2026 Capital Gains Tax Reforms
On 12 May 2026, the Federal Government announced significant changes to how capital gains tax and negative gearing apply to Australian investment property. For Perth buyers, sellers and investors, these reforms represent the most substantial shift in property taxation in nearly three decades. This guide explains what was announced, when the changes take effect, and what they may mean for property transactions across Perth and Western Australia.
QUICK ANSWER:
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From 1 July 2027, the 50% CGT discount is being replaced with an inflation-adjusted indexation method, along with a minimum 30% tax rate on realised gains.
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Negative gearing on residential property will be limited to new builds only.
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Properties and other assets held before 7:30pm AEST on 12 May 2026 (5:30pm Perth time) are fully grandfathered — existing owners are not affected.
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New build investors keep full negative gearing and can choose between the old or new CGT arrangement.
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The family home (main residence) remains exempt from CGT.
What the 2026 Budget Actually Changed
The Budget announced two key changes affecting residential property investors, both taking effect from 1 July 2027 — providing a transition window of more than twelve months from Budget night.
What Is Capital Gains Tax and Why Is It Changing?
Capital gains tax (CGT) is the tax paid on the profit made when an asset is sold for more than its purchase price.
For property, it generally applies to investment properties, holiday homes, and any property that is not the owner’s main residence. The family home is typically exempt under the main residence exemption.
Under rules in place since 1999, individuals who hold an asset for more than 12 months have been entitled to a 50% CGT discount, meaning only half of the capital gain is included in their taxable income.
The 2026 Budget replaces this long-standing arrangement with an inflation-adjusted indexation method. The Government’s stated intention is to tax the real capital gain only, rather than gains that simply reflect inflation, and to direct investor activity toward new housing supply rather than competition for existing homes.
How the Transition Period Works
The window between Budget night (12 May 2026) and 1 July 2027 is significant for anyone considering buying or selling investment property in Perth. Understanding which rules apply to your transaction depends on when the property was acquired and when it is sold.
Property acquired on or before 12 May 2026
CGT discount: Existing 50% discount, grandfathered indefinitely.
Negative gearing: Existing rules, grandfathered indefinitely.
If you already owned the property on Budget night, nothing changes for you. The current rules apply to that property for as long as you hold it.
Property acquired between 13 May 2026 and 30 June 2027
CGT discount: Existing 50% discount applies to gains accrued before 1 July 2027. The new inflation-adjusted method applies to gains accrued from 1 July 2027 onwards. Gains are apportioned between the two periods on a prospective basis.
Negative gearing: Existing rules until 1 July 2027, then the new rules apply.
This is the transition window. The Budget describes the CGT treatment for these assets as “prospective” — meaning the existing 50% discount is preserved for the portion of the gain that accrued before the start date.
Property acquired from 1 July 2027 onwards — established home
CGT discount: New inflation-adjusted indexation method only, with a minimum 30% tax on realised gains.
Negative gearing: Restricted. Rental losses cannot be offset against wages or other income. Losses can still be carried forward against future property income.
If you buy an established (existing) home as an investment from this date onwards, the new rules apply in full.
Property acquired from 1 July 2027 onwards — new build
CGT discount: Choice of the existing 50% discount or the new inflation-adjusted method, whichever is more favourable at the time of sale.
Negative gearing: Full negative gearing retained, including against wages and other income.
New builds are the favoured category under the reforms. The Government’s intention is to direct investor capital toward new housing supply rather than competition for existing homes.
For buyers and sellers planning transactions during the transition period, settlement timing may carry tax implications worth discussing with your accountant before signing a contract. As your settlement agent, Hartfield Conveyancing can ensure your settlement proceeds efficiently within the timeframe required.
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Settlement Activity in Western Australia During the Transition
In the period leading up to 1 July 2027, settlement activity across Perth is expected to remain steady. Some investors may bring forward planned purchases or sales to settle under current arrangements. Owner-occupier settlements, family transfers, deceased estate settlements, and strata transactions are unaffected by the announced reforms and continue under existing settlement procedures.
Hartfield Conveyancing assists clients with all of these transaction types across Perth and regional WA. Whether you are buying your first home, purchasing an investment property, selling within the transition window, or settling a new build, our experienced team manages every legal and administrative requirement to ensure your property settlement proceeds accurately and on time.
This page provides general information only and does not constitute tax, legal, or financial advice. The reforms described are based on the Federal Government’s Budget announcement of 12 May 2026 and may be subject to amendment as draft legislation progresses through Parliament. The application of CGT and negative gearing rules depends on individual circumstances. For advice specific to your situation, please consult a qualified tax professional. Information current as at 12 May 2026
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