The proposed **Treasury Laws Amendment (Tax Reform No. 1) Bill 2026** may significantly change how Australian property investors are taxed.
The reforms focus on three major areas:
* replacing the 50% capital gains tax discount;
* limiting negative gearing for certain residential properties; and
* providing concessions for eligible new residential dwellings.
As these changes could affect investment returns and future purchasing decisions, property owners should understand the proposed rules before making long-term investment plans.
## Changes to the Capital Gains Tax Discount
Under the proposed reforms, the existing 50% capital gains tax discount would generally be removed for individuals and trusts from **1 July 2027**.
Instead, the cost base of an asset would be adjusted for inflation using the Consumer Price Index. This is known as the **cost base indexation method**.
Under this method, only the increase in the asset’s value above inflation would generally be treated as a taxable capital gain.
For assets already owned before 1 July 2027, the proposed transitional rules would divide the capital gain into:
* the gain accrued before 1 July 2027; and
* the gain accrued from 1 July 2027 onwards.
The asset would effectively be valued at market value on 30 June 2027, although any capital gain would generally remain deferred until the asset is actually sold.
Property investors may therefore need to obtain reliable market valuations for relevant assets around the commencement date.
## Proposed 30% Minimum Tax on Capital Gains
The reforms also propose a minimum tax rate of **30%** on certain capital gains made by individual taxpayers.
The minimum tax would generally apply only to gains accrued from 1 July 2027 onwards. It would operate together with the cost base indexation rules to ensure that a minimum level of tax is paid on relevant capital gains.
Certain recipients of social security payments, including some age pension and JobSeeker recipients, may be excluded from the minimum tax rules.
The actual impact would depend on the taxpayer’s income, asset ownership, available capital losses and personal circumstances.
## Negative Gearing Restrictions
The proposed reforms would also limit negative gearing for certain residential investment properties acquired after **7:30 pm AEST on 12 May 2026**.
Where the rules apply, rental losses may no longer be immediately deductible against salary, business income or other investment income.
Instead, the losses would generally be quarantined and carried forward. They may later be used against eligible residential rental income or certain residential capital gains.
The proposed rules would not generally apply to:
* residential properties acquired before the commencement time;
* properties held by a self-managed superannuation fund;
* certain vacant land acquired before 12 May 2026; or
* a property that was the taxpayer’s main residence before 12 May 2026 and was later converted into an investment property.
These exemptions mean that the acquisition date and history of each property will be important when determining whether rental losses can continue to be claimed.
## Concessions for New Residential Dwellings
The proposed reforms provide more favourable treatment for qualifying new residential dwellings.
An eligible new dwelling may continue to receive ordinary negative gearing treatment, meaning rental losses may remain deductible against other income.
When the property is sold, the taxpayer may also be able to choose between:
* the existing 50% capital gains tax discount; or
* cost base indexation together with the proposed 30% minimum tax.
To qualify, the property must generally be a genuinely new residential dwelling that adds to Australia’s housing supply.
For example, demolishing one existing house and replacing it with one new house may not qualify because it does not increase the total housing supply.
## What Should Property Investors Do?
Although the reforms are proposed and may change before becoming law, investors should begin reviewing:
* the acquisition dates of their investment properties;
* whether each property is new or established;
* available capital and rental losses;
* property market values around 30 June 2027;
* the ownership structure of future investments; and
* the potential after-tax return from future property purchases.
Tax outcomes should be considered before signing a purchase contract, restructuring ownership or selling a significant asset.
## Speak With WNR Business Consulting
WNR Business Consulting assists property investors, business owners and high-net-worth individuals with tax planning, capital gains tax, investment structures and SMSF matters.
Professional advice can help you understand how the proposed reforms may affect your existing portfolio and future investment strategy.
**Contact Eugene Dou CPA**
WNR Business Consulting
Phone: 0402 500 543
Email: [eugene.dou@wnrbc.com.au](mailto:eugene.dou@wnrbc.com.au)
Website: [www.wnrbc.com.au](http://www.wnrbc.com.au)
*Disclaimer: This article is provided for general information only and does not constitute taxation, financial or legal advice. The reforms discussed are proposed measures and may be amended before becoming law. You should obtain professional advice based on your personal circumstances before making any investment or taxation decision.*