Labor’s CGT and Negative Gearing Reforms Reshape Australian Tax System, June 13

Treasurer Jim Chalmers handed down the 2026–27 Federal Budget on May 12, 2026, with sweeping changes to capital gains tax and negative gearing rules. The government framed the reforms as necessary to improve housing affordability and support younger Australians. These are proposed measures not yet law—Parliament must pass legislation before they take effect. Investors, accountants, and industry groups have already divided over whether the changes represent structural reform or will discourage investment.

How Capital Gains Tax Will Change

From July 1, 2027, the government will replace the current 50% capital gains tax discount with a cost base indexation method. This means gains will be adjusted for inflation before tax is applied. From July 1, 2028, a minimum 30% tax rate will apply to all capital gains, regardless of how long an asset was held.

Former Treasury official Cathal Leslie warned that combined with the existing 30% corporate tax rate, shareholders in Australian companies could face an integrated tax rate of more than 50% on retained corporate profits. This would be the second-highest rate in the world, according to Leslie.

Negative Gearing Restrictions Take Effect

From July 1, 2027, negative gearing benefits will be limited to new builds only. Investors can no longer claim tax deductions on losses from existing rental properties. The government says this change targets housing affordability by discouraging investment in established properties.

Industry groups and accountants warn the restrictions could increase tax complexity and discourage investment activity. The Australian Shareholders Association has submitted feedback to Parliament, drawing on responses from 1,112 investors through its Investor Sentiment Survey.

What Workers and Small Businesses Get

The Budget includes tax relief for workers and small business owners. From July 1, 2026, the 16% marginal tax rate drops to 15%, then to 14% on July 1, 2027. Workers can claim a $1,000 instant tax deduction for work-related expenses from July 1, 2026, without needing receipts.

Small businesses with turnover under $10 million get a permanent $20,000 instant asset write-off from July 1, 2026. Loss carry back returns permanently for companies with turnover up to $1 billion. These measures aim to support business investment and growth.

Industry Reaction and Next Steps

The Australian Shareholders Association called for the current 50% CGT discount to be retained beyond July 1, 2027. The group stressed that major tax changes need proper consultation, clear transitional rules, and plain-English guidance before implementation. The Housing Industry Association flagged concerns about the reforms.

The Senate Economics Legislation Committee is holding public hearings to examine the proposed changes. Dates and details may change as legislation moves through Parliament. Investors should speak to a registered tax adviser before making decisions based on these proposals.

Final Thoughts

Labor’s tax reforms will reshape how Australians invest in property and shares from July 2027. Investors face higher capital gains taxes and restricted negative gearing, while workers and small businesses get modest tax cuts. The changes remain proposals—Parliament must pass them into law.

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