2026 Tax Changes Australia: Federal Budget CGT & Negative Gearing Updates

On 25 June 2026, the first tranche of tax changes from the controversial Federal Budget passed through both houses of Parliament and have become law.  The Act is very complex and taxpayers with significant capital assets will be required to consider these changes carefully.  The capital gains tax changes are 49 pages.  

Below is a high-level summary of the key changes contained in this Act: 

1. Capital Gains Tax – Amendments for individuals and certain trusts  

• Removal of the 50% discount for capital gains calculated on the sale of assets which are owned on 1 July 2027 and acquired after this time.
• Assets are deemed to be disposed and re-acquired at their market value on 1 July 2027 (including pre-CGT assets).
• Indexation of the market value will occur after this date and will reduce capital gains when assets are sold in the future.  This means that for existing assets that have experienced significant growth, the 50% discount still will be available for capital gains on that growth accrued up until 1 July 2027.
• There is an exemption for “new residential dwellings” and affordable housing.
• There are specific rules about how you offset capital losses and the Act introduces new concepts of residential and non-residential capital gains.
• A minimum tax rate of 30% on capital gains will apply to individuals.  This means that certain items cannot be deducted from capital gains, however, eligible charitable donations will be able to be deducted.
• The small business concessions for existing assets remain unchanged.  However, certain small businesses with turnover of less than $10 Million now may be eligible for a 50% capital gains tax reduction, but these rules are very complex and only will apply to certain structures.
• Foreign residents are excluded from some of the amendments.

2. Changes to Negative Gearing – Amendments for individuals, certain trusts and companies 

• For residential properties acquired after 12 May 2026, losses on properties only can be offset against rental income or capital gains on those types of residential properties.  Unapplied losses can be carried forward into future years.
• Does not apply to non-residential dwellings (e.g. commercial properties).
• Does not apply to existing negatively geared rental properties.
• There are certain exemptions for social and affordable housing.
• There is an exemption for a “new residential dwelling”.  However, “new residential dwelling” is not specifically defined in the Act and will be determined by the Minister at a later date via a legislative instrument.

3. Working Australian Tax Offset 

• For the years beginning from 1 July 2027, working Australians earning labour income above the tax-free threshold ($18,200) will receive a non-refundable $250 offset.

4. Standard deduction for work-related expenses 

• For the years beginning from 1 July 2027, working Australians will be entitled to a standard deduction of up to $1,000 against their assessable labour income, subject to several rules.

5. Limited Recourse Borrowing Arrangements in SMSF for residential property 

• From 45 days after the Act receives royal assent (expected shortly), any residential property acquired by an SMSF will be unable to be financed by way of limited recourse borrowing.
• This amendment does not affect existing residential properties.
• This amendment does not affect “business real properties” (within the specific meaning of that term under the relevant superannuation legislation).

6. Additional comments on small business concessions 

While we applaud the Treasury for increasing the small business definition to encompass revenue up to $10 Million in the application of the capital gains tax legislation, the drafting provides significant complexity, and we do not agree with their comments that it will apply to 98% of businesses.  The drafting only applies to 1 of the 4 existing small business concessions. Furthermore, there are implications with the $6 Million valuation test, how this test applies to companies and the interaction with the 30% minimum capital gains tax.  We are continuing to review the legislation.

We encourage all clients who are planning on acquiring or selling significant CGT assets to make contact to discuss the above changes.  As we have already discussed with the majority of clients, we will be working with you in the coming year on the valuation of assets.  In the meantime, we recommend a continued focus on growing your business to be strong and sustainable.

 

 

Date: 30/06/2026

The Macro Group Limited AFSL:485843 Tax Agent Number 24 76 5236.

The information in this article contains general information only. We have not taken into consideration any of your personal objectives, financial situation or needs. Before taking any action, you should consider whether the general advice contained in this communication is appropriate to you having regard to your circumstances and needs and seek appropriate professional advice if you think you need it. We recommend that you consult a licensed or authorised financial adviser if you require financial advice that takes into account your personal circumstances.