Key Highlights of Australia's Latest Tax Reforms: Major Changes to Negative Gearing and CGT
Today let's take a brief look at the core content of Australia's latest tax reforms. These changes focus mainly on two key areas: Negative Gearing and the Capital Gains Tax (CGT) discount rules, and they may have a noticeable impact on the structure of future property investment.
1. Changes to Negative Gearing rules
Current rules
Under the existing system, if an investment property makes a loss after deducting various expenses (including interest, management fees, maintenance costs, etc.) from its rental income, that loss can be used to offset your personal salary income.
Here's a simple example:
Annual salary income: 200,000
Investment property loss: 30,000
In this case, tax is only calculated on 170,000 of income. This is one of the very important tax advantages of property investment in Australia.
New policy (effective from 1 July 2027)
Under the new arrangements, the negative gearing rules for established properties will be adjusted:
Established properties already held before 7:30pm on 12 May 2026:
Can continue to enjoy the existing negative gearing policy
Established properties purchased between 13 May 2026 and 30 June 2027:
Can still enjoy negative gearing in the short term, but from 1 July 2027, newly incurred investment losses will no longer be directly deductible against current-year income. Under the new policy, future investment losses will no longer be offset against salary income in the current period, but will instead be allowed to accumulate and be used to offset Capital Gains Tax (CGT) when the property is sold.
New properties:
The current negative gearing policy remains unchanged
2. What is a "New Residential Premises"
The policy specifically distinguishes between "new properties" and "established properties", with "new residential premises" generally including:
Newly built dwellings on vacant land
A duplex rebuilt after demolishing an old dwelling
Multiple new dwellings built after a land subdivision
Apartment development projects
However, please note:
If a single old dwelling is simply demolished and then rebuilt as a single dwelling, it is no longer considered a "new residential premises".
3. Adjustments to the Capital Gains Tax (CGT) discount
Current rules
Under the existing system: assets held for more than 12 months are eligible for a 50% capital gains tax discount
For example:
If a property gains 1,000,000 in value, only 500,000 actually needs to be included in taxable income. This policy generally applies to Australian PRs or citizens.
New policy changes
The CGT rules will undergo a structural adjustment in the future:
Capital gains accrued before 1 July 2027:
Will still be calculated under the existing rules
Capital gains accrued after 1 July 2027:
Will instead be calculated using inflation indexation
New properties: continue to enjoy the existing CGT discount policy
4. Summary of the overall trend
This round of tax reform points to a very clear direction:
The policy is gradually reducing the tax advantages of established investment properties
While relatively encouraging new residential assets
In the future, both the negative gearing and capital gains tax structures are gradually "tilting towards new properties".