If you own an investment property or hold shares outside superannuation, you've probably seen the headlines. The 50% capital gains tax discount is being replaced. Negative gearing is being narrowed. And after months of debate, both changes are now locked in as law.

For many clients, the immediate question is simple: does this affect me, and if so, when? The honest answer is that it depends on what you hold, when you bought it, and what you plan to do next. This isn't a reason to panic or to make rushed decisions. But it is worth understanding clearly, because the rules that applied to your portfolio for the last two decades are genuinely changing.

What was announced, and what's now law

On 12 May 2026, as part of the Federal Budget, the government announced reforms to negative gearing and capital gains tax. Those reforms have since passed both houses of Parliament and received royal assent, as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026. They are confirmed law, not a proposal.

Two separate changes are involved, and it's worth keeping them distinct.

Change one: the CGT discount is being replaced

Since 1999, individuals, trusts and partnerships have generally been able to discount a capital gain by 50% if they held the asset for more than 12 months. From 1 July 2027, that discount is replaced with cost base indexation and a 30% minimum tax rate on the gain.

In practice, this means the original cost of an asset will be adjusted for inflation (using the Consumer Price Index) before the taxable gain is calculated, so you're only taxed on the real, inflation-adjusted gain rather than the full nominal gain. A minimum effective tax rate of 30% will then apply to that indexed gain.

Three details matter here:

• The change only applies prospectively. The 50% discount continues to apply to gains that accrue up to 1 July 2027. Indexation and the 30% minimum rate apply to gains accruing after that date. If you sell an asset in coming years, your gain will effectively be split into a pre- and post-2027 component.
• The split is done through a "deemed sale" at 30 June 2027. Under the transitional rules, every CGT asset you hold at that date is treated as sold and immediately re-bought just before 1 July 2027. No tax is payable at that point. The gain accrued to then keeps the 50% discount and is deferred until you actually sell; growth after that date falls under the new rules. The split is measured primarily by market value at 1 July 2027, which makes one practical step worth diarising now: keep evidence of what your assets were worth at that date. For listed shares the closing price does the job; for property, a contemporaneous valuation or appraisal is far cheaper than reconstructing one years later. This applies even to pre-CGT assets (bought before 20 September 1985), because growth on those assets after 1 July 2027 becomes taxable for the first time.
• New residential builds get a choice. Investors who buy a new-build residential dwelling can choose, when they eventually sell, between the 50% discount and indexation with the 30% minimum rate. It's worth being precise here: new residential dwellings are the only asset class that kept the 50% discount in the final legislation (a proposed power for the Minister to add other asset classes was removed in the Senate), and choosing indexation instead also brings that gain within the 30% minimum rate. Affordable housing keeps its existing discount arrangements of up to 60%.

Change two: negative gearing is narrowed to new builds

From the 2027–28 income year, negative gearing on residential investment property purchased after 7:30pm AEST on 12 May 2026 (Budget night) will only be available for new builds. For established dwellings bought after that date, net rental losses will be quarantined: deductible only against residential property income and gains (and carried forward until used), rather than against your salary or other income.

The final law contains specific exceptions to this quarantine: new residential dwellings, dwellings acquired before Budget night (grandfathered, with no cap on the number of properties per investor — a proposed one-dwelling limit did not pass), widely held trusts and complying superannuation entities.

The government's stated intent is to shift the tax incentive toward the construction of new housing supply, rather than the purchase of existing dwellings.

What's grandfathered, and what isn't

This is the part most worth sitting with, because the reforms are less sweeping than the headlines imply.

• Properties held at Budget night (12 May 2026, 7:30pm AEST) continue to be eligible for negative gearing under the existing rules for as long as you hold them. You are not forced to sell, and you are not retrospectively taxed on past decisions.
• Capital gains that accrue before 1 July 2027 keep the 50% discount treatment, regardless of when you eventually sell.
• Only new purchases of established dwellings from Budget night onward, and gains accruing from 1 July 2027 onward, fall under the new rules.

In other words, if you already own investment property or shares, very little changes for you immediately. The reforms are mostly about how new investment decisions are taxed going forward.

What hasn't changed

Just as important as what changed is what didn't. Several long-standing settings were left untouched by the final legislation:

• Your family home. The main residence exemption is unchanged. Selling the home you live in remains free of CGT in the ordinary way.
• Superannuation. Complying super funds are excluded from the new regime entirely. The one-third CGT discount inside super continues, which means an effective rate of around 10% on long-held gains in accumulation phase, and 0% on assets supporting a retirement pension. Nothing about the reform requires a valuation of super assets at 1 July 2027 or changes how your fund's gains are taxed.
• Companies. Companies never had the CGT discount, so their treatment is unchanged.
• Small business CGT concessions. All four concessions survive (more on this below).
• The other familiar super settings. Contribution caps, the Division 293 high-income contribution tax and preservation rules were not part of this package. The separate tax on very large super balances (Division 296) is its own measure and sits apart from these reforms.

Why the comparison matters. The practical effect of the changes is to widen the gap between how the same gain is taxed in different structures. From 1 July 2027, a gain on an asset held personally faces indexation and at least a 30% rate; the same gain inside super in accumulation phase faces around 10%, and potentially 0% in pension phase; and the family home remains exempt. That shift in relative treatment — not any single rule — is the bigger planning story, and it's why decisions about where new investments sit (personal names, super, trust or company) deserve more attention than they needed under the old settings. None of this makes one structure right for everyone: contribution caps, access rules and your timeframe all constrain what's possible, and super's tax advantages come with preservation until retirement.

What it means for family and discretionary trusts

Trusts are squarely inside the CGT changes, though it's worth being precise about how. A trust doesn't pay tax on capital gains itself in the ordinary course — gains flow through to beneficiaries, and under the current rules an individual beneficiary has been able to apply the 50% discount to a distributed gain. What the reform does is remove discount eligibility for gains made through trusts, so that from 1 July 2027 a gain distributed to a beneficiary is worked out under indexation with the 30% minimum rate instead. In other words, holding an asset through a family trust doesn't preserve the old treatment: the new rules follow the gain through to the beneficiary. The deemed-sale transition at 30 June 2027 applies to trust assets too, so a family trust holding shares or an investment property should keep evidence of asset values at 1 July 2027, just as an individual should.

Two further points are specific to trusts:

• The negative gearing quarantine applies to family trusts. The exclusion for "widely held" trusts covers large public vehicles, not private discretionary trusts. An established dwelling bought by a family trust after Budget night falls under the new quarantine rules.
• A separate 30% minimum tax on discretionary trusts is proposed from 1 July 2028. Announced in the same Budget but legislated separately, this measure would tax distributions of trust income at 30% at the trustee level, with a non-refundable credit for individual beneficiaries. It is not yet law, and the detail may change. Alongside it, the government has proposed a three-year restructure rollover (from 1 July 2027 to 30 June 2030) to let trusts move assets into companies or fixed trusts without triggering immediate tax. If your family group uses a discretionary trust, this is worth watching closely — but it's a reason to plan, not to restructure pre-emptively before the rules are settled.

Trust distributions, streaming of capital gains and the interaction between the two measures are areas where the detail genuinely matters. This is one to work through with your accountant with your specific deed and beneficiaries in front of you.

What it means for small business owners

The four small business CGT concessions — the 15-year exemption, the 50% active asset reduction, the retirement exemption and the rollover — all survive the reform. If you're selling a business or business premises, these concessions can still reduce or eliminate the taxable gain in the same way they do now, and they apply on top of whichever general treatment (discount or indexation) is available.

The Senate went one step further: the turnover threshold for the 50% active asset reduction rises from $2 million to $10 million aggregated turnover from the 2027–28 income year, which brings a meaningfully larger group of business owners within reach of that concession. The other three concessions keep their existing $2 million turnover / $6 million net asset value tests.

For business owners weighing an eventual sale, the combination — general discount replaced by indexation, but a more generous active asset reduction — means the arithmetic of a future sale changes in both directions. Worth modelling properly with your accountant before assuming you're better or worse off.

What this means for you: a practical framework

Rather than a generic checklist, it's more useful to think through where you sit:

If you already own investment property purchased before 12 May 2026: Your negative gearing treatment is unaffected. No action is required, though it's worth understanding how the CGT change will apply if and when you sell after 1 July 2027.

If you're considering buying an investment property now: The type of property, new build versus established dwelling, will materially affect your ongoing tax treatment. This is worth factoring into any purchase decision, alongside the usual considerations of location, yield and long-term suitability.

If you hold shares or managed funds outside super: The CGT discount change is the more relevant one. Longer-term holdings accumulated before 1 July 2027 retain the current 50% discount on gains accrued to that date. Decisions about when to realise gains, and how your portfolio is structured between super and personal names, may be worth revisiting with your adviser and accountant as 2027 approaches.

If you're planning to sell an asset around 2027: Timing may matter more than usual. This is a conversation to have well before the date, not in the weeks beforehand.

For everyone holding CGT assets outside super: Plan to have evidence of market value at 1 July 2027 — closing prices for listed holdings, a valuation or appraisal for property. It's a small administrative step now that avoids a difficult reconstruction exercise when you eventually sell.

Common mistakes to avoid:

• Assuming the changes are retrospective. They are not, for either negative gearing or CGT.
• Making a rushed purchase or sale before 1 July 2027 purely to "beat" the rules, without weighing the decision on its own merits.
• Overlooking the state of your total superannuation balance and personal investments together. Some of the commentary around these reforms (and the related changes to how large superannuation balances are taxed) points to a broader shift in incentives between investing personally and investing through super. That's a bigger-picture conversation worth having with your adviser.

The bottom line

The CGT and negative gearing reforms are real, they are now law, and they do change the incentives for property and share investors from 1 July 2027 onward. But for existing investments, the impact is limited by design. There's no need for sudden action. What's worth doing is understanding where your portfolio sits relative to the new rules, and factoring the change into any purchase, sale or restructuring decisions between now and 2027.

Speak with an adviser

If you're weighing up a property purchase, considering when to sell an asset with an accumulated gain, or simply want to understand how these changes interact with your broader financial plan, it may be worth reviewing your position before making changes. We're happy to talk it through.

Important information

This article is general information only. It has been prepared without taking into account your objectives, financial situation or needs, and should not be relied on as personal financial or tax advice. Tax outcomes depend on your individual circumstances, and we'd recommend speaking with your accountant or tax adviser, as well as your financial adviser, before acting on anything above. FinPeak Advisers is a Corporate Authorised Representative (1249766) of Spark Advisors Australia (AFSL 380552).