The capital gains tax (CGT) and negative gearing changes announced in the May Budget have continued to attract attention, particularly around property valuations at 1 July 2027.
Understandably, many of our clients are asking what the changes mean for them and whether they need to take action now.
While the first round of legislation passed in June 2026, several important details are still being finalised. This means the advice that was appropriate immediately after the Budget may need to be revisited as more information becomes available.
At Advisory Partner, we’re following these developments closely. Our priority is to understand how the final rules will affect you and provide advice based on the legislation, not the headlines.
This is the first in a series of updates as the position develops.
What We Know So Far
The first round of legislation passed in late June 2026, establishing several key changes scheduled to commence from 1 July 2027.
Here’s a summary of the main changes:
- The 50% CGT discount will be replaced. For individuals, trusts and partnerships, the existing discount will be replaced by an inflation-adjusted cost base and a minimum 30% tax rate on capital gains. Companies are not affected by this change.
- Gains accrued before 1 July 2027 are expected to retain their existing treatment. The intention is to distinguish between gains made before and after the commencement date, although the final rules for calculating this split are still being developed.
- Negative gearing will be restricted for certain established residential properties. The changes apply to established properties purchased after 7:30 pm on 12 May 2026. Existing holdings and properties under contract before the relevant cut-off retain their current treatment, while new builds are excluded from the restriction.
- The main residence exemption remains unchanged. Your family home continues to be covered by the existing rules, subject to the usual eligibility requirements.
- Some small business CGT concessions have been expanded. The turnover threshold for the 50% active asset reduction has increased from $2 million to $10 million. Other concessions, including the 15-year exemption and retirement exemption, retain their existing thresholds.
These changes establish the broad direction of the reforms. However, the detail will matter when applying the new rules to individual circumstances.
What’s Still Being Finalised?
Further legislation and guidance are needed to clarify how some of the changes will operate in practice.
Areas still being worked through include:
- How a property will qualify as a new residential property for negative gearing purposes.
- How the rules will apply to inherited property, deceased estates and trusts.
- How property transfers following a relationship breakdown will be treated.
- How CGT rollovers and other existing concessions will interact with the new rules.
- How gains will be apportioned between the existing and new CGT arrangements at 1 July 2027.
These details may have a material impact on the tax outcomes for some property owners and investors. Until the rules are settled, it’s important to be cautious about drawing conclusions based on the information currently available.
The 1 July 2027 Property Valuation Question
One of the most widely discussed aspects of the reforms is whether property owners should obtain a market valuation at 1 July 2027.
Under the proposed arrangements, an asset sold after this date may need to have its capital gain apportioned between the period before and the period after the new rules commence. Establishing the value at 1 July 2027 could therefore become relevant to calculating the taxable gain.
Treasury has released a draft formula that would estimate the value at that date using the asset’s purchase and eventual sale prices. A market valuation is another potential approach.
This has prompted a number of advertisements encouraging property owners to arrange valuations now.
Before making a decision, there are a few things worth understanding:
- A market valuation may not be compulsory. Under the current draft, an alternative calculation method is proposed, with the appropriate approach generally determined when the asset is sold.
- The proposed formula is not yet final. Its methodology and application may change as the legislation and supporting guidance are developed.
- A valuation may or may not be worthwhile. The answer will depend on factors such as the property type, changes in its value over time and how long you intend to hold it.
There is still time before 1 July 2027, and the final requirements are not yet settled. We recommend avoiding rushed decisions or unnecessary expenditure based solely on advertising or media coverage.
If you own an investment property and are unsure whether a valuation will be appropriate, speak with your adviser before committing to one.
Other Details Worth Understanding
Beyond the headline changes, several other provisions may affect particular taxpayers. These are worth keeping in mind as we work through the implications of the reforms.
Your residency history may matter.
People who have been foreign or temporary residents at any time since May 2012 may be ineligible for the new inflation adjustment on their capital gains. If you or a family member has lived or worked overseas, let your adviser know so this can be considered as part of your circumstances.
Assets acquired before September 1985 may be affected.
Assets that were previously exempt from CGT because they were acquired before 20 September 1985 may become subject to CGT on growth occurring after 1 July 2027. Growth accrued before that date is intended to retain its existing treatment. This may also affect older family companies holding these assets.
Certain government payment recipients may be exempt from the minimum tax.
The proposed rules include exemptions for recipients of certain government payments, including the Age Pension, JobSeeker and the Farm Household Allowance. Eligibility will depend on the final provisions.
Superannuation contribution deductions may not reduce the minimum tax.
Some taxpayers make deductible superannuation contributions in a year they realise a capital gain to help manage their overall tax position. Under the proposed rules, these deductions would not reduce the minimum 30% tax applying to the relevant gain. This is an important consideration when planning the timing of asset sales.
Capital losses will be subject to ordering rules.
From 1 July 2027, the proposed arrangements will restrict the ability to choose how capital losses are applied against gains. The final rules will determine how these calculations operate.
Negative gearing losses are not simply disappearing.
Where deductions are restricted under the new arrangements, the proposed treatment allows eligible losses to be carried forward and applied against future residential property income or gains, subject to the applicable rules.
The proposed trust tax is a separate reform.
A minimum 30% tax on discretionary trusts has been proposed for commencement from 1 July 2028. This is separate from the CGT and negative gearing changes and remains subject to consultation and further legislative development.
The implications of these provisions will vary. Their relevance will depend on the assets you hold, your residency history, your income and your broader financial position.
What Should You Do Now?
For most people, the immediate priority is to understand the changes without rushing into decisions.
At this stage, we recommend that you:
- Avoid making major decisions based on headlines alone. The final legislation and supporting guidance will be important in determining the right course of action.
- Keep accurate records. Retain purchase documents, records of capital improvements and other information relevant to the cost base of your assets.
- Consider your longer-term plans. If you are thinking about buying or selling an investment property, restructuring your investments or transferring assets, discuss the potential implications with your adviser.
- Seek advice before acting. Your circumstances will determine which provisions are relevant and whether any action is appropriate.
At Advisory Partner, we’re monitoring the changes as further information becomes available. We’ll continue to share updates as the legislation is finalised and we gain a clearer understanding of the practical implications for our clients.
Our approach is to provide advice that reflects the rules as they stand and how they apply to your individual circumstances.
Have Questions About Your Situation?
If you’re unsure how the proposed changes may affect you, get in contact the Advisory Partner team.
We can help you understand the issues relevant to your circumstances and identify what needs to be considered as the rules develop – we’ll help you move forward with clarity and confidence.
This article contains general information only and does not take into account your objectives, financial situation or needs. The information is current as at October 2026 and reflects legislation, proposals and draft provisions at that time. Some details remain subject to further legislation and guidance. You should seek professional advice before making decisions based on this information.