What is changing
Four measures, announced in the 25 March 2025 Federal Budget, change how investment property is taxed:
- CGT split at 1 July 2027 - capital gains accrued before that date keep current treatment (50% discount for individuals); gains accrued after lose the discount and face a 30% minimum tax floor.
- Negative-gearing restriction on established residential property from 1 July 2027 - net losses can no longer offset salary or other income.
- Trust minimum tax of 30% from 1 July 2028 - caps the income-splitting advantage of discretionary trusts.
- Division 296 super tax from 2026-27 - additional 15% on the portion of super earnings attributable to a Total Super Balance above $3M.
None is law yet. The Bills had not been introduced at the time of writing (late 2026). But the rhetoric has held steady through three Budget updates and investors are already pricing the changes into decisions.
CGT split at 1 July 2027
The mechanic: on any residential property sold on or after 1 July 2027, the capital gain is split at the valuation as at that date. The pre-2027 portion retains current law - the 50% CGT discount for individuals and trusts, 33.3% for SMSF accumulation, 0% for SMSF pension members, no discount for companies.
The post-2027 portion is treated differently:
- No 50% discount. The post-reform portion is taxed in full.
- Indexed cost base. CPI indexation returns - only the real gain (gain net of inflation) is taxed. This partially offsets the loss of the discount.
- 30% minimum tax floor. If marginal-rate tax on the post-2027 portion would be less than 30% of the gain, the floor applies.
For most leveraged investors the loss of the discount dominates the win from indexation - the floor adds another ratchet at the top. Worked numbers for a sample $1.6M Sydney property are in our sell-before-2027 explainer.
Negative gearing restriction
Under current law, a leveraged investor running a net tax loss on a rental property (rent minus interest, expenses and depreciation) can offset that loss against salary or other income. That is negative gearing.
From 1 July 2027 the proposed reform quarantines net property losses on established residential property acquired after Budget night. The losses don't disappear - they carry forward indefinitely and can be applied against future residential rental income. They cannot offset salary, other property income, business income, or capital gains.
Two narrowings worth noting:
- New residential is excluded. The restriction targets established stock; the policy objective is to channel investment into new housing supply.
- Capital losses don't convert. Quarantined revenue losses cannot be converted to capital losses against the property's eventual CGT gain.
Full worked example with our sample Sydney property (showing the $67,927 lost salary offset over the 6-year hold): How the proposed 2027 negative gearing restriction works.
Trust minimum tax (proposed 2028)
A discretionary trust currently lets the trustee stream rent and capital gains to whichever beneficiary is on the lowest marginal rate that year. From 1 July 2028 the proposed Trust Minimum Tax caps that advantage: the trust group pays whichever is higher - the sum of beneficiary tax under current streaming, or 30% of net trust income.
For most discretionary trusts already streaming to high-rate beneficiaries the floor is a no-op. For trusts that have been streaming to low-rate adult students, retirees on minimal income, or family members on parental leave, the effective tax rate jumps to 30%.
A restructure-relief window from July 2027 to June 2030 lets trusts convert to other structures (company, joint personal) without triggering CGT or stamp duty on the transfer. Outside that window, restructuring carries the usual transaction costs (typically $100k+ for a $1.5M residential property).
Division 296 super tax
From the 2026-27 income year, Division 296 adds a 15% additional tax on the portion of a super member's earnings attributable to a Total Super Balance above $3M. It sits on top of existing earnings tax (15% in accumulation, 0% in pension), so the effective marginal rates become:
- SMSF accumulation, <$3M: 15% on earnings, 10% on long-term gains.
- SMSF accumulation, >$3M portion: 30% on earnings.
- SMSF pension, <$3M: 0% on earnings and gains.
- SMSF pension, >$3M portion: 15% on earnings.
The $3M threshold is not indexed in the current proposal, which means bracket creep will pull more members over the line each year. The mechanic is also notional: tax is calculated on the change in TSB year-on-year, adjusted for contributions and withdrawals - not on cash distributions from the fund.
Who it actually hits
Each measure bites different ownership structures differently:
| Measure | Hits hardest | Largely unaffected |
|---|---|---|
| Negative gearing restriction | Personal, joint personal (leveraged, high-rate) | Trust, company, SMSF (losses already internal) |
| CGT split + 30% floor | Personal, joint personal, trust (when streamed), SMSF accumulation | SMSF pension (0% CGT) |
| Trust minimum tax | Discretionary trusts streaming to low-rate beneficiaries | Personal, company, SMSF |
| Division 296 | SMSF members with TSB > $3M | Personal, joint personal, trust, company |
Per-structure comparison with worked numbers: Which ownership structure is best for an Australian investment property in 2027?
What to do
The decision tree, plain English:
- If you already own established residential: run the numbers under both regimes. Decide whether the property still serves you with the salary offset removed. If cashflow drag is the problem, structural change is rarely the answer - structure change costs typically swamp the tax saving over a normal hold. If equity is the problem, the sell-vs-hold decision is the lever.
- If you're considering buying: new residential is treated differently from established. The policy gap can be material. Run both classifications before committing.
- If you hold via a discretionary trust: the restructure-relief window (Jul 2027 – Jun 2030) exists for a reason. Don't wait until July 2028 to think about whether the trust still serves you.
- If you have or are setting up an SMSF: factor Div 296 into the long-term TSB trajectory. The $3M threshold catches more members each year because it isn't indexed.
None of these decisions belong to a calculator. They belong to a conversation between you and your accountant, with modelled numbers in front of both of you. The Byrz report exists to provide those modelled numbers, on your property, at $49 per report.
Caveats
All four measures are proposed as of late 2026. Final legislation, regulations and ATO guidance may change the scope (which dwellings are caught), the start dates, the transitional rules, the floor rates and the cap thresholds.
The reforms also do not address state and local taxes - land tax, stamp duty, council rates, vacancy taxes - which are set independently by each state Treasury and can shift independently of federal policy.
Nothing on this page is tax, legal, financial, credit or investment advice. Modelled numbers are scenario planning only; outcomes for your property depend on your specific inputs.