Negative Gearing and CGT Reform: What the 2026 Act Does

Short answer

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 became law on 26 June 2026. It changes negative gearing for some residential property expenses and changes the capital gains tax treatment of gains realised from 1 July 2027.

The transition rules are not identical.

• For negative gearing, the acquisition cutoff of 7.30 pm AEST on 12 May 2026 matters. Expenses for relevant established residential property interests acquired after that time are generally quarantined from wages and other non-property income from the 2027-28 income year, subject to the Act's exceptions.
• For CGT, it is misleading to say every asset held before Budget night keeps the old 50% discount forever. The Act contains deemed-sale, reacquisition, deferred-gain and apportionment rules around 1 July 2027.

Negative gearing transition

The Act preserves the former treatment for residential ownership interests last acquired before 7.30 pm AEST on 12 May 2026. It also contains treatment for new residential dwellings and specified housing priorities.

For an affected established property acquired after the cutoff, otherwise deductible residential property amounts can generally be used against residential property income and relevant capital gains. Unused quarantined amounts may be carried forward under the legislation.

This is a tax-law classification, not a reason to bring forward or delay a purchase. Contract changes, ownership interests, trusts, partnerships and the definition of a new residential dwelling can alter the result.

CGT transition is different

For many Australian resident individuals and trusts holding an asset on 30 June 2027, the Act can treat the asset as sold just before 1 July 2027 and reacquired immediately afterwards.

The pre-July 2027 gain or loss can be deferred until the later realisation event. The post-July 2027 portion can use the new indexation rules where the statutory conditions are met. The Act also introduces a 30% minimum-tax calculation for certain gains from CGT events on or after 1 July 2027.

This means a single calculation that indexes the original purchase price for the entire historic ownership period is not generally correct for an asset already held at 30 June 2027.

New residential dwellings

The Act contains a choice for qualifying new residential dwellings between specified discount and indexation treatments. Whether a property meets the statutory definition needs to be checked against the legislation and ATO guidance when available.

Separate SMSF borrowing change

Schedule 5 of the same Act restricts new limited recourse borrowing arrangements for real property from 10 August 2026. It uses a separate business real property test and separate transition rules. See the SMSF property borrowing update before assuming that residential property finance through an SMSF remains available.

Calculator limitation

The CGT Reform Comparison Calculator is limited to a simplified example for an asset acquired on or after 1 July 2027. It does not model the transition calculation for assets already held on 30 June 2027.

Sources

• Federal Register of Legislation: Treasury Laws Amendment (Tax Reform No. 1) Act 2026, checked 10 July 2026.
• Australian Government Budget 2026-27: tax reform, checked 10 July 2026.

General information disclaimer

This article is general information only. It is not tax, legal, financial or investment advice. The transition provisions are detailed and can produce different results depending on acquisition date, ownership, residency, property use, losses and exemptions. Obtain advice from a registered tax professional before acting.