The Stage 3 tax cuts are legislated and rolling out across the 2026 and 2027 income years. They're usually discussed as wage policy, but they also quietly change the maths on every Australian investment property - both the value of a negative-gearing offset and the CGT bill on sale. Here's what changes.
The Stage 3 schedule (as currently legislated)
| Bracket | 2025-26 | 2026-27 | 2027-28+ |
|---|---|---|---|
| $0 – $18,200 | 0% | 0% | 0% |
| $18,201 – $45,000 | 16% | 15% | 14% |
| $45,001 – $135,000 | 30% | 30% | 30% |
| $135,001 – $190,000 | 37% | 37% | 37% |
| $190,001+ | 45% | 45% | 45% |
Plus 2% Medicare levy on top. The cuts are confined to the bottom $18k–$45k bracket: 2 percentage points over two years.
What it does to negative gearing
Under current law (still in force until 2027-28), a leveraged investor uses the property loss to reduce taxable income. The tax saving is the marginal-rate tax applied to the loss amount.
For a high-income investor on the top 45% bracket, Stage 3 doesn't change much - their marginal rate doesn't shift. For someone whose income hovers around $45k–$80k, the value of each dollar of negative-gearing offset depends on where the loss takes their taxable income:
- Loss pulls income from $45,001 into the bottom bracket: tax saved at 16% (2025-26) → 15% (2026-27) → 14% (2027-28). That's a ~12% relative reduction in the saving over two years.
- Loss pulls income from $135,001 into the 30% bracket: no change. The bracket rate stays at 30%.
- Loss pulls income from $190,001 into the 37% bracket: no change.
Stage 3 affects mostly low-to-middle income investors, and only modestly. The big shift to negative gearing economics is the proposed 2027 negative-gearing restriction, which removes the salary offset entirely for established residential.
What it does to CGT
Same logic on the way out. A capital gain is added to taxable income (after the 50% discount for individuals on long-term gains). The CGT bill is the marginal-rate tax on the discounted gain.
For most property investors selling under current law, the discounted gain on a $1M property pushes them firmly into the top brackets - where Stage 3 doesn't apply. For smaller gains or lower base incomes, the lower bottom-bracket rate from 2027 means a slightly smaller CGT bill on long-term gains.
The much bigger CGT change is the proposed 1 July 2027 CGT split with the 30% minimum tax floor, which removes the discount on the post-2027 portion of the gain.
What it doesn't change
Stage 3 is bracket-rate only. It doesn't change:
- The threshold values - brackets are not indexed for inflation.
- The 2% Medicare levy.
- The Division 293 high-income super surcharge.
- State land tax, stamp duty, or council rates.
The combined effect
For most leveraged property investors, the Stage 3 cuts are rounding error compared to the 2027 reform package. The lost negative-gearing offset, the CGT split mechanic, and (for SMSF property) Division 296 move the numbers by orders of magnitude more than a 2-percentage-point bracket cut at the bottom.
That said, the Byrz engine uses the legislated Stage 3 trajectory across the full forecast horizon - so your property report reflects the actual bracket schedule you'll be taxed under, year by year, not a snapshot.
Caveats
Stage 3 is legislated and substantially harder to repeal than the 2027 reform package. The current schedule (16% → 15% → 14%) reflects the modified version that passed in early 2024. A future government could change the trajectory; the current schedule reflects 2026 law.
Related reading: our comprehensive 2027 reform guide for how Stage 3 interacts with the other proposed measures.