The 2026 tax reforms: what changes from 1 July 2027, and what is still only proposed

Technically reviewed 8 October 2026 · General information only, not personal advice. Read our disclaimer.

On 26 June 2026 the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 became law. It is the largest change to how capital gains are taxed in Australia since the 50% discount arrived in 1999, and most of it starts on 1 July 2027. If you own a business, an investment property or shares outside super, and you are thinking about selling, restructuring or gifting any of them in the next few years, the year you do it now matters as much as how you do it.

This note is the plain-English version of what changed, what is still only proposed, and what we are doing about it with clients. It is dated, and it will be updated as the ATO publishes guidance and the proposals become law or don’t. Status as at 8 October 2026.

What is law, and when it starts

The general CGT discount ends for individuals and trusts. For CGT events on or after 1 July 2027, the 50% discount is no longer available to individuals or trusts, with two exceptions: gains on new residential dwellings and on affordable housing keep a discount. Companies did not receive the general discount, but that does not mean a company or a company-owned group is unaffected by the wider package. Complying super funds sit outside this change.

Indexation comes back in its place. From 1 July 2027 individuals and trusts index the cost base of assets held at least twelve months for inflation. The gain you pay tax on is the growth above inflation, not the whole nominal gain.

The transition point for affected assets. For resident individuals, and for trusts that meet the residency conditions, affected assets held across the change are treated as sold at the end of 30 June 2027 and reacquired on 1 July 2027. No tax is payable then. The gain built up to that point is deferred until you actually sell, and it keeps the discount if it qualified for it; growth after it is indexed. The deemed price is market value just before 1 July 2027, unless you choose an apportionment method the Minister may set by legislative instrument (none has been issued yet), and that choice can be made when you lodge the return for the year you actually sell. Assets bought before 20 September 1985 have their own rule and lose their pre-CGT status at the same point. Some assets, including new dwellings and affordable housing, sit outside the reset.

Before ordering valuations, we identify which assets are affected and what evidence the eventual calculation will need. The useful first step is a map of your position, not a valuation invoice for everything you own.

A minimum tax on individuals’ capital gains. From 1 July 2027, resident individuals pay at least 30% on the relevant capital gains they make, directly or through a trust, after the transition. It works as a floor on the tax attributable to those gains, not a charge on the sale price: if the ordinary calculation produces less, the difference is added. Recipients of certain government payments are excluded. The question is not “30% of what I sell it for?” We work through the gain, the available concessions and the transition rules before comparing the after-tax result.

A wider gate for one small business concession. From the 2027-28 income year, the 50% active asset reduction becomes available to businesses with aggregated turnover below $10 million. The $2 million turnover test and the $6 million net asset test still apply to the 15-year exemption, the retirement exemption and the rollover. One gate widens; the other three do not.

Negative gearing is limited. From the 2027-28 income year, losses on residential investment property are quarantined rather than deducted against wages and other income. Exceptions cover new dwellings and interests acquired before 7.30 pm (ACT time) on 12 May 2026; for a property bought under a contract, the relevant time is when the contract was entered into, not settlement.

Smaller items. From 2026-27, employees can claim a standard work-related deduction of up to $1,000 against PAYG wage income, reduced by certain actual claims. A Working Australians tax offset of up to $250 applies from 2027-28. And from 10 August 2026, a self-managed super fund using a limited recourse borrowing arrangement to buy real property is generally limited to business real property, subject to transitional rules for existing arrangements. Buying property with SMSF borrowing now needs a fresh check of the asset and the transitional rules, before committing to the purchase or a refinance, not after the documents are signed.

What is proposed but is not law

The proposed trust tax has moved beyond the July consultation. On 3 September 2026 Treasury released exposure draft legislation for a 30% minimum tax on discretionary trusts from 1 July 2028. It is a trustee-level top-up, with an offset for individual beneficiaries, and it excludes fixed and widely held trusts, super funds, testamentary trusts, charities and some other categories. The draft includes an alternative that could let some trusts elect fixed distributions to nominated beneficiaries rather than restructure. As drafted, that election is available only to trusts in existence on 1 July 2028, only in the 2028-29 year, and it locks the distribution pattern in, with limited ability to vary it; an inconsistent distribution would revoke it with a heavy tax cost. That choice has trade-offs of its own. Expanded rollover relief for businesses that would rather restructure out of a trust is also proposed for three years from 1 July 2027. Consultation on the draft closed on 18 September 2026; it has not been introduced to Parliament as at the date of this note, and it is expected to change before it is.

Separately, the government has said it will progress, in its own legislation, the 2018-19 Budget measure to bring unpaid present entitlements within Division 7A, the issue the High Court’s decision in Bendel brought back into focus. Nothing on that has been released in draft.

We are comparing the draft options, not treating them as rules you can use today, and we do not restructure anyone on the strength of a draft.

What it means in practice

If you are planning to sell before 1 July 2027. The current rules apply: the discount, the current concession ordering and the current thresholds. The change does not make a pre-July 2027 sale automatically better; it makes the comparison worth running properly, including the buyer’s timetable and whether the contract date, which is generally when the CGT event happens, lands on the right side of the line.

If you will still own affected assets on 30 June 2027. Work out which assets the transition touches and what evidence the eventual calculation will need. For a business, that usually means agreeing a sensible valuation approach early rather than reconstructing one years later.

If you are choosing a structure now. The traditional reason to hold appreciating assets in a trust rather than a company, access to the discount, largely disappears for gains after 30 June 2027, and a trust minimum tax is proposed from 2028. That does not make companies the answer; it makes the old shortcut unreliable. Each case now has to be modelled on the rules that will apply when you exit. Our note on how we decide between a company and a trust sets out the questions.

If you run a small business with turnover between $2 million and $10 million. From 2027-28 the 50% active asset reduction opens to you on the turnover test, provided the other basic conditions are met. Combined with the loss of the general discount, the arithmetic of a sale changes shape rather than simply getting worse. The concessions note walks through how they fit together.

If you hold residential property with a loss. Check when you entered into the contract to buy it. If it was before 7.30 pm on 12 May 2026, the quarantining does not apply to that interest; if you are buying now, model the cash flow without the deduction against wages.

There is no reason to rush a transaction just because the rules are changing. But if you are already buying, selling or restructuring, check the timing before you commit.

Sources

• Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Federal Register of Legislation, as made 26 June 2026 (see Schedule 1, new Subdivision 112-E and Division 119; Schedule 2, s 26-155; Schedule 5).
• Exposure draft legislation: minimum tax on discretionary trusts, Treasurer’s media release, 3 September 2026.
• Consultation on discretionary trusts reform implementation, Treasurer’s media release, 8 July 2026.
• Key superannuation rates and thresholds: contributions caps, ATO (concessional cap $32,500 and CGT cap $1,935,000 for 2026-27).

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