The Federal Government’s significant tax reforms to CGT and negative gearing that took effect after the Budget night on 12 May 2026 are now law.
This represents the most significant shakeup to Australia’s property, small business, and investment taxation system in more than two decades. At EMspire Advisory, we are focused on helping you understand how these new laws practically impact your strategy.
Here are the three most critical components of the passed legislation:
1. Small Business: Expanded CGT Concessions
Changes for small business owners:
– The News: The Act expands the eligibility for the existing small business active asset 50% CGT reduction by increasing the aggregated annual turnover threshold from $2 million to $10 million.
– The Benefit: If you are looking to sell your business or an active business asset, it is now easier to qualify for substantial tax reductions.
– The EMspire Tip: This threshold increase will help mid-sized business owners who were previously locked out of small business concessions. When considering a business exit or restructuring your business structure should be reviewed to maximize your tax-free retirement or rollover outcomes under the newly expanded $10 million rule.
2. The New Property Landscape: Negative Gearing and SMSF Borrowing Bans
The rules for residential property investing have been fundamentally rewritten to shift investor capital away from established housing and toward expanding Australia’s housing supply.
– The News: From 1 July 2027, negative gearing on residential properties will be restricted exclusively to new builds. Furthermore, Self-Managed Super Funds (SMSFs) are now banned from entering into new borrowing arrangements (LRBAs) to purchase residential property.
– The Impact: For any established residential properties purchased after the Budget night deadline (12 May 2026), you can no longer use rental losses to offset your personal salary or wage income. Those losses are now “quarantined” and can only offset residential property income or future residential capital gains.
– The EMspire Tip: Existing property investments and contracts signed before 7:30 pm on 12 May 2026 are grandfathered. While residential borrowing inside an SMSF is gone for new arrangements, commercial property borrowing (business real property) remains fully permissible.
3. The CGT Overhaul: Out with the 50% Discount, In with Indexation
The Act changes how capital gains are calculated for individuals, trusts, and partnerships, replacing a system that has stood since 1999.
– The News: From 1 July 2027, the traditional 50% CGT discount for assets held for more than 12 months will be completely replaced by an inflation-adjusted indexation model combined with a minimum 30% tax on realized gains.
– What it means: Instead of automatically halving your taxable capital gain, your asset’s original cost base will be adjusted upwards to account for inflation, and a minimum 30% tax floor will be applied to that remaining “real” gain.
– The EMspire Tip: Historical gains are protected. Any capital growth achieved before 1 July 2027 will still enjoy the 50% discount. This means obtaining accurate market valuations of your investment portfolios and properties as of mid-2027 will be vital to drawing a clear line in the sand between old and new tax treatments.
A Heads-Up for Everyday Workers
Starting from the 2026–27 income year, all Australian tax residents earning salary and wages income are entitled to a standard $1,000 deduction for work-related expenses without needing to track small receipts.
This runs alongside the newly legislated Working Australians Tax Offset (WATO) to deliver meaningful tax relief, benefiting the average worker by up to $2,816 a year by 2028.
The team at EMspire Advisory are trusted, qualified Chartered Accountants, tax agents, and small business accountants. We work closely with our clients to achieve the best possible outcomes. To find out more, please contact us!
Please note that this information is not specific and is general in nature and cannot be relied on as advice. Please contact us for advice specific to you and your circumstances.