Key Federal Budget Tax Measures Now Law: What Investors Should Know
The Government’s first tranche of Federal Budget tax reform measures has now passed Parliament and received Royal Assent. The reforms are contained in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026.¹
These changes include significant reforms to capital gains tax (CGT), negative gearing, work-related deductions, tax offsets, small business CGT concessions and self-managed super fund borrowing arrangements. While some measures do not commence immediately, they may affect future investment decisions, property strategies and tax planning.
For many Australians, the key message is this: the rules are changing, but not all changes apply straight away. It is important to understand the timing, the transitional arrangements and whether your existing investments may be affected.
Capital Gains Tax Changes From 1 July 2027
From 1 July 2027, the Government will replace the current 50% CGT discount with an indexed cost base method for eligible capital gains.² This means the cost base of an asset may be adjusted for inflation, with tax applying to the real gain rather than the full nominal gain.²
The reforms also introduce a minimum 30% tax rate on realised capital gains accrued from 1 July 2027.² The Australian Taxation Office has confirmed that the CGT reforms will only apply to gains that accrue after 1 July 2027.³
This is an important distinction for investors. Assets held before the commencement date are not necessarily taxed entirely under the new system. Instead, the new treatment is intended to apply to gains accrued from 1 July 2027 onwards.³
For clients with investment properties, shares, managed investments or other CGT assets, this may make record keeping and future planning more important. The timing of asset sales, future investment choices and the use of tax-effective structures may need to be reviewed with professional advice.
Negative Gearing Limited to New Builds
The legislation also introduces changes to negative gearing for residential property. From 1 July 2027, negative gearing benefits will be limited to new-build residential properties.³
The Australian Taxation Office states that properties held at the Budget announcement time of 7:30pm AEST on 12 May 2026 will be exempt from the negative gearing changes.³ This means existing property investors may have different treatment compared with those who acquire established residential property after that date.
For investors purchasing established residential property after Budget night, unused rental losses may not be able to be offset against other income such as salary and wages in the same way. The Government’s Budget materials state that those losses may instead be carried forward and applied against future residential property income.²
These reforms are intended to direct more investment toward newly built housing supply. However, individual outcomes will depend on when the property was acquired, the type of property, ownership structure and future income position.
$1,000 Standard Deduction for Work-Related Expenses
From 1 July 2026, a new $1,000 standard deduction for work-related expenses will apply for eligible individuals.¹
This measure is designed to simplify the process of claiming work-related expenses. Rather than keeping detailed records for smaller work-related claims, eligible taxpayers may be able to rely on the standard deduction. However, where actual deductible expenses exceed the standard amount, taxpayers should seek guidance from their tax adviser about the most appropriate claiming method.
Working Australians Tax Offset
The reforms also introduce the Working Australians Tax Offset, which is scheduled to commence from 1 July 2027.¹ The Budget tax reform overview describes this as an ongoing annual tax cut for eligible Australian workers.²
While this measure may provide some tax relief, clients should remember that broader changes to CGT and property deductions may still affect their overall tax position depending on their personal circumstances.
Small Business CGT Concessions
As part of amendments to the legislation, the turnover threshold for access to the small business 50% active asset reduction will increase from $2 million to $10 million from 1 July 2027.⁴
This may be relevant for business owners considering succession planning, business sale opportunities or restructuring. The small business CGT concessions are complex, so eligibility should be carefully reviewed with professional advice before any transaction is undertaken.
SMSF Borrowing Changes
The legislation also includes changes to limited recourse borrowing arrangements (LRBAs) for self-managed super funds (SMSFs). The Act amends the superannuation borrowing rules so that, for real property, new LRBA arrangements are limited to business real property.¹
This means SMSFs will be restricted from entering into new LRBA arrangements for residential real property, except where the property qualifies as business real property.¹ The commencement table for the Act states that the LRBA changes commence on the 45th day after Royal Assent.¹
Existing arrangements may need to be reviewed carefully before refinancing, restructuring or acquiring further property through an SMSF. Clients should seek specialist SMSF, legal and tax advice before making decisions in this area.
Further Consultation and Future Legislation
The Government has indicated that further tranches of legislation will follow as the broader tax reform package is implemented.² Further consultation is expected in areas such as discretionary trusts, the definition of new builds and types of exempt housing investment, including affordable housing.²
This means some details may continue to evolve. Clients should be cautious about making major investment or ownership decisions based only on headlines, as the final application of these rules can depend on legislation, ATO guidance and individual circumstances.
What Clients Should Consider
These reforms may affect different clients in different ways. For some, the changes may have little immediate impact. For others, particularly those with investment properties, large unrealised capital gains, business assets, SMSFs or trust structures, the new rules may be more significant.
It may be worth reviewing:
Investment property ownership and acquisition plans
Assets with significant unrealised capital gains
Business succession or sale plans
SMSF property borrowing arrangements
Trust structures and tax planning strategies
Record keeping for assets held before and after key commencement dates
The key is not to rush decisions, but to understand how the changes may apply to your circumstances and seek advice before acting.
Final Thoughts
The passing of these reforms marks a major shift in Australia’s tax landscape. While some measures commence from 1 July 2026, many of the larger investment-related changes begin from 1 July 2027.¹ ²
For clients, this creates an opportunity to review existing arrangements, understand potential future impacts and make informed decisions with the support of professional advice.
References
Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Federal Register of Legislation. View source [legislation.gov.au]
Tax reform | Budget 2026–27, Australian Government Budget website. View source [budget.gov.au]
Tax reform – Boosting home ownership – Reforming negative gearing and capital gains tax, Australian Taxation Office. View source [ato.gov.au]
2026–27 Federal Budget – CGT and housing tax reform, PwC Australia. View source [pwc.com.au]
Your Vision Financial Solutions Pty Ltd ABN 64 650 296 478 and its Advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This article has been prepared without taking into account your personal objectives, financial situation or needs.