The Changes Already Legislated
Five key measures have passed into law and will progressively take effect from 2026 and 2027.
CGT discount overhaul. From 1 July 2027, the current capital gains tax (CGT) discount will be replaced with a system based on cost base indexation, alongside a 30% minimum tax on gains. Notably, this will apply to gains accruing even on assets acquired before CGT was introduced (pre-CGT assets), marking a significant shift for long-term investors and family groups holding legacy assets.
A bigger break for small business. The turnover threshold for accessing the 50% active asset reduction, a key small business CGT concession, will rise substantially, from $2 million to $10 million. This opens the concession up to a much larger pool of mid-sized businesses planning a sale, restructure, or succession.
Negative gearing narrowed. From 1 July 2027, negative gearing for residential property will be limited to new residential dwellings only, subject to transitional rules for existing arrangements. This is one of the more structurally significant changes in the package, and property investors should start reviewing their portfolios and structures well before the effective date.
Support for workers. On the flip side, individuals stand to benefit from two new measures: the Working Australians Tax Offset, effective from 1 July 2027, and an instant $1,000 tax deduction for work-related expenses, effective from 1 July 2026 meaning this one is almost here.
SMSFs barred from residential property borrowing. Self-managed super funds (SMSFs) will no longer be able to enter new limited recourse borrowing arrangements (LRBAs) to acquire residential property, effective from 10 August 2026. Existing LRBAs are unaffected, and contracts entered before that date will still be protected, but the window to start a new arrangement is now genuinely closing.
What's Still Being Consulted On
Beyond the legislated measures, the Government has flagged several further proposals following a round of stakeholder consultation. These aren't law yet, but they signal clear policy direction and are worth watching closely.
- A targeted CGT discount for start-up investors. A new, more generous CGT discount is proposed for those investing in innovative start-ups, a move likely aimed at encouraging capital into the early-stage and venture space.
- Relief for testamentary trusts. Income of discretionary testamentary trusts may be exempted from the minimum tax proposed for trusts, providing welcome certainty for estate planning structures.
Why This Matters Now
Even where effective dates sit in 2027, the lead time is shorter than it looks. Structuring decisions around property, business sales, super contributions and estate plans often need to be made years in advance to achieve the intended outcome, and transitional rules, where they exist, tend to reward those who act early rather than those who wait for the deadline.
For small business owners, the expanded turnover threshold could open up succession and exit planning options that weren't previously available. For property investors, the shift in negative gearing rules warrants a hard look at portfolio strategy well before mid-2027.
Get Ahead of the Changes
Tax reform of this scale doesn't happen often, and the interaction between the legislated measures and the proposals still on the table makes personalised advice more valuable than ever. Our team is across every detail of this package and can help you understand exactly how it applies to your circumstances.
