Highlights
- New Capital-gains-tax/”>Capital Gains Tax and negative gearing reforms are scheduled to take effect from 1 July 2027, subject to legislation being passed.
- The 50% CGT discount will be replaced by a cost-base indexation system alongside a minimum 30% tax on net capital gains.
- Negative gearing concessions will be restricted to new-build residential properties under the proposed reforms.
- The changes may alter the relative appeal of property and shares by reducing some of the tax advantages historically associated with property Investment.
For decades, the question of whether to invest in property or shares has been one of the great debates in Australian Personal Finance. Now, sweeping changes to the tax treatment of capital gains and negative gearing are forcing investors to revisit their assumptions. Announced as part of the 2026-27 Federal Budget, the reforms will reshape the after-tax Economics of property investment from 1 July 2027 — and could tilt the long-standing balance between bricks and shares. Here is what investors need to know as of Tuesday 9 June 2026.
What is changing
The Government has announced two major reforms. First, the 50% capital gains tax discount — which has long allowed investors to halve the taxable gain on Assets held for more than 12 months — will be replaced with a system based on cost-base indexation, alongside a minimum 30% tax on net capital gains. Second, negative gearing, the practice of deducting investment losses against other income such as wages, will be limited to new builds.
Both measures are slated to take effect from 1 July 2027 and were announced on Budget night in May 2026. Importantly, transitional arrangements mean the changes apply to gains arising on or after that date, while prior gains remain subject to the current rules. Existing arrangements will also be preserved for properties held before Budget night, softening the immediate impact for current investors.
How the changes work
Under the new capital gains regime, the flat 50% discount gives way to indexation, which adjusts the cost base of an asset for Inflation, plus a minimum 30% tax on net gains for assets held longer than 12 months. The shift changes the maths of long-term investing: rather than simply halving the gain, investors will calculate their taxable gain by reference to inflation, with a floor on the tax rate applied.
On negative gearing, the restriction to new builds is designed to channel investment towards new housing Supply. Investors who buy new builds will still be able to deduct losses against other income, while those who purchase established housing after Budget night will be able to deduct losses only against residential property income, carrying forward unused losses rather than offsetting them against wages. The reforms are not yet law and remain subject to the legislative process.
Why the changes matter
The capital gains discount and negative gearing have been central pillars of the case for property investment in Australia, contributing to the popularity of residential property as an Asset Class. By altering both, the reforms change the after-tax returns available from property, particularly for investors in established dwellings who relied on negative gearing to offset their wages.
For the property-versus-shares debate, the implications are significant. Shares have always offered advantages such as Liquidity, Diversification and lower entry costs, while property has offered Leverage and favourable tax treatment. By trimming property’s tax advantages, the changes could make shares relatively more attractive for some investors, prompting a reassessment of how capital is allocated between the two.
What it means for share investors
For investors weighing the ASX, the reforms add a new dimension to the comparison. While the capital gains changes apply to all CGT assets — including shares — the removal of the property-specific negative gearing benefit for established dwellings narrows one of property’s distinctive advantages. Combined with the liquidity and diversification benefits of shares, this could make Equity investment more appealing on a relative basis for some.
That said, the changes are nuanced. The capital gains reforms affect shares too, replacing the 50% discount with indexation and a minimum tax, so the comparison is not as simple as property losing out and shares winning. Investors will need to consider their individual circumstances, time horizons and the specific assets involved when assessing how the reforms affect their strategy.
A complex transition
The transitional arrangements add complexity. Because existing property holdings and prior gains are largely preserved under the current rules, the changes create a distinction between assets acquired before and after Budget night. This grandfathering reduces the immediate impact on current investors but introduces a more complicated landscape for new investment decisions.
Investors should also bear in mind that the measures are not yet law and could be amended as they pass through Parliament. The detail of the final legislation will determine the precise impact, making it important to stay informed and to seek professional advice tailored to individual circumstances.
What to watch next
The key developments to watch are the passage of the legislation through Parliament and any amendments to the announced measures. Investors should also monitor how the changes affect property market activity and sentiment, and whether capital begins to rotate towards shares as a result. Given the complexity and the not-yet-law status of the reforms, those affected should consider seeking professional financial and tax advice to understand the implications for their own situation.
The case for shares in a changing tax landscape
The reforms invite a fresh look at the long-standing case for share investment relative to property. Shares have always offered advantages that the tax changes do not diminish: high liquidity, allowing investors to buy and sell quickly; low entry costs, with no stamp duty or large deposits required; and easy diversification across companies, sectors and geographies. These structural benefits stand in contrast to property, which involves high Transaction Costs, illiquidity and concentration in a single, large, undiversified asset.
By trimming property’s distinctive tax advantages — particularly negative gearing on established dwellings — the reforms narrow one of the key reasons investors have favoured property. For some, this could tilt the balance towards shares, especially given the ASX’s Dividend yields and the franking credits that accompany many Australian dividends, which provide their own tax efficiency. The comparison is not straightforward, since the capital gains changes apply to shares as well, but the relative attractiveness of shares may improve for investors who relied on negative gearing.
For investors weighing the two asset classes, the reforms are a prompt to reassess the trade-offs in light of the new tax landscape. The decision will depend on individual circumstances, including time horizon, Risk tolerance, income needs and existing exposures. The changes do not make one asset class definitively superior, but they do alter the calculus in ways worth considering carefully.
Navigating the reforms thoughtfully
Given the complexity of the changes and their not-yet-law status, investors would be wise to approach the reforms thoughtfully rather than making hasty decisions. The transitional arrangements, which preserve existing arrangements for assets held before Budget night and limit the changes to gains arising on or after 1 July 2027, create a nuanced landscape in which the timing and nature of investments matter considerably. The distinction between new builds and established housing for negative gearing purposes adds further complexity.
Because the measures remain subject to the legislative process, their final form could differ from what was announced, making it premature to overhaul investment strategies based on the current proposals. The most prudent course is to stay informed about the legislation’s progress, understand how the changes might affect one’s own circumstances, and seek professional financial and tax advice tailored to individual situations. The interplay between property and shares is influenced by many factors beyond tax — including valuations, interest rates, income needs and personal goals — and tax should be one consideration among several rather than the sole driver of decisions. The reforms represent a meaningful shift in the tax treatment of investment, but navigating them well requires careful, individualised assessment rather than reactive change. For many investors, the appropriate response will be measured reflection rather than immediate action.