Australia's 2026 Budget: CGT Overhaul and Negative Gearing - What It Means for Your SMSF

Q: 1. The 50% CGT Discount Is Being Scrapped

What is changing? Under current law, Australian residents who hold a capital asset - investment property, shares, or crypto assets - for more than 12 months receive a 50% discount on their net capital gain before it is added to assessable income. For an individual on the top marginal tax rate of 47%, this reduces the effective CGT rate to approximately 23.5%. From 1 July 2027, the 50% CGT discount will be replaced with: - Inflation indexation of the cost base from the date of acquisition; and - A 30% minimum tax on net capital gains after indexation. Key details: - Applies to assets sold on or after 1 July 2027 - Gains accrued before 1 July 2027 remain eligible for the existing 50% discount under transitional arrangements - The main residence exemption is unchanged - your primary home is unaffected - Investors in new builds can choose between the 50% discount or the new indexation arrangements - Cost base indexation applies from 1 July 2027 forward What does this mean in practice? For a high-income investor on the 47% marginal rate: | Holding period | Current effective CGT rate | Post-1 July 2027 effective rate | |---|---|---| | Less than 12 months | 47% | 47% (unchanged) | | More than 12 months | ~23.5% | 30% minimum | Transitional rule - practical example: An investor purchases an established investment property for $600,000 in 2021. The property is valued at $1,100,000 on 1 July 2027 - meaning $500,000 of gain has accrued under the old rules and remains eligible for the 50% discount. The investor sells for $1,200,000 on 30 June 2028. The additional $100,000 gain (from 1 July 2027 to sale) is subject to the new 30% minimum tax. A formal valuation of investment assets as at 1 July 2027 is important for any asset acquired before that date. This is how the gain is split between the old and new regimes.

Q: 2. Negative Gearing Limited to New Builds from 1 July 2027

What is changing? From 1 July 2027, negative gearing deductions will only be available for new builds. Investors who purchase established residential properties after Budget night (13 May 2026) will no longer be able to offset rental losses against their other income (such as wages or salary). Losses from established properties can still be carried forward and offset against future income from that same property - they simply cannot be deducted against other income going forward. What is grandfathered? - All properties held before Budget night (13 May 2026): fully grandfathered, existing rules continue to apply - New builds purchased at any time: eligible for negative gearing under both current and new rules - Established properties purchased after 13 May 2026: losses can be carried forward but not deducted against other income from 1 July 2027

Q: Negative Gearing: SMSFs Are Exempt

The Government has confirmed that superannuation funds, including SMSFs, are exempt from the negative gearing changes. An SMSF that holds an investment property - whether new or established, whether acquired before or after Budget night - can continue to deduct interest and holding costs against fund income. This is consistent with how superannuation funds are taxed. SMSFs are assessed on their net income (including rental income and investment income) at the concessional rate of 15%. Deductions - including interest on borrowings under a limited recourse borrowing arrangement (LRBA) - are applied against fund income at that rate, not against an individual's marginal tax rate. The negative gearing changes target personal income tax, not the superannuation tax framework.

Q: CGT: SMSFs Retain Their Existing 10% Rate

The Government has confirmed that superannuation funds, including SMSFs, are not affected by the 30% minimum tax on capital gains. SMSFs retain their existing concessional CGT treatment. Under existing law - which continues to apply - SMSFs pay CGT at 15%, reduced to 10% for assets held for more than 12 months (the one-third discount applied at the fund level). This rate is unchanged by the Budget. Why does this matter? | Investor type | CGT rate on assets held >12 months (post-2027) | |---|---| | Individual (top marginal rate) | 30% minimum | | Individual (average income ~$90K) | ~17-22% (depending on indexation) | | SMSF (accumulation phase) | 10% - unchanged | | SMSF (pension phase, within Transfer Balance Cap) | 0% - unchanged | The gap between holding assets inside an SMSF versus personally widens materially from 1 July 2027. For a high-income individual, the difference on long-term capital gains moves from roughly 13.5 percentage points (23.5% vs 10%) to at least 20 percentage points (30% vs 10%).

Q: Concessional Tax Rates Inside Superannuation

| Type of Income | Rate (accumulation phase) | |---|---| | Investment income (interest, rent, dividends) | 15% | | Capital gains - assets held less than 12 months | 15% | | Capital gains - assets held more than 12 months | 10% (one-third discount) | | Income in pension phase (within Transfer Balance Cap) | 0% | These rates are set by the Income Tax Assessment Act 1997 and are unchanged by the Budget.

Q: Contribution Caps (Current and Upcoming)

Concessional contributions (pre-tax: employer SG, personal deductible contributions): - $30,000 per year (current) - Increasing to $32,500 from 1 July 2026 - Taxed at 15% inside the fund (30% for high-income earners via Division 293) - Carry-forward rule: unused concessional cap amounts from the prior 5 financial years can be accessed if your total superannuation balance is below $500,000 Non-concessional contributions (after-tax): - $120,000 per year, or up to $360,000 using the 3-year bring-forward rule for eligible members - Subject to total superannuation balance thresholds Carry-forward example: An individual with 5 years of unused concessional caps (at $30,000 per year) plus the current year ($32,500) could make a total deductible contribution of approximately $167,500 in a single year - a significant above-the-line deduction - subject to eligibility.

General information only. This article provides factual information about proposed legislative changes and general superannuation rules. It does not constitute financial product advice, tax advice, or legal advice. Independent professional advice that considers your personal circumstances is recommended before making any financial decisions.

The Australian Government’s FY2026/27 Federal Budget, delivered on 13 May 2026, contains the most significant restructuring of capital gains tax (CGT) and negative gearing rules in a generation. For long-term holders of investment property and crypto assets outside superannuation, the changes materially increase the tax on future gains.

For SMSF investors, the picture is different - and materially better.

This guide answers the key questions:

What are the CGT and negative gearing changes?
Do the changes apply to SMSFs?
What is the existing SMSF tax framework?
What do investors need to do before 1 July 2027?

Key Takeaways

The 2026 Federal Budget removes the 50% personal CGT discount on assets acquired after a yet-to-be-confirmed date, expected to take effect from 1 July 2027.
Negative gearing deductions will be restricted for new residential property investments from the same date.
SMSFs retain their existing CGT treatment: a one-third discount on the standard 15% rate, resulting in an effective 10% rate on assets held over 12 months. This was not altered by the Budget.
The Budget changes apply to personally held assets and trust structures - not to assets held inside a superannuation fund.
The gap between the tax treatment of assets held personally versus inside an SMSF has widened as a result of these changes.

What Changed: The Two Big Budget Announcements

1. The 50% CGT Discount Is Being Scrapped

What is changing?

Under current law, Australian residents who hold a capital asset - investment property, shares, or crypto assets - for more than 12 months receive a 50% discount on their net capital gain before it is added to assessable income. For an individual on the top marginal tax rate of 47%, this reduces the effective CGT rate to approximately 23.5%.

From 1 July 2027, the 50% CGT discount will be replaced with:

Inflation indexation of the cost base from the date of acquisition; and
A 30% minimum tax on net capital gains after indexation.

Key details:

Applies to assets sold on or after 1 July 2027
Gains accrued before 1 July 2027 remain eligible for the existing 50% discount under transitional arrangements
The main residence exemption is unchanged - your primary home is unaffected
Investors in new builds can choose between the 50% discount or the new indexation arrangements
Cost base indexation applies from 1 July 2027 forward

What does this mean in practice?

For a high-income investor on the 47% marginal rate:

Holding period	Current effective CGT rate	Post-1 July 2027 effective rate
Less than 12 months	47%	47% (unchanged)
More than 12 months	~23.5%	30% minimum

Transitional rule - practical example:

An investor purchases an established investment property for $600,000 in 2021. The property is valued at $1,100,000 on 1 July 2027 - meaning $500,000 of gain has accrued under the old rules and remains eligible for the 50% discount.

The investor sells for $1,200,000 on 30 June 2028. The additional $100,000 gain (from 1 July 2027 to sale) is subject to the new 30% minimum tax.

A formal valuation of investment assets as at 1 July 2027 is important for any asset acquired before that date. This is how the gain is split between the old and new regimes.

2. Negative Gearing Limited to New Builds from 1 July 2027

What is changing?

From 1 July 2027, negative gearing deductions will only be available for new builds. Investors who purchase established residential properties after Budget night (13 May 2026) will no longer be able to offset rental losses against their other income (such as wages or salary).

Losses from established properties can still be carried forward and offset against future income from that same property - they simply cannot be deducted against other income going forward.

What is grandfathered?

All properties held before Budget night (13 May 2026): fully grandfathered, existing rules continue to apply
New builds purchased at any time: eligible for negative gearing under both current and new rules
Established properties purchased after 13 May 2026: losses can be carried forward but not deducted against other income from 1 July 2027

How Do These Changes Interact With SMSFs?

Negative Gearing: SMSFs Are Exempt

The Government has confirmed that superannuation funds, including SMSFs, are exempt from the negative gearing changes. An SMSF that holds an investment property - whether new or established, whether acquired before or after Budget night - can continue to deduct interest and holding costs against fund income.

This is consistent with how superannuation funds are taxed. SMSFs are assessed on their net income (including rental income and investment income) at the concessional rate of 15%. Deductions - including interest on borrowings under a limited recourse borrowing arrangement (LRBA) - are applied against fund income at that rate, not against an individual’s marginal tax rate. The negative gearing changes target personal income tax, not the superannuation tax framework.

CGT: SMSFs Retain Their Existing 10% Rate

The Government has confirmed that superannuation funds, including SMSFs, are not affected by the 30% minimum tax on capital gains. SMSFs retain their existing concessional CGT treatment.

Under existing law - which continues to apply - SMSFs pay CGT at 15%, reduced to 10% for assets held for more than 12 months (the one-third discount applied at the fund level). This rate is unchanged by the Budget.

Why does this matter?

Investor type	CGT rate on assets held >12 months (post-2027)
Individual (top marginal rate)	30% minimum
Individual (average income ~$90K)	~17-22% (depending on indexation)
SMSF (accumulation phase)	10% - unchanged
SMSF (pension phase, within Transfer Balance Cap)	0% - unchanged

The gap between holding assets inside an SMSF versus personally widens materially from 1 July 2027. For a high-income individual, the difference on long-term capital gains moves from roughly 13.5 percentage points (23.5% vs 10%) to at least 20 percentage points (30% vs 10%).

Frequently Asked Questions

Does the 30% CGT minimum tax apply to my SMSF? No. The Government has confirmed SMSFs retain their existing CGT treatment: 15% on short-term gains, 10% on long-term gains (held more than 12 months). This is unchanged by the Budget.

Does negative gearing still apply inside an SMSF? Yes. SMSFs are exempt from the negative gearing changes. An SMSF can continue to deduct interest and holding costs against fund income regardless of when the property was acquired or whether it is a new build or established property.

What happens to my existing negatively geared investment property? Properties held before Budget night (13 May 2026) are fully grandfathered - your existing arrangements continue unchanged.

Do I need a valuation on 1 July 2027? If you hold investment assets personally (not inside super), a contemporaneous market valuation as at 1 July 2027 is important to correctly apportion gains between the old and new regimes. For SMSF-held assets, the transitional split has no tax rate consequence (the 10% rate continues), but annual valuations for financial reporting are still required as they are under existing rules.

Can I still use an SMSF to hold investment property with a loan? Yes. LRBAs (limited recourse borrowing arrangements) remain available for SMSFs. The SMSF exemption from negative gearing changes means interest deductibility inside the fund is unaffected.

Can an SMSF hold crypto assets? Yes, subject to the fund’s trust deed, investment strategy, and sole purpose test compliance. Crypto assets are treated as property for CGT purposes - 15% on short-term gains, 10% on long-term gains. The ATO’s full guidance is at ato.gov.au/smsf.

The Existing SMSF Tax Framework

Concessional Tax Rates Inside Superannuation

Type of Income	Rate (accumulation phase)
Investment income (interest, rent, dividends)	15%
Capital gains - assets held less than 12 months	15%
Capital gains - assets held more than 12 months	10% (one-third discount)
Income in pension phase (within Transfer Balance Cap)	0%

These rates are set by the Income Tax Assessment Act 1997 and are unchanged by the Budget.

Contribution Caps (Current and Upcoming)

Concessional contributions (pre-tax: employer SG, personal deductible contributions):

$30,000 per year (current)
Increasing to $32,500 from 1 July 2026
Taxed at 15% inside the fund (30% for high-income earners via Division 293)
Carry-forward rule: unused concessional cap amounts from the prior 5 financial years can be accessed if your total superannuation balance is below $500,000

Non-concessional contributions (after-tax):

$120,000 per year, or up to $360,000 using the 3-year bring-forward rule for eligible members
Subject to total superannuation balance thresholds

Carry-forward example: An individual with 5 years of unused concessional caps (at $30,000 per year) plus the current year ($32,500) could make a total deductible contribution of approximately $167,500 in a single year - a significant above-the-line deduction - subject to eligibility.

SMSFs and Borrowing (LRBA)

SMSFs can borrow to purchase assets - including residential and commercial property and listed securities - through a limited recourse borrowing arrangement (LRBA). Under an LRBA:

The SMSF borrows to purchase a single acquirable asset
The asset is held in a separate holding trust until the loan is repaid
The lender’s recourse is limited to the asset being acquired
Interest costs are deductible against fund income at 15%
The SMSF exemption from negative gearing changes means this deductibility continues regardless of property type

LRBA rules are detailed and subject to ATO guidance. For current requirements including related party loan terms, refer to ato.gov.au.

SMSFs and Crypto Assets

The ATO treats crypto assets as property for CGT purposes. An SMSF may hold crypto assets where doing so is consistent with the fund’s trust deed, investment strategy, and the Superannuation Industry (Supervision) Act 1993 requirements - including the sole purpose test.

Key compliance requirements for SMSF crypto holdings:

Valued at market value each year for financial reporting
Transactions recorded and cost bases maintained
Investment strategy must account for risk and liquidity characteristics
Must be kept separate from members’ personal crypto holdings

CGT treatment: 15% on short-term gains, 10% on long-term gains (held more than 12 months). Unchanged by the Budget.

What to Do Before 1 July 2027

If you hold investment assets personally (outside super):

Obtain a formal market valuation of investment properties as at 1 July 2027
Export price records for any crypto assets held at that date
Review your overall investment structure with a tax adviser - the post-2027 CGT gap between personal and SMSF holdings is significant
Review any negatively geared properties acquired after 13 May 2026

If you hold assets inside an SMSF:

No structural changes required - your CGT rates and deductibility are unaffected
Continue annual valuations for financial reporting as required under existing rules
Review contribution strategies to maximise use of concessional caps, particularly if total super balance is below $500,000

If you are considering establishing an SMSF: The widening gap between personal and SMSF CGT rates from 1 July 2027 strengthens the case for holding long-term investment assets (property, crypto, shares) inside superannuation. Establishment timelines and eligibility should be discussed with a specialist adviser.

Summary: Budget Changes and SMSF Treatment

Change	Effective Date	Applies to SMSFs?
50% CGT discount removed	1 July 2027	No - SMSFs unaffected
30% minimum tax on net capital gains	1 July 2027	No - SMSFs retain existing 10% rate
Negative gearing limited to new builds	1 July 2027	No - SMSFs are exempt
Budget night grandfathering cut-off	13 May 2026	N/A (personal holdings only)
Transitional CGT split (pre/post July 2027)	From 1 July 2027	N/A - existing SMSF rates continue
SMSF concessional CGT rate (15%/10%)	Ongoing	Confirmed - unchanged by Budget
SMSF pension phase income tax rate	Ongoing	0% - unchanged