Canberra’s 2026-27 Federal Budget, handed down on 12 May by Treasurer Jim Chalmers, included proposed changes to capital gains tax (CGT) and negative gearing that could reshape how Australians invest across shares, property and other assets.
Under the proposed reforms, the long-standing 50 per cent CGT discount would be replaced from 1 July 2027 with inflation indexation of an asset’s cost base alongside a minimum 30 per cent tax rate on real capital gains. Negative gearing on residential property would also be restricted to new builds that add to housing supply, while many existing holdings purchased before the announcement date would be grandfathered.
The government says the reforms are designed to restore the original intent of CGT by taxing only real, above-inflation gains while directing investor demand toward new housing supply. Treasury estimates the measures could raise billions in additional revenue over the forward estimates.
The proposals apply across asset classes including shares, investment properties, crypto assets and business holdings owned by individuals, trusts and partnerships.
Yet many analysts argue the practical impact may vary sharply depending on the type of investment involved. While higher effective taxation on capital gains is the broad direction, the mechanics of inflation indexation combined with leverage and rental income mean residential property may remain comparatively favourable in several common investment scenarios.
The following case studies are fictitious.
Scenario 1: John Smith, growth-share investor
John Smith, 44, is a senior engineer in Brisbane with a marginal tax rate of 37 per cent. Over the past decade he has built a $420,000 portfolio of Australian and international growth ETFs and individual shares, focusing on companies with strong earnings momentum rather than high dividend yields.
In early 2028, under the proposed framework, he sells a parcel generating a nominal capital gain of $95,000 after five years.
Under the current rules, the 50 per cent CGT discount would reduce the taxable gain to $47,500. Under the proposed system, however, the cost base would instead be indexed for inflation. Assuming cumulative inflation of around 14 per cent over the holding period, only the real gain above inflation would be taxed.
For investors holding high-growth assets that substantially outperform inflation, some tax specialists say the outcome could still produce a higher effective tax burden than the existing discount model.
“I used to accept the volatility of growth stocks because the CGT discount softened the upside tax hit,” John says. “If that disappears, I’d probably think harder about dividend-paying assets or even property.”
High-growth assets such as shares may lose part of their tax efficiency if Australia ultimately moves away from the current 50 per cent CGT discount. Property, meanwhile, retains structural features that can soften the impact of indexed taxation, including leverage, rental income and grandfathering protections
Scenario 2: Priyanka Sharma, established-property investor
Priyanka Sharma, 39, a Melbourne-based project manager, owns two investment properties purchased in 2022 and 2024, both established dwellings financed with mortgages.
Because many of the proposed changes are expected to be grandfathered, investors like Priyanka who purchased before the policy announcement may retain much of the existing negative gearing treatment.
Suppose she sells one property in 2031 after years of moderate price growth broadly tracking inflation plus a small premium. Under an indexed CGT framework, the taxable gain could end up materially lower than the nominal headline gain.
Property investors also tend to use leverage, meaning even modest asset growth can generate amplified equity returns despite relatively low real growth on the underlying asset.
“The tax side may not hurt as much as people think if growth stays steady rather than explosive,” she says. “The bigger question is what happens for future investors buying established homes after the changes.”
Scenario 3: Ismail Khan and David Patel, new-build strategy
Perth business partners Ismail Khan and David Patel have been considering investing in a small apartment development.
Under the proposed reforms, new housing construction would continue receiving preferential treatment through the retention of negative gearing incentives aimed at encouraging additional supply.
That means investors in new developments may continue accessing deductions unavailable to buyers of established homes acquired after the proposed cut-off date.
“If governments want more supply, they’ll keep supporting new builds,” Ismail says. “That changes where investors may decide to put their money.”
Analysts say such settings could gradually redirect investment capital away from existing homes and toward newly constructed developments, particularly in major growth corridors.
Across these examples a broader pattern emerges. High-growth assets such as shares may lose part of their tax efficiency if Australia ultimately moves away from the current 50 per cent CGT discount. Property, meanwhile, retains structural features that can soften the impact of indexed taxation, including leverage, rental income and grandfathering protections.
The reforms remain subject to consultation, legislative passage and political negotiation. Industry groups, economists and investors continue debating whether the changes would improve housing affordability, alter investor behaviour or simply shift capital from one asset class to another.
This article is for informational purposes only and does not constitute financial or tax advice. Readers should consult a qualified accountant or financial adviser regarding their personal circumstances.
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