Australia’s capital gains tax reform became law on 26 June 2026. From 1 July 2027 the 50% CGT discount is replaced by cost base indexation for individuals and trusts, a 30% minimum tax rate applies to net capital gains, and a deemed disposal on 1 July 2027 locks in the 50% discount on gains accrued before that date. Negative gearing ends for residential dwellings acquired after 12 May 2026. The same budget lifted the super guarantee to 12%, raised the transfer balance cap to $2 million, and cut the $18,201–$45,000 marginal rate. Franking credits are unchanged.
Last reviewed: 18 July 2026.
Has the capital gains tax reform passed?
Yes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 passed the Senate on 25 June 2026 and received royal assent on 26 June 2026. The changes are law and take effect from 1 July 2027. Model your own position with our capital gains tax calculator.
What are the 2025-26 budget tax changes for investors?
The 2025–26 Federal Budget introduces significant tax changes for Australian investors. Media headlines have swung between “the CGT discount is abolished” and “nothing changes until 2027,” leaving DIY investors genuinely confused.
The reality is more nuanced. Some measures were already in effect, and the headline CGT and negative-gearing reforms received royal assent on 26 June 2026 and take effect from 1 July 2027. What matters now is understanding exactly what is changing, when it starts, and what your options are before then.
What are the new CGT rules from 1 July 2027?
How the Current 50% CGT Discount Works
When you sell an asset held for more than 12 months, the ATO allows individuals and trusts to reduce their taxable capital gain by 50%. Complying superannuation funds receive a 33⅓% discount, producing an effective CGT rate of 10% on long-term gains. Companies receive no discount.
This system has been in place since 1999 and has shaped how millions of Australians structure their investments.
The 50% discount is replaced by indexation
From 1 July 2027 the 50% CGT discount is removed for individuals, partnerships and trusts and replaced by cost base indexation — your cost base is lifted in line with inflation, so you are taxed on the real gain rather than the inflationary one. The 12-month holding rule still applies. Companies, complying super funds, and foreign or temporary residents are outside this change.
The minimum 30% tax rate on real capital gains (now law)
From 1 July 2027 a minimum 30% tax rate applies to net capital gains for individuals. “Real” gains are adjusted for inflation, stripping out the portion of your gain that reflects rising living costs.
The key word is minimum. If your marginal rate already produces a tax outcome above 30% on the discounted gain, the new floor applies. High-income earners in the 37% and 45% marginal rate brackets will feel this most acutely.
Deemed disposal on 1 July 2027
This is the detail most media coverage has missed. On 1 July 2027 every CGT asset is treated as sold and immediately rebought at its market value that day. The notional gain up to that point is deferred — you are not taxed in 2027 — and when you eventually sell, that pre-2027 slice may still receive the 50% discount, while growth after 1 July 2027 is taxed under indexation and the 30% floor. So a long-term holder does not lose the discount on the gain already accrued — only on future growth. Assets acquired before 20 September 1985 are captured too: they take a cost base equal to their market value at 1 July 2027, so pre-CGT assets cease to exist from that date.
Worked Example: High-Income Investor Selling ASX Shares After 1 July 2027
An individual on a 45% marginal rate sells shares with a $100,000 nominal gain that accrues entirely after 1 July 2027. Indexation reduces this to an $80,000 real gain.
- Under the old 50% discount: 50% of $100,000 = $50,000 taxable. Tax at 45% = $22,500.
- Under the new rules (gains accruing after 1 July 2027): 30% minimum on the $80,000 real gain = $24,000 tax.
The transition matters more than the headline. If you held the shares before 1 July 2027, the deemed disposal preserves the 50% discount on the gain accrued up to that date — the $24,000 figure applies only to growth after it. For most long-term holders the real-world increase is far smaller than a straight “22.5% becomes 30%” comparison suggests; on very large gains accruing wholly post-2027, the additional burden becomes material.
CGT Comparison: Individuals vs. SMSFs vs. Companies
| Entity | Current CGT (long-term) | Post-2027 (law, from 1 July 2027) |
|---|---|---|
| Individual (45% bracket) | ~22.5% effective | 30% minimum on real gains |
| Individual (19% bracket) | ~9.5% effective | Likely unchanged — below 30% floor |
| SMSF (accumulation) | 10% effective | Unchanged |
| SMSF (retirement phase) | 0% up to TBC | 0% — unchanged |
| Company | No discount | No discount — unchanged |
The gap between personal and super tax treatment widens significantly after 2027, with direct implications for asset location strategy.
Negative Gearing Reforms
What Changes and What Stays
The reform restricts negative gearing on residential dwellings acquired after 7:30pm AEST on 12 May 2026. From 1 July 2027, net rental losses on those dwellings are quarantined against residential rental income rather than offset against salary. Dwellings acquired before 12 May 2026 are unaffected. This is law, not a proposal.
New builds retain full negative gearing concessions as a policy incentive to increase housing supply. If you are considering a new investment property, this distinction matters for your after-tax return modelling.
For investors holding negatively geared established properties, the after-tax cost increases. An investor claiming $15,000 per year in rental losses at a 37% marginal rate saves approximately $5,550 annually. Under the new restrictions, that saving disappears.
Does Negative Gearing Still Apply to Shares and Margin Lending?
The restrictions target residential property, not share investing. Margin loan interest and borrowing costs to generate assessable income from shares remain deductible under current ATO rules. No Budget measure changes this for share investors.
Superannuation: What Has Changed
Superannuation Guarantee Rising to 12%
The Superannuation Guarantee increased from 11.5% to 12% from 1 July 2025. SMSF members who are also employers should ensure payroll reflects the updated rate to avoid ATO penalties.
Transfer Balance Cap Increase to $2 Million
The general Transfer Balance Cap increased to $2 million from FY2026. Pension-phase earnings and capital gains remain tax-free up to this cap.
Contribution Caps Confirmed
- Concessional contributions cap: $30,000
- Non-concessional contributions cap: $120,000
Carry-forward rules for unused concessional contributions still apply subject to your total super balance.
The Proposed 30% Tax on Balances Over $3 Million: Still Stalled
The proposed measure to apply a 30% minimum tax on earnings attributable to super balances above $3 million has not passed parliament. SMSF trustees with large balances should monitor legislative updates but avoid restructuring on the basis of a measure that has not become law.
Franking Credits: Unchanged
The 2025–26 Budget does not change the dividend imputation system. Franking credits remain fully refundable. Your ability to claim franking credit offsets and receive cash refunds where applicable continues under the same rules. Despite pre-Budget speculation, this pillar of ASX investing is untouched.
How do income threshold adjustments affect my portfolio?
The tax rate on income between $18,201 and $45,000 drops from 16% to 15% from 1 July 2026, then to 14% from 1 July 2027.
The benefit of salary sacrifice rests on the gap between your marginal rate and the 15% contributions tax inside super. Once that rate drops to 14%, salary sacrificing from that bracket costs more in contributions tax than it saves. For lower-to-middle income earners, the benefit narrows and warrants review before 1 July 2026.
Asset Location Strategy: Why Structure Matters More After 2027
Before 2027, the effective CGT rate for a high-income individual holding an ASX share over 12 months is around 22.5%. After 2027, the floor rises to 30% on real gains. Inside super in accumulation phase, nothing changes — the 10% rate remains.
That gap makes where you hold growth assets a structurally significant decision.
- High-growth, low-income assets (e.g. growth ETFs) are better suited inside super, where CGT treatment is more favourable.
- Income-producing assets with franking credits work well in personal names or SMSFs where credits offset or are refunded.
- Trusts offer flexibility for income splitting but receive no CGT advantage under the new rules.
A portfolio tracker like Crowdfolio lets you view holdings across entities, model unrealised gains, and identify where your current asset location creates unnecessary tax exposure.
ATO Expanded Enforcement: What Investors Need to Know
The Budget allocates additional funding to the ATO’s Tax Integrity Program from 1 July 2026, meaning greater likelihood of data matching, audits, and compliance reviews across a wider range of asset classes.
Areas of increased scrutiny include rental deductions, capital gains reporting on shares, ETFs, and cryptocurrency, and super guarantee compliance.
Keep records of acquisition dates and costs, all cost base components, disposal dates and proceeds, and any DRP purchases or bonus shares affecting cost base. Records must be kept for five years after disposal.
Investor Action Checklist
Immediate actions:
- List every investment you hold across all entities
- Confirm purchase date, cost base, and current market value for each position
- Identify holdings with significant unrealised gains
- Ensure cost base records are complete, including brokerage and DRP parcels
Medium-term planning:
- Model your CGT bill with a capital gains tax calculator under current rules versus the 30% minimum that applies from 1 July 2027
- For high-income investors with large unrealised gains, quantify the difference with a registered tax agent
- Do not assume selling early is always better — transaction costs, reinvestment risk, and compounding matter too
Structural decisions:
- Consider whether high-growth assets held personally should shift into super over time via concessional contributions
- If approaching retirement, assess whether a pension-phase account absorbs more assets before the Transfer Balance Cap
- Speak to a licensed financial adviser before restructuring across entities
Frequently Asked Questions
Q: How does the CGT change affect investors who have held stocks for more than 12 months?
From 1 July 2027, a minimum 30% rate applies to real gains for individuals. Investors in the 37% or 45% brackets face a higher effective rate than under the current 50% discount method. Investors in lower brackets whose tax outcome falls below 30% are likely unaffected.
Q: Will negative gearing still be tax-effective after the Budget changes?
Negative gearing on residential dwellings acquired after 12 May 2026 is restricted from 1 July 2027 (now law). New builds retain full concessions. For share investors using margin loans, negative gearing rules are unchanged.
Q: Are franking credits affected by the Budget?
No. The dividend imputation system is unchanged. Fully franked dividends continue to carry tax credits, and investors whose marginal rate falls below 30% continue to receive cash refunds of excess credits.
Q: What does the proposed 30% tax on super balances over $3 million mean for SMSF investors?
This measure has not passed parliament and remains stalled. SMSF trustees with large balances should monitor the legislation but avoid restructuring prematurely.