Following our update in May, the legislation has now passed. Here's what's confirmed, what's still being worked through, and what property owners need to do before 1 July 2027.
When the 2026 Federal Budget landed in May, we outlined the proposed changes to negative gearing, capital gains tax (CGT), and the implications for property investors. Since then, the legislation has moved through parliament. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 has now been passed by the Senate with amendments, most significantly, the addition of a ban on new SMSF borrowing for residential property, secured as a condition of Greens support.
The law is now settled in its key provisions. The detail, particularly ATO guidance on valuations, is still to come.
What the Legislation Confirms
Negative gearing restricted from 1 July 2027
From 1 July 2027, net rental losses on established residential properties purchased after 7:30pm AEST on 12 May 2026 can no longer be offset against salary or other income. Those losses are quarantined and can only be applied against future residential property income or capital gains.
New builds remain fully eligible for negative gearing
New builds, properties that genuinely add to housing stock, are exempt from the restrictions. The definition has conditions: the property must not have been previously sold or occupied for more than 12 months, and knock-down rebuilds or renovations that don't increase supply don't qualify.
The edges of this definition are still being clarified. Get specific advice before proceeding if you're considering a purchase that may qualify.
Exempt from negative gearing changes
Widely held trusts, build-to-rent developments, and investors participating in government housing programs are excluded from the restrictions and retain existing negative gearing treatment. Superannuation funds, including SMSFs, are also excluded, though a separate change affecting SMSF borrowing for residential property is addressed below.
What's Unchanged
Properties held at announcement, including those under contract but not yet settled at 7:30pm on 12 May 2026, are grandfathered. Existing negative gearing treatment applies until sale.
The New CGT Framework From 1 July 2027
The 50% CGT discount for individuals, trusts, and partnerships is being replaced. From 1 July 2027:
- Capital gains on assets held longer than 12 months will be adjusted for inflation via cost base indexation
- A 30% minimum tax rate applies to the remaining real gain
- Gains accrued before 1 July 2027 are assessed under the current rules, only post-transition gains fall under the new framework
- The main residence exemption is unchanged
- Income support recipients, including Age Pension recipients, are exempt from the 30% minimum tax
This applies across all CGT assets, not just residential property, held by individuals, trusts, and partnerships.
What's Unchanged for Super
Superannuation funds, including SMSFs, retain their existing CGT treatment. The one-third discount in accumulation phase and CGT exemptions in pension phase are preserved. The new rules do not apply to assets inside super.
The new addition: SMSF borrowing for residential property is banned. This is the change that wasn't in the original Budget announcement.
As the price of Greens support, the Government agreed to ban SMSFs from entering new limited recourse borrowing arrangements (LRBAs) to acquire residential property. The amendment, tabled on 23 June 2026, makes a single change to the Superannuation Industry (Supervision) Act 1993: new LRBAs can only be used to acquire business real property. In practical terms, that means commercial, industrial, and business premises used wholly and exclusively in a business. The commercial LRBA strategy remains entirely available.
Key Points for SMSF Trustees
- Existing residential LRBAs are fully grandfathered: including future refinancing. No existing arrangements need to be unwound.
- The ban is prospective: it takes effect from 10 August 2026 (45 days after Royal Assent). Exchange of contracts before commencement provides protection, even if settlement occurs after.
- The SMSF tax advantage is unchanged: SMSFs remain the only structure where you can negatively gear a new purchase of an established residential property. The borrowing pathway for residential is closing; the tax treatment inside super is not.
- The window is short: lenders are already beginning to pull residential LRBA products in anticipation of the ban. Anyone mid-process on a residential LRBA needs to move immediately.
The Framework is Set. The Detail Isn’t
The law confirms the framework. It doesn't answer every question.
Several technical gaps remain, raised by the Tax Institute, CPA Australia, and others during the Senate inquiry, particularly around apportionment methodologies, the interaction between the old and new CGT regimes for transitional assets, and the scope of certain exemptions.
The ATO is yet to publish detailed guidance on how it expects taxpayers to calculate and substantiate gains under the new rules. That includes valuation requirements, which matters significantly for anyone planning their position ahead of 1 July 2027.
We expect ATO guidance to emerge progressively. We're tracking it closely and will update clients as it becomes available.
Frequently Asked CGT & Negative Gearing Questions
For many property owners valuations will be required to support cost base apportionment and establish CGT positions under the new framework. Where gains straddle the 1 July 2027 transition date, the split between old-rules gains and new-rules gains will need to be defensible. A credible, independently prepared market value assessment at the relevant date is the most reliable way to do that. Valuations must reflect objective market value and be evidence-based, the ATO's existing standards on this haven't changed.
The critical date is 1 July 2027. Under the transitional arrangements, taxpayers will generally need to either use a market value as at 1 July 2027 to calculate the pre- and post-transition portions of any eventual gain or apply an ATO-approved apportionment method, for example, a time-based formula. Which approach applies, and how it's calculated, will depend on ATO guidance that is still to come. Getting a well-supported market value at 1 July 2027 locked in now creates the clearest baseline.
The ATO has not yet specified whether a desktop assessment is sufficient or whether a full inspection-based valuation will be required under the new rules.
What is clear from existing ATO principles is that valuations must be objective, supportable, and fully documented, with methodology, basis, and inputs clearly explained. Our recommendation is a full internal valuation. It provides the most robust and defensible basis for tax compliance and decision-making. If a desktop assessment is ultimately determined to be sufficient for your circumstances, we can deliver that too.
We're already seeing the pattern in our enquiry pipeline. Clients and their advisers are prioritising:
- Baseline valuations at key transition dates, particularly enquiries regarding locking in a valuation for 1 July 2027
- Retrospective valuations to establish or confirm historic cost bases
- Valuations to support trust restructures or asset transfers considered under the new rules
- Independent, professionally prepared reports that will hold up to ATO scrutiny
Note: The ATO has not yet issued specific guidance on valuation requirements under the new legislation. The responses above reflect current best understanding and established ATO principles. Clients should obtain advice from their accountant or tax adviser for their specific circumstances
What To Do Now
- Identify your affected properties: Which assets in your portfolio were acquired after 7:30pm on 12 May 2026, or are likely to be sold post-1 July 2027? These are the ones where the transition rules will matter most.
- Talk to your accountant: The interaction between the old and new CGT regimes requires careful modelling. Don't make holding, selling, or restructuring decisions without advice.
- Start thinking about 1 July 2027 valuations now: Demand for independent property valuations is going to increase significantly as the transition date approaches.
- SMSF trustees: act urgently if mid-process on a residential LRBA. The window closes 10 August 2026 (45 days after Royal Assent). Contracts, not settlements, are what matter.
Stay Informed
ATO guidance on valuation requirements is still to come. When it does, we'll be communicating directly with our clients and professional referrers on what it means in practice and what the recommended path looks like.
If you'd like to stay across developments as they land, subscribe to our updates below.
And if you're ready to lock in a property valuation ahead of the 1 July 2027 transition date, our team is taking bookings now. Talk to an Acumentis specialist today to discuss your property and secure your place in the calendar.
*This article provides general information only and does not constitute tax, financial, or legal advice. Property owners and investors should seek independent advice from a qualified tax adviser or accountant regarding their specific circumstances.*