What are the key changes to negative gearing in the 2026 Federal Budget?

The Australian Government plans to restrict negative gearing deductions to new residential builds only, moving away from the current system that allows deductions on any investment property.

How will the Capital Gains Tax (CGT) discount change for Australian investors?

The government intends to repeal the 1999 flat 50% CGT discount and replace it with an indexation system. Under this new regime, investors will only pay tax on "real" gains—the profit remaining after the original purchase price is adjusted for inflation.

Why is the government targeting negative gearing and CGT discounts now?

The reform is driven by a need for budget repair and a desire to improve housing affordability for younger Australians. Treasury data shows that negative gearing currently costs the Commonwealth $7.4 billion annually, while the CGT discount primarily benefits high-income earners.

What is the proposed 30% minimum tax on family trusts?

The government is considering a 30% flat tax on all distributions from discretionary trusts to curb "income splitting," where wealthy individuals distribute earnings to family members in lower tax brackets.

How could these tax reforms impact Australian house prices?

Analysis from Commonwealth Bank suggests that the combined impact of negative gearing and CGT changes could result in house prices being 3% to 6% lower than they otherwise would have been. While this may dampen capital growth for current holders, it is intended to lower the entry barrier for first-home buyers.

Will current property investors lose their tax benefits immediately?

No, the proposed changes are expected to include "grandfathering" provisions, meaning properties held before the budget announcement will likely retain their current tax treatment. There is also speculation regarding a one-year grace period for those who purchase existing homes immediately after the budget.

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Budget 2026: Major tax overhaul targets investors and trusts

Written by Isaac FrancisPublished May. 12 2026Last Updated May. 12 2026

The federal government is set to unveil a sweeping overhaul of negative gearing, capital gains tax, and trust distributions.

The centrepiece of the reform is a strategic wind-back of negative gearing, which currently costs the Commonwealth roughly $7.4 billion annually.

Reports indicate that deductions may soon be restricted to new builds only, a move designed to incentivise housing supply while curbing investor speculation in existing dwellings.

Existing owners are expected to be protected by grandfathering clauses, while a one-year grace period may apply to new purchases of established homes.

The government also plans to repeal the 1999 CGT discount, which currently allows investors to pay tax on only half of their gains.

Under the new proposal, the flat 50% discount will be replaced by an indexation system, where taxable gains are adjusted for inflation.

The shift aims to ensure only "real" profits are taxed, potentially raising $20 billion over the next decade.

To prevent income splitting among wealthy families, Labor is considering a 30% minimum tax on all distributions.