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Negative gearing and CGT consultation begins
The government has opened its consultation phase on negative gearing and capital gains tax reforms in a bid to lock in all the legislation’s details before it comes into effect on 1 July 2027.
The government has opened its proposed capital gains tax (CGT) and negative gearing reforms up to consultation, seeking feedback on the next stage of draft legislation.
The government released exposure drafts of the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, providing industry bodies an opportunity to express concerns and raise points of contention with the reforms.
Beginning 1 July 2027, the government will limit negative gearing to new residential properties, reintroduce CGT cost base indexation and introduce a 30 per cent minimum tax on real capital gains.
According to the Treasury, the draft amendments were designed to address a number of more complex issues and ensure the changes appropriately apply to a range of circumstances and structures.
The government has amended the “widow tax”, with properties now maintaining their tax benefits when changing hands following the death of an owner or a divorce, rather than losing the concessions.
Similarly, testamentary trusts (trusts established under a person’s will), deceased estates and special disability trusts will be exempt from the blanket 30 per cent tax applied on discretionary trusts.
In addition, the documents outline the definition of what constitutes a “new” residential dwelling.
Under the new legislation, a new dwelling is defined as a property that genuinely adds to housing supply, provided it was acquired within 24 months of a certificate of occupancy being issued, rather than the previously set-out 12-month period.
The Treasury said the reform would provide builders and developers more time to sell their stock.
Similarly, the increased 24-month window means a property could be transacted multiple times and still maintain the negative gearing benefits.
The changes also introduce an exemption for some affordable and social housing, National Disability Insurance Scheme (NDIS) housing, and build-to-rent developments from the changes to negative gearing.
The owner of a residential dwelling available solely to an NDIS participant will be able to continue to offset any losses incurred against other assessable income.
Similarly, properties under affordable housing and public housing initiatives will also be able to offset their losses, which also extends to dwellings that are part of a build-to-rent development.
Treasurer Jim Chalmers said the reforms would help to level the playing field for first home buyers, while preserving the gains for investors and supporting the delivery of new housing supply.
“The release of these draft materials reflects the government’s commitment to consult on more complex elements of the tax reforms announced in the budget.”
“Consistent with other significant tax reforms, the government will continue to finalise implementation of the reforms in further tranches of legislation.”
The consultation will close on 21 August 2026.
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