What the FY26/27 Australian Federal Budget Means for Property Investors and SMSFs CGT

The Australian Government has delivered one of the most consequential budgets for investors in recent years. Rachel Li, CPA, Client Director at Nestwell SMSF explains what the key proposed budget changes mean for property investors and self-managed super fund holders for CGT in Australia - and what steps are worth thinking about now.

Two major structural changes are on the table: the removal of the 50% CGT discount and the abolition of negative gearing on established residential property. Below, we walk through each change, how they interact with superannuation, and what practical steps are worth considering.

Important: These are proposals only - neither change is yet law. We will continue to monitor developments and update our clients as legislation progresses.

CGT discount replaced with a 30% minimum tax

Key change The 50% CGT discount on investment assets sold from 1 July 2027 will be replaced by a 30% minimum tax on net capital gains, with annual cost base indexation to account for inflation.

Under the current rules in Australia, investors who hold an asset for more than 12 months pay CGT on only half the gain - effectively halving their taxable income from the sale. The proposed new budget CGT changes removes this discount and instead applies a minimum 30% tax on the net gain, with the original cost base indexed annually for inflation from 1 July 2027.

Your main residence remains entirely exempt from CGT. This change applies only to investment assets.

How the transition works in practice

Gains that accrued before 1 July 2027 are protected - the 50% discount will still apply to that portion under the transitional rules. Only gains that accrue after that date will be subject to the new 30% minimum tax.

Worked example

You purchased an investment property in 2021 for $600,000. By 1 July 2027, it is valued at $1,100,000 — a $500,000 gain. That $500,000 remains eligible for the 50% CGT discount under the old rules.

You later sell the property in June 2028 for $1,200,000. The additional $100,000 gain (before cost base indexation adjustments from 1 July 2027) will be subject to the new 30% minimum tax.

This means you will likely need a formal valuation of your investment properties as at 1 July 2027 to accurately calculate which portion of any future gain falls under the old versus new rules.

Action to consider: Begin thinking now about obtaining formal property valuations as at 1 July 2027 for any investment properties held outside of superannuation. The earlier you plan for this, the better prepared you will be.

Negative gearing removed on established residential properties

Key change Negative gearing on established (existing) residential investment properties has been removed, effective from 7:30pm AEST on 12 May 2026. Negative gearing on new builds remains available.

If you already hold a residential investment property acquired before 7:30pm on 12 May 2026, you are fully grandfathered under the existing rules. Your negative gearing entitlements are preserved and no immediate action is required.

From that point forward, investors looking to purchase residential property will only be able to negatively gear against a new build - not an established dwelling.

Note for SMSF holders: Superannuation funds - including self-managed super funds - are exempt from the negative gearing changes. This is a meaningful distinction for those considering property investment through their SMSF.

What this budget means for CGT in superannuation in Australia

Despite the changes above, superannuation remains a highly effective tax planning structure - arguably more so in the context of this budget.

Contribution caps and catch-up contributions

Concessional (pre-tax) contributions to superannuation are tax deductible up to $30,000 per year, rising to $32,500 from 1 July 2026. If your super balance is below $500,000 and you have not fully utilised your contribution caps in the prior five years, you could be eligible for a deduction of up to approximately $167,500 — a significant opportunity as part of broader tax planning.

You can also make up to $360,000 in after-tax (non-concessional) contributions, which may be relevant if you are looking to purchase property within an SMSF rather than in your personal name.

CGT concessions in SMSFs - an open question

The Government has not specifically excluded superannuation funds from the new CGT rules, and this creates genuine uncertainty for SMSF holders. Currently, SMSFs benefit from a concessional CGT rate of 15%, reduced to 10% for assets held more than 12 months. It is unclear whether the proposed 30% minimum tax overrides these concessions, or whether the existing superannuation CGT regime is preserved.

We expect the Government will need to clarify this interaction. We are monitoring developments closely and will provide a further update once the position becomes clear.

Actions worth considering now

Given the proposals announced, here are five things worth thinking about in the coming weeks and months:

1. If you hold residential investment properties acquired before 7:30pm on 12 May 2026, your negative gearing entitlements are preserved. No immediate action is required on those properties.

2. If you are considering purchasing a residential investment property going forward and not using super, only new builds will attract negative gearing. Factor this into any acquisition decisions.

3. Consider whether making additional contributions to superannuation — including salary sacrifice — makes sense as part of your broader tax planning strategy, particularly given the catch-up contribution opportunity.

4. Begin planning to obtain formal property valuations as at 1 July 2027 for any investment assets held outside of super. This will be important for calculating the split between old and new CGT rules on any future sale.

5. For SMSF holders, hold off on major decisions regarding CGT until the Government clarifies how the new rules interact with the existing super fund concessions. We will provide a further update when that clarity arrives.

This article is for informational purposes only. The measures outlined above are proposals and are not yet law - the Government may amend or abandon them at any time. This does not constitute financial, tax, or legal advice. Please seek professional advice tailored to your personal circumstances. Additional budget measures - including the proposed 30% flat tax for discretionary trusts, startup concessions, and the extension of the EV FBT discount - will be covered in a separate update.