The Australian Treasury opened a consultation on the second tranche of capital gains tax and negative gearing legislation, seeking feedback on issues ranging from death and relationship breakdown transfers to the definition of a 'new residential dwelling', with submissions due by 21 August 2026, ahead of the reforms taking effect on 1 July 2027.
The Australian Treasury has launched a public consultation on the Capital Gains Tax and Negative Gearing – Tranche 2 legislation on 4 August 2026.
Comments on the consultation are due by 21 August 2026.
In the 2026–27 Budget, the government announced reforms to negative gearing and capital gains tax (CGT). The reforms aim to make the tax system fairer, support home ownership and help fund tax cuts for workers. The Australian Parliament has passed the first stage of legislation, and it is now law. The government is welcoming feedback on the next stage of draft legislation.
Feedback
The government is seeking feedback on how the reforms should apply in specific situations, including:
- keeping current tax treatment when certain property transfers because of death or relationship breakdown
- defining a ‘new residential dwelling’, which lets owners offset net rental losses against other income and access the 50% CGT discount
- exempting some affordable and social housing, NDIS housing, public housing and build-to-rent developments from the negative gearing changes
- keeping existing negative gearing and CGT treatment when first using an eligible main residence to produce assessable income
- excluding capital gains from certain trusts and deceased estates from the minimum tax on capital gains
- setting out how to calculate capital gains made before and after 1 July 2027
- further clarifying how the CGT changes apply to trusts, including attribution managed investment trusts (AMITs)
- ensuring the changes apply correctly to people who are Australian residents for only part of the time they own an asset
- ensuring certain CGT events do not trigger tax earlier than intended for deferred capital gains
From 1 July 2027, the government will limit negative gearing to new residential properties, reintroduce capital gains tax cost base indexation, and introduce a 30% minimum tax on real capital gains.
The government is introducing these reforms in stages. The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 contains the second stage of the reforms.
Further detail is available in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and Explanatory Memorandum, and the negative gearing and CGT reform tax explainer.
The Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026 amends the Income Tax Assessment Act 1997 and 3 other taxation laws to replace the 50% capital gains tax discount for individuals, trusts and partnerships with cost base indexation and a 30% minimum tax rate on capital gains accruing on and after 1 July 2027; Income Tax Assessment Act 1997 to limit negative gearing for residential property investments to new builds from 1 July 2027; Income Tax Assessment Act 1997 to provide for a non-refundable tax offset from the 2027-28 financial year for Australian resident individuals who earn labour income; and Income Tax Assessment Act 1997 and Fringe Benefits Tax Assessment Act 1986 to provide for a USD 1,000 standard deduction from the 2026-27 financial year for work-related expenses for individuals who are Australian tax residents who derive assessable labour income.
