Alongside the proposed changes to negative gearing, the 2026 Federal Budget also introduced significant proposed reforms to capital gains tax (CGT) for investment properties. While the legislation has not yet passed Parliament, understanding the proposed changes now can help investors make informed decisions about their long-term property strategy.

If you owned your investment property before 12 May 2026

If you purchased your investment property before Budget night (12 May 2026), you will continue to receive the current 50% CGT discount on capital gains accrued up to 1 July 2027. Under the proposed reforms, any capital growth after 1 July 2027 would instead be assessed using an inflation-indexed cost base, with tax payable at a minimum rate of 30%. As part of the new system, the property's market value at 1 July 2027 may become an important reference point when calculating future capital gains, meaning many investors may require a professional valuation at that date.

If you purchased between 12 May 2026 and 1 July 2027

Properties purchased during this transition period may be subject to both systems.If the property is sold before 1 July 2027 and has been held for more than 12 months, the existing 50% CGT discount may still apply.If the property is sold after 1 July 2027, gains accrued before that date may qualify for the 50% discount, while gains made after 1 July 2027 would fall under the proposed indexation method.Remember, for tax purposes, the purchase date is the contract date, not settlement.

If you purchase after 1 July 2027

Under the proposed legislation, investment properties purchased from 1 July 2027 onwards would no longer qualify for the 50% CGT discount. Instead, the property's cost base would be adjusted for inflation over the period of ownership before capital gains tax is calculated.

What could this mean in practice?

Because the proposed reforms replace a long-standing tax concession with a new indexation method, many investors are asking how the changes could affect them. Our tax depreciation partner, BMT, has prepared practical examples and detailed modelling to help explain how the proposed legislation may work under different investment scenarios. Their examples demonstrate how factors including purchase price, ownership period, inflation and sale price can all influence the eventual capital gains tax outcome.

Are there any exceptions?

The proposed reforms include two important exceptions:

• Investors who purchase eligible newly constructed properties that add to housing supply may be able to choose between the existing 50% CGT discount and the proposed indexation method.
• The proposed changes apply to individuals, trusts and partnerships. Self-managed super funds are not included.

Learn more

These reforms remain proposed legislation and may change before becoming law. Because every investment property is different, investors should seek independent tax advice before making decisions. For a more detailed explanation of the proposed changes, practical examples and modelling, read BMT's white paper or explore their investment property examples.