The 2027 Capital Gains Tax Discount Change: What It Means for Property Investors

Written by Christopher Hall, AdvDipFP | Authorised Representative, AFSL 526688 | June 2026

From 1 July 2027, the 50% capital gains tax (CGT) discount is to be replaced by a discount based on inflation, with a minimum 30% tax on gains, and negative gearing is to be limited to new builds — measures announced in the 2026–27 Federal Budget (Australian Government, 2026). Existing arrangements remain unchanged for properties held before Budget night, 12 May 2026, and the CGT reforms apply only to gains arising after 1 July 2027. For established-property investors, the change alters the after-tax economics of holding — a planning consideration, not a prediction about prices.

What is changing, and from when?

The 2026–27 Federal Budget set out two linked changes to how investment property is taxed (Australian Government, 2026):

• The 50% CGT discount is to be replaced by an inflation-based (indexation) discount. Rather than halving a gain, the cost base would be lifted in line with inflation before the gain is taxed, so relief applies to the part of a gain that reflects inflation rather than a flat 50%. A minimum 30% tax on gains is also introduced. These reforms apply only to gains arising after 1 July 2027.

• Negative gearing is to be limited to new builds from 1 July 2027, to focus tax support on new supply. Existing arrangements remain unchanged for all properties held before Budget night (12 May 2026). For established housing bought after that date, investors would be able to carry forward unused losses to future years, but not deduct them against other income such as wages.

Investors in new builds will be able to choose the 50% CGT discount or the new arrangements (Australian Government, 2026). As announced Budget measures, the changes are subject to the usual legislative process; how they apply to any individual depends on their circumstances, and a qualified adviser or accountant can confirm the position.

Who does the change affect?

The practical effect lands on established-property investors at the margin — the comparatively small group whose decisions help set prices. Most Australians who own a rental property own just one, but the investors who hold most of Australia's rental housing own multiple properties, and it is at that margin that changes to holding costs and after-tax returns are felt first. It is the same dynamic that explains why a small change at the margin can move house prices in either direction. The CGT and negative-gearing changes are one set of settings among many — interest rates, credit conditions, supply and migration all move the market too — so no single change determines what happens to prices.

What should property investors actually plan for?

A change that alters the after-tax economics of holding a property can bring a sale decision forward — prompting some investors to weigh whether to sell before 1 July 2027, restructure ownership, or hold. Christopher Hall, AdvDipFP, Authorised Representative, AFSL 526688, has completed more than 500 life insurance policy reviews for Australian families, and the pattern he returns to here is not the tax rule itself, but the difference between a sale made by choice and a sale forced by circumstance.

Residential property is an illiquid asset. In Christopher Hall's experience, a property portfolio cannot be partially sold the way a share or pension account can be drawn down — adjusting it usually means a full sale event, with its own tax, timing and market consequences. That illiquidity is manageable while a sale stays a choice. The risk Arrow Equities is concerned with is the sale forced early — when an owner dies or can no longer work, and a mortgage or a family's income still has to be met. A forced sale at the wrong moment in the market is the worst-timed sale of all, and it is exactly the outcome a tax-driven "should we sell?" conversation tends to surface.

This is where life, total and permanent disability (TPD) and income protection cover earn their place. Cover sized to the debt and to the income a property depends on means that if the worst happens, the family has the cash to clear the loan or replace the income — and the decision to sell stays a decision, made on their terms, rather than a forced sale at a moment not of their choosing. It is the same concentration risk in a property-heavy portfolio the rest of this cluster examines, viewed through the question of what happens to the people behind the asset.

The CGT change sits alongside other settings now in motion — the Division 296 super tax change and the 2026 ban on new SMSF property borrowing among them — and as those settings prompt investors to revisit how property is held, it is a natural moment to check that the protection behind it still fits. Investors weighing a restructure may wish to have their existing life, TPD and income protection cover reviewed by a specialist life insurance adviser before any property is sold or any ownership change is made, so the protection is mapped before the structure changes. Income protection premiums held personally may, depending on individual circumstances, be claimable as a personal tax deduction — a point worth confirming with a qualified adviser or accountant when structures are reviewed.

Tax settings will keep changing; what a household can control is the structure and the protection around the wealth it has built. That is the focus of Arrow Equities' work on protecting the wealth tied up in property — making sure a change in the rules does not become a forced change in circumstances.

Frequently Asked Questions

What are the 2027 capital gains tax discount changes in Australia?

From 1 July 2027, the 50% capital gains tax discount is to be replaced by a discount based on inflation, and a minimum 30% tax on gains is introduced (Australian Government, 2026). Rather than halving a gain, the cost base is lifted in line with inflation before the gain is taxed, so relief applies to the inflation component rather than a flat 50%. The reforms apply only to gains arising after 1 July 2027. They were announced as Budget measures and are subject to the legislative process.

When do the CGT and negative gearing changes start?

Both changes are to take effect from 1 July 2027 (Australian Government, 2026). The CGT reforms apply only to gains arising after that date. For negative gearing, existing arrangements remain unchanged for all properties held before Budget night, 12 May 2026.

Will the 2027 changes affect property already owned?

For negative gearing, existing arrangements remain unchanged for all properties held before Budget night, 12 May 2026 (Australian Government, 2026). The CGT reforms apply to gains arising after 1 July 2027. How the rules apply to any individual depends on their circumstances, and a qualified adviser or accountant can confirm the position.

Is negative gearing being abolished in Australia?

No. Under the 2026–27 Budget, negative gearing is to be limited to new builds from 1 July 2027, to focus tax support on new supply (Australian Government, 2026). Properties held before Budget night are unchanged. For established housing bought afterwards, investors would be able to carry forward unused losses but not deduct them against other income such as wages; new-build investors keep full deduction rights.

Does selling a property before 1 July 2027 keep the 50% CGT discount?

The announced CGT reforms apply only to gains arising after 1 July 2027 (Australian Government, 2026), which is why the period before that date is sometimes described as a planning window. Whether selling, holding or restructuring suits any individual depends entirely on their circumstances — a qualified adviser or accountant can assess what applies before any decision is made.

What happens to a property plan if an owner dies or cannot work before they sell?

Residential property is illiquid and usually cannot be sold in part. If an owner dies or can no longer work, a mortgage or a family's income may still need to be met, which can force a sale at the wrong time. In Christopher Hall's experience across 500+ policy reviews, life, TPD and income protection cover sized to the debt and income can provide the cash to avoid that — keeping a sale a choice rather than a forced event. Reviewing existing cover with a qualified adviser is the usual starting point.

Book a quick review with an adviser

Book a quick review with an adviser now. For investors weighing whether to sell, restructure or hold ahead of the 2027 changes, a review of the cover and structure behind a property plan checks that life, TPD and income protection are sized to the debt and income a property carries — so a change in the tax rules does not become a forced change in circumstances.

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About the Author

Christopher Hall, AdvDipFP, is the principal financial adviser at Arrow Equities and an Authorised Representative under AFSL 526688. He has completed more than 500 life insurance policy reviews for Australian families, with a specialisation in life risk insurance.

Bibliography

#	Source	Type	Date
1	Australian Government — Budget 2026–27: Tax Reform (budget.gov.au) — 50% CGT discount replaced by an inflation-based discount + minimum 30% tax on gains from 1 July 2027 (applying only to gains arising after that date; new-build investors may choose the 50% discount or the new arrangements); negative gearing limited to new builds from 1 July 2027, with existing arrangements unchanged for all properties held before Budget night. Budget handed down 12 May 2026.	Tier 1 — government/institutional	2026
2	Christopher Hall, Arrow Equities — proprietary observations from 500+ life insurance policy reviews	CH practitioner	2026

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