Negative gearing and CGT discount changes from 1 July 2027: what the law says

The timeline

• 7:30pm (ACT legal time), 12 May 2026 — the cut-off. Dwellings you acquired before then are outside the negative gearing change.
• 26 June 2026 — the Act is made.
• 1 July 2027 — the loss quarantine applies from the 2027–28 income year, and the CGT changes apply to CGT events from this date.

Negative gearing: the quarantine

New section 26-155 says that if what you could otherwise deduct for using or holding residential dwellings as residential accommodation exceeds your income from them, the excess is not deductible that year. It becomes a quarantined amount, which is first applied against capital gains from residential property and then treated as a deduction for residential property in the following year.

The Act's own example: a landlord with $65,000 of deductions and $50,000 of rent deducts $50,000 and carries forward $15,000. Next year, $70,000 of deductions against $52,000 of rent leaves $33,000 carried forward. In the third year deductions fall to $20,000 against $72,000 of rent, and the whole carried amount is used: $19,000 remains taxable.

Who is outside the quarantine

• An interest in a residential dwelling you last acquired before the cut-off. If you bought under a contract, you are treated as owning it from the date you entered the contract (s.26-155(3)).
• A residential dwelling that is a new residential dwelling in relation to you. The Act leaves the requirements to a ministerial legislative instrument aimed at dwellings that genuinely add to supply (s.26-160(3)–(4A)). Until it is made, treat new-build status as unconfirmed.
• Dwellings used for purposes the Minister determines for social, affordable or specialist housing (s.26-155(2)(c)).
• Widely held unit trusts and complying superannuation funds (s.26-155(4)).

CGT: from discount to indexation

For CGT events from 1 July 2027 the 50% discount for individuals and trusts is replaced by cost-base indexation. An asset you hold on 30 June 2027 is treated as sold at market value just before 1 July 2027 and reacquired (s.112-155). The notional gain to that date is deferred until you really sell and keeps the discount (s.112-160). New residential dwellings keep the 50% discount after 1 July 2027 (s.115-102).

New Division 119 adds a minimum tax of 30% on post-July-2027 capital gains of Australian-resident individuals: work out the income tax attributable to the gain; if it is less than 30% of the gain, pay the difference. Deferred gains and new-dwelling gains are not included.

What it means in practice

For an existing negatively geared investor, nothing changes until you sell — and then only growth after 30 June 2027 is treated differently. For a buyer of an established home after the cut-off, the tax benefit of running at a loss moves from each year to the sale. For a buyer of a new build, the old treatment continues, subject to the definition. The negative gearing calculator puts numbers on all three.

Questions landlords ask

Is negative gearing abolished for everyone?

No. Only losses on dwellings acquired after the cut-off that are not new residential dwellings are quarantined, and only from 2027–28.

Are quarantined losses lost?

No. They reduce residential capital gains and are carried forward as residential deductions.

Does the 30% minimum tax apply to my pre-2027 gain?

No. Deferred gains from the deemed sale are excluded from the minimum tax capital gain (s.119-5(2)).