Capital Gains Tax and Negative Gearing Are Changing: What You Need to Consider Before 1 July 2027

For Australians approaching retirement - or already enjoying it - the tax treatment of investments can make a meaningful difference to how long your savings last. From 1 July 2027, significant changes to capital gains tax (CGT) and negative gearing will alter the way many investments are taxed.

Importantly, this is not just an investment property story. The CGT reforms extend broadly across assets including residential and commercial property, shares, managed investments and even certain assets acquired before CGT was introduced in 1985. Companies and complying superannuation funds, including SMSFs, are generally outside these particular CGT changes.

So, rather than asking, “Is property still a good investment?”, a better question may be: “How do these changes affect the investments I already own and the decisions I’m planning to make?”

Your CGT strategy may need a retirement rethink

At present, individuals who have held an eligible investment for at least 12 months can generally receive a 50% CGT discount. From 1 July 2027, that treatment changes for gains accruing after that date. Instead, the cost base will generally be increased for inflation using CPI, and the resulting capital gain may be subject to a minimum 30% tax.

This matters particularly around retirement.

Traditionally, someone might deliberately wait until retirement to sell shares, an investment property or another valuable asset. With employment income reduced, the capital gain could potentially fall into lower marginal tax brackets.

The new minimum tax makes that strategy less straightforward. For the portion of a capital gain accruing from 1 July 2027, simply waiting for a low-income year may no longer produce the same tax advantage.

There are exceptions. For example, certain recipients of means-tested government income-support payments, including the Age Pension, may be exempt from the minimum tax in a financial year in which they receive an eligible payment.

The practical lesson is not that everybody should rush out and sell before July 2027. Tax should rarely be the tail wagging the investment dog. Instead, if you were already considering selling an investment over the next few years, it may be worth comparing the outcome of selling before and after the new rules commence.

Existing assets aren't escaping the changes completely

If you already own shares, managed funds, residential or commercial property, there is an important transitional rule to understand.

For assets acquired before 1 July 2027 and disposed of afterwards, the capital gain will effectively be divided into two periods. Growth up to 30 June 2027 generally remains under the existing CGT rules, including access to the 50% discount where applicable. Growth from 1 July 2027 falls under the new indexation system and potentially the 30% minimum tax.

This also has a surprising consequence for pre-CGT assets. An asset acquired before 20 September 1985 may currently be largely outside the CGT system, but gains accruing from 1 July 2027 can come within the new regime.

That makes record keeping increasingly important.

For certain assets you may eventually need to establish their value around the transition date. Depending upon the asset, this may involve a market value or an approved apportionment method.

If you own property, private investments or other difficult-to-value assets, consider discussing valuation requirements with your accountant well before you sell. Trying to reconstruct a property's value ten years later could turn into the financial equivalent of searching the garage for a receipt from 1997.

Negative gearing is changing too - but mainly for residential property

Negative gearing receives plenty of headlines, but it is important to separate these rules from the broader CGT reforms.

From 1 July 2027, an established residential investment property acquired from 7.30 pm AEST on 12 May 2026 will generally no longer allow its net rental loss to reduce salary, interest or other non-property income.

Instead, the loss is generally quarantined. It can potentially offset residential property income - including income from other residential properties - and residential property capital gains, with unused losses generally carried forward.

Established properties acquired before the Budget announcement are generally grandfathered. Qualifying newly built residential properties also receive an exception, supporting investment that adds to Australia's housing supply. The proposed detailed definition covers circumstances such as constructing a dwelling on vacant land, adding additional separately saleable dwellings, converting certain buildings into housing, and acquiring some recently completed dwellings within the prescribed timeframe.

Crucially, these negative gearing restrictions are about residential property. They do not impose the same restriction on commercial property, shares or other non-residential investments.

For somebody approaching retirement, that means the after-tax cash flow of a new established residential investment property deserves particularly careful consideration. A property producing a $15,000 annual tax loss might look quite different if that loss can no longer immediately reduce tax on your salary.

Look at your whole portfolio before 1 July 2027

Perhaps the biggest takeaway is that these reforms should prompt a portfolio review rather than a knee-jerk transaction.

Start by identifying what you own: investment properties, commercial property, Australian and international shares, managed funds, private investments and older pre-CGT assets. Then consider which assets contain substantial unrealised gains and which you realistically expect to sell during retirement.

For people approaching retirement, the years immediately before and after leaving work can already involve several moving pieces - super contributions, pension commencement dates, downsizing and investment sales, debt reduction and changing taxable income. The new CGT rules add another piece to that puzzle.

Superannuation also deserves attention. Complying super funds, including SMSFs, are not subject to these particular CGT reforms and continue to receive the existing one-third CGT discount for eligible assets held for at least 12 months. That does not automatically mean moving investments into super is the answer. Contribution caps, tax, preservation rules, transfer balance rules and transaction costs all need to be considered.

Similarly, don't assume making a large deductible super contribution in the year you realise a capital gain will necessarily eliminate the tax. The 30% minimum tax can limit the effectiveness of deductions against post-1 July 2027 indexed capital gains.

The useful exercise now is to model different scenarios. What happens if you sell in 2027 versus 2030? What if you retire first? What if an investment is held personally rather than through super? What happens to your cash flow if a rental loss becomes quarantined?

A few calculations today could prevent an expensive surprise later.

Where does that leave you?

The changes do not make property, shares or managed investments suddenly unattractive, nor do they mean everyone approaching retirement should restructure their portfolio before 1 July 2027.

They do make timing, ownership structure, valuations, record keeping and tax planning more important.

If retirement is approaching, consider reviewing assets you expect to sell over the next five to ten years rather than focusing only on what happens in 2027. If you're already retired, pay particular attention to large unrealised gains, pre-CGT assets and whether the minimum 30% tax could change your planned disposal strategy.

Most importantly, make decisions based on the investment itself and your retirement objectives first, with tax as one part of the equation. Paying a little more tax on a successful investment can still be preferable to making a poor investment decision simply to save tax.

Disclaimer: The information provided in this article is general in nature and has been prepared without considering your personal objectives, financial situation, or needs. It does not constitute financial advice. Before making any decisions, you should assess its appropriateness and seek professional financial advice tailored to your circumstances. Additionally, ensure you review the relevant Product Disclosure Statement (PDS) before deciding on any financial product.