Australia has introduced legislation to clarify the application of its capital gains tax reforms to investment trusts, superannuation funds and foreign residents. The proposed changes address indexation rules, preserve CGT discounts for eligible housing, establish minimum tax exemptions and introduce safeguards against tax avoidance ahead of the reforms taking effect on 1 July 2027.
Australia’s government introduced the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 to Parliament on 14 October 2026, proposing further amendments to the capital gains tax (CGT) reforms, clarifying their application to investment trusts, retirement savings funds and foreign residents. Building on earlier 2026 enactments, this legislative tranche refines Capital Gains Tax (CGT) rules, modifies negative gearing, and establishes transitional relief for Payday Superannuation.
The second tranche of Capital Gains Tax (CGT) reforms is set out in Schedule 4 of the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026. It builds directly on the core CGT overhaul enacted earlier in 2026, which replaces the general 50% CGT discount for individuals and trusts with cost base indexation and introduces a 30% minimum tax on capital gains starting 1 July 2027.
Schedule 4 resolves technical interactions, provides legislative certainty for complex structures, and establishes key policy exemptions across six core areas:
Integration of attribution managed investment trusts (AMITs)
The amendments align attribution managed investment trusts (AMITs) with other trusts by deeming CGT assets held before 1 July 2027 to be sold and reacquired on 30 June 2027. This separates capital gains accrued before the reforms from those arising afterwards.
AMITs may calculate capital gains using cost base indexation at the trust level, but the indexation benefit must be reversed when gains are attributed to members.
This allows individual investors to apply indexation based on their own eligibility. Capital gains attributed by AMITs to individual investors will also be included when calculating the investor’s 30% CGT minimum tax.
Trustee choice to opt-out of indexation
Trustees of trusts (including MITs and AMITs) may formally elect not to apply cost base indexation for an income year. This election is permitted only if no direct or indirect beneficiary/member is entitled to apply indexation (for instance, where all beneficiaries are companies, superannuation entities, or downstream trusts that have also opted out). This choice removes unnecessary administrative and calculation burdens when indexation provides no practical tax benefit to beneficiaries.
Housing discount preserved
Capital gains from new residential dwellings and affordable housing remain eligible for the 50% CGT discount at both the trust and individual beneficiary levels, including for AMITs. Trustees may also choose between applying the 50% CGT discount and using cost base indexation alongside the 30% CGT minimum tax.
CGT minimum tax exemptions & integrity rules
The 30% CGT minimum tax exemption applies to genuine testamentary trusts, deceased estates, special disability trusts and vulnerable minor beneficiaries, including orphans and minors with disabilities. Anti-avoidance rules will deny the exemption where assets are transferred into testamentary trusts or deceased estates after the announcement date to avoid the minimum tax.
Pro-rata treatment for foreign and temporary residents
Foreign and temporary resident individuals may access CGT discounts and indexation benefits on capital gains made directly, but these benefits are apportioned based on the number of days they were Australian tax residents and not temporary residents during the asset holding period. For gains arising after 1 July 2027, a specific formula will calculate the eligible indexation benefit for the resident period.
Earlier, on 1 October 2026, Australia’s new foreign resident capital gains tax (CGT) rules took effect, introducing changes to the taxation of Australian asset disposals and stricter notification requirements for high-value transactions. The ATO announced the changes on 2 October 2026.
