Guide 2026–2031 : What the Federal Budget And New Tax Laws Mean For You
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The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, passed by Parliament on 25 June 2026, abolishes the 50% CGT discount from 1 July 2027, replacing it with indexation plus a 30% minimum tax. Negative gearing on established properties purchased after 12 May 2026 is also now law. This guide breaks down the impact by income bracket and ownership structure, with actions every investor should take before the deadline.
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, passed by Parliament on 25 June 2026, delivers the most significant overhaul of property investment taxation in a generation. From 1 July 2027, the 50% CGT discount is replaced with an indexation-plus-30%-minimum-tax system, negative gearing on established residential property is restricted, and a 30% minimum tax is introduced on discretionary trust income. This guide sets out exactly what each type of investor should do — and when.
In this article
What Changed in the 2026 Federal Budget?
Three major reforms are now law, with most taking effect from 1 July 2027:
1. CGT Discount Replaced with Indexation + 30% Minimum Tax
The current 50% CGT discount — which has allowed Australian investors to effectively halve their taxable capital gain after 12 months of ownership — is being abolished. In its place, gains will be calculated using an inflation-indexation method, and a hard 30% minimum tax will apply regardless of the investor’s income level.
The 50% CGT discount continues to apply to all gains arising before 1 July 2027. A formal valuation as at 30 June 2027 on each property resets the cost base — meaning only future gains attract the new regime. Whether you sell or hold, this valuation is essential.
2. Negative Gearing Restricted on Established Residential Properties
For established residential properties purchased after 7:30pm AEST on 12 May 2026 (budget night), landlords will no longer be able to deduct net rental losses against income that is not rental income or rental gains. Properties purchased before that cut-off remain fully grandfathered under the current rules — for as long as you continue to hold them.
Note: The negative gearing restriction applies to individuals, partnerships, companies, and most trusts. SMSFs and widely held trusts are excluded from the negative gearing restriction — however, new SMSF borrowing to acquire residential property is separately banned.
New build residential properties are exempt from this restriction and continue to attract full negative gearing deductibility.
3. SMSF Borrowing for Residential Property Banned
As part of the Greens deal to pass the bill, an amendment was added prohibiting SMSFs from entering new Limited Recourse Borrowing Arrangements (LRBAs) to acquire residential property. This takes effect 45 days after Royal Assent (approximately mid-August 2026).
Key points: existing LRBA arrangements are grandfathered; pre-commencement contracts (even where settlement occurs after commencement) are protected; refinancing of existing borrowings is permitted; LRBAs for business real property (as defined in s66 of the SIS Act) are unaffected.
Note that SMSFs remain excluded from the negative gearing restriction and retain a one-third CGT discount — but the borrowing pathway for new residential acquisitions is now closed.
Scenario 1: High Income Earner (45% Marginal Rate)
High Income Earner (45% Marginal Rate)
Individual or joint ownership · Established residential property purchased before 12 May 2026
⚠ High Urgency — Act Before 30 June 2027- Post-2027 indexation only shelters inflation — real gains remain fully exposed to tax
- While the 30% minimum is technically lower than your 45% marginal rate, indexation provides far less shelter than the current 50% flat discount
- Any new established residential property purchased after budget night loses negative gearing against other income
- Sell high-gain, low-yield properties now. At a 45% marginal rate, your effective CGT rate under the current 50% discount is 22.5%. This figure increases materially under the new indexation regime, where real (above-inflation) gains receive no additional discount.
- Obtain a formal property valuation as at 30 June 2027 on every investment property you intend to hold. This resets the cost base and is essential whether you sell now or in ten years.
- Review your ownership structure immediately. Holding in your own name at 45% becomes increasingly costly for any future acquisitions under the new rules.
- Redirect capital into new builds. Investors in new residential construction retain the right to choose between the 50% CGT discount and the indexation method — plus full negative gearing is preserved. Note: The term ‘new residential dwellings’ is currently undefined in the legislation as passed. The government has indicated it will consult on and define this term via subsequent legislative instruments. Investors should not assume any particular property qualifies until the definition is confirmed.
- Consider a company structure for new acquisitions. With corporate tax rates of 25–30%, companies now sit at or below the new CGT minimum tax floor, making them genuinely competitive.
- Commercial property remains unchanged. Negative gearing is unrestricted and no new CGT structural changes apply specifically to commercial assets.
- Shares become relatively more attractive. The same CGT rules apply, but franking credits and dividend income can offset the tax impact effectively.
Scenario 2: Middle Income Earner (32–39% Marginal Rate)
Middle Income Earner (32–39% Marginal Rate)
Individual ownership · Working professional
⚠⚠ Very High Urgency — Strongest Case to Sell Before 30 June 2027- Under current rules, the 50% discount brings your effective CGT rate down to just 16–19.5% — one of the most favourable positions in the tax system
- Post-July 2027, the 30% minimum tax floor means your effective rate increases, even though you are not a high earner
- This income bracket is the most adversely impacted group by the minimum tax change
- Crystallise gains before the deadline. You currently pay less than 30% effective CGT. After 1 July 2027, you will pay more. Selling high-gain properties before the cut-off can save tens of thousands of dollars in tax on a typical investment property.
- Time the sale to coincide with a lower-income year if possible — parental leave, unpaid leave, or a career transition can push you into a lower tax bracket and maximise the benefit of the 50% discount in your final year before the change.
- Get valuations on all properties as at 30 June 2027 to establish the new cost base for anything you retain.
- New builds are your best residential option. The 50% CGT discount is preserved for new construction, and full negative gearing is retained.
- Maximise concessional super contributions in the year of any future sale. This reduces taxable income and softens CGT impact. The effective CGT rate inside super remains at 10% — unchanged by the budget.
- Focus on yield-positive or neutrally-geared properties for any new established residential acquisitions, since negative gearing against salary income will no longer be available for post-budget-night purchases.
If you are thinking of selling, now is the time to request a free sales appraisal from our team. Understanding your current equity position is the starting point for making the right decision before 30 June 2027.
Scenario 3: Retired / Low Income
Retired / Low Income
Individual ownership · Minimal other income in the year of sale
🔴 Most Urgent — Dramatic Change for Retirees- Under current rules, a retiree with no other income can pay near-zero effective CGT — the 50% discount combined with a zero marginal rate is one of the most powerful tax positions available
- From 1 July 2027, this benefit is completely eliminated. The 30% minimum tax applies regardless of income level — even to retirees on no other income
- Pre-1985 (pre-CGT) assets: gains arising after 1 July 2027 will be subject to the 30% minimum tax for the very first time
- Selling before 30 June 2027 is strongly advantageous. If your income is low enough, your effective CGT could be as low as 0–15% under the current regime — compared to a hard 30% floor from 1 July 2027 onwards. On a $500,000 gain, the difference is up to $150,000 in tax.
- Stagger sales across two financial years if you hold multiple properties — splitting gains across FY2025-26 and FY2026-27 can keep you in lower tax brackets in each year and maximise the discount benefit.
- Pre-1985 assets: sell before 30 June 2027. The pre-CGT exemption disappears on all gains arising after that date. This may be the single most consequential decision for holders of pre-CGT properties.
- Age Pension recipients may be exempt from the 30% minimum tax — if you are or will be receiving the Age Pension, this potentially changes your position significantly. Confirm your eligibility with a financial adviser before making any decisions.
- Superannuation remains the most tax-efficient vehicle. CGT inside super stays at an effective 10% rate. If assets can be structured to be held within super prior to sale, this should be explored with your SMSF adviser. Note: While the CGT and negative gearing advantages of holding property in an SMSF are preserved, new SMSF borrowing (LRBAs) to acquire residential property is now banned from approximately mid-August 2026. If you were planning to use an SMSF LRBA to acquire a residential property, this pathway is now closed. Speak with your SMSF specialist urgently if any new arrangements were in progress.
- Downsizer contributions (if eligible) allow up to $300,000 per person into super from the proceeds of selling your family home. The main residence CGT exemption remains entirely intact.
Scenario 4: Business Owner / Discretionary Trust
Business Owner / Discretionary Trust
Trust or company ownership structures
🔴 Two Hits Coming — Restructure Window Is Now Open- Hit 1 — CGT from 1 July 2027: Discretionary trusts lose the 50% CGT discount and face the new 30% minimum tax on capital gains
- Hit 2 — Trust income from 1 July 2028: A 30% minimum tax applies to all discretionary trust income, non-refundable even when distributed to low-income beneficiaries
- Corporate beneficiary arrangements may be effectively eliminated under the new rules — specialist advice is essential now
- Sell high-gain properties held in trust before 30 June 2027. The 50% CGT discount is still available, and gains can be distributed to low-income beneficiaries at favourable rates — before the minimum tax locks in this opportunity permanently.
- Review corporate beneficiary arrangements urgently. These arrangements may be effectively eliminated by the new rules. Take specialist tax advice now — the legislation passed 25 June 2026 and the clock is running.
- Obtain 30 June 2027 valuations on all trust-held properties regardless of whether you sell — this resets the cost base for all future post-2027 gains.
- 3-year rollover relief (available from 1 July 2027) provides a time-limited window to restructure out of discretionary trusts into companies without triggering a CGT event. This window will not be available again once it closes.
- Company structures are now strongly preferred for ongoing property investment — the 25–30% corporate tax rate sits at or below the new minimum trust tax, with no distribution compulsion and efficient retained earnings accumulation.
- Fixed and unit trusts are excluded from the discretionary trust minimum tax — for some clients, converting to a unit trust structure may be worth exploring alongside the company option.
- Division 7A and retained earnings strategies become more important under a company structure — retained profits taxed at 25–30% and reinvested can compound more efficiently than distributed trust income under the new regime.
- Small business CGT concession expanded The turnover threshold for the small business 50% active asset CGT concession has been raised from $2 million to $10 million. If your annual turnover is between $2M and $10M, this change materially improves your CGT position on the sale of active business assets (including commercial property used in the business). Confirm your eligibility with your accountant.
Summary: At-a-Glance Strategy by Investor Type
The table below summarises the key strategic position for each investor type under the new rules.
| Scenario | Sell Before 30 Jun 2027? | Best New Structure | Best Asset Class Post-2027 |
|---|---|---|---|
| High income (45%) | ✓ High-gain properties | Company | New builds, commercial, shares |
| Middle income (32–39%) | ✓✓ Strongest case | Super + new builds | New builds, super fund assets |
| Retired / low income | ✓✓✓ Urgent if large gains | Super (downsizer contributions) | Age Pension exempt; super |
| Trust / business owner | ✓✓ Sell + restructure | Company or unit trust | Commercial, new builds via company |
Universal Actions — Every Investor Should Do These
Regardless of your income bracket, ownership structure, or whether you plan to sell or hold, these four actions apply to every property investor right now:
Thinking of Selling Your Investment Property Before 30 June 2027?
Our experienced team at Affinity Property Australia can provide a free appraisal and guide you through the process of selling your investment property for the best possible price — with a tenant in place or vacant.
Important Disclaimer: This article provides general strategic analysis based on the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, which passed both houses of Parliament on 25 June 2026 and is awaiting Royal Assent. A second tranche of legislation is expected later in 2026 to address small business CGT carve-outs and the joint-ownership grandfathering gap. This material does not constitute personal financial, taxation or legal advice. Individual outcomes depend on your specific cost base, income, ownership structure and personal circumstances. Affinity Property Australia is a licensed real estate agent, not a tax adviser. Please consult a registered tax agent or licensed financial adviser before making any investment or taxation decisions.
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