The Federal Government's 2026-27 Budget has put tax reform firmly back in the spotlight, with proposed changes to CGT and negative gearing among the most closely watched measures. While the headlines have prompted debate and strong reactions, history shows that Budget announcements are only one input into long-term investment decision making.
What matters most for investors is understanding how the proposed changes may work in practice, when they would take effect, and how they might interact with broader financial goals, seeking financial advice where appropriate.
These are the main messages from the eight experts interviewed for ASX Investor Update after the Federal Government released its 2026-27 Budget on Tuesday night, 12 May 2026.
The experts agreed with the Federal Government’s description of its tax-reform package as the "most significant transformation of Australia’s tax system in more than a quarter of a century"[1], and urged investors to understand the changes.
The experts welcomed the Federal Government’s decision to include transitional arrangements for its proposed changes. This means investors have time to respond and adapt to the changes, should they wish to do so, before the new changes take effect - assuming the reforms become law.
It’s worth noting that the proposed Budget tax reforms are yet to be legislated, meaning they could be subject to parliamentary consultation, negotiation and amendment. Also, the proposed CGT and negative gearing changes don’t take effect until 1 July 2027.
For investors, the Budget announcements, while important, are one of many factors that can help inform investment decision and tax-planning considerations.
Finally, every investor’s circumstances are different. Some will be affected more than others by the proposed Budget changes. Investors may wish to consider how the budget measures impact their personal circumstances with their professional adviser or accountant.
Key Budget changes for investors
Among the proposed Budget changes, four stand out for investors:
- From 1 July 2027, the Federal Government will replace the 50% CGT discount for individuals, trusts and partnerships with cost-base indexation. Superannuation is not included in the changes to the capital gains tax discount, with current CGT settings for superannuation remaining unchanged.[2]
- A minimum tax rate of 30% will apply to real capital gains from 1 July 2027, with no impact until the gain is realised.
- From 1 July 2027, the Federal Government is restricting negative gearing for residential property investments to new builds.
- From 1 July 2028, the Federal Government will introduce a minimum 30% tax on discretionary trusts’ taxable income with some exceptions. Rollover relief will be provided for three years from 1 July 2027 to assist small businesses and others that wish to restructure.
1. CGT cost-base indexation
The current 50% CGT discount was introduced in 1999, allowing certain taxpayers to reduce their taxable capital gain for assets held for at least 12 months by half, rather than adjusting for inflation.
Under the Budget changes, indexation will be calculated using the Consumer Price Index, in a similar manner to arrangements previously in place between 1985 and 1999. The Federal Government says this returns CGT to its "original intent of taxing real capital gains, appropriately compensating taxpayers for inflation". [3]
In its Budget analysis, Challenger’s Technical Services Team gave an example of how the proposed cost-base indexation would work: [4]
- Zoe purchases shares in a company for $100 on 1 July 2027. She then sells her shares on 1 July 2032 for $125, having made a gain from this investment of $25. As the shares were purchased on or after 1 July 2027, Zoe’s capital gains are subject to cost-base indexation.
- Assuming inflation is 2.5% each year Zoe holds the assets, she can work out that the indexed cost base of the shares is $113. Zoe’s taxable capital gain is reduced from $25 to $12 under cost-base indexation. This is slightly less than the taxable capital gain of $12.50 under the 50% discount.
2. Minimum tax rate on capital gains
The Federal Government is also introducing a 30% minimum tax on real capital gains earned from 1 July 2027. It says the "minimum tax will reduce incentives to defer the sale of assets to periods when other income and marginal tax rates are low". [5]
According to an example provided by Challenger of how the change would work: [6]
- Jack has taxable income before capital gains of $25,000 in 2029–30 and realises a capital gain of $10,000 on an asset he purchased in 2027–28. Jack does not receive an income support payment, so he is not exempt from the minimum tax. The tax on Jack’s capital gain of $10,000 is $1,400, or a tax rate of 14% (excluding the Medicare levy).
- As this is lower than 30%, Jack pays an additional $1,600 in tax to bring the tax rate on his capital gain up to 30%. Jack may have tax offsets available to reduce the minimum tax and would be exempt from the minimum tax if he received an income support payment in that year.
3. Negative gearing
The Federal Government is limiting negative gearing for residential property to new property builds from 1 July 2027. Gearing on shares, commercial property and other asset classes will be unaffected by the changes.
Market reaction
Here is how experts interviewed by ASX Investor Update reacted to the proposed reforms on CGT and negative gearing:
Shani Jayamanne, Director, Investment Specialist, Wealth, Morningstar Australia
Key takeaway: Focus on fundamentals first.
The CGT changes will be the biggest worry for investors. It’s important, however, that investors avoid making, short-term decisions purely for tax purposes. Tax matters, but it is only one component of investment outcomes. More important is ensuring an investment aligns to your needs, risk capacity and investment time horizon.
As investors, we think of time, particularly for our superannuation, in terms of decades. There will always be tax and other legislative changes along the way. A long-term approach to portfolio construction may remain important for some investors rather than solely focusing on minimising tax. It’s also worth remembering that if Australia has a higher-inflation, lower-growth environment, the change to cost-base indexation might be beneficial for some investors.
Michael Brown, Head of Finance and Regulatory Affairs, VanEck Australia
Key takeaway: Transitional arrangements provide time for investors to review their positions.
The big tax innovation in this Budget is the use of transitional tax arrangements. In all the years I have analysed tax policy, I cannot recall a Budget that has given investors so much time to prepare for tax changes. Investors have until 1 July 2027 before the CGT and negative gearing changes begin. They have until 1 July 2028 before the changes to the taxation of discretionary trusts start.
As such, the Federal Government is giving investors a lot of lead-time to digest the changes and see whether it changes their investment strategy and tax planning. This means investors can take their time to assess the changes rather than make quick decisions and make a call if or how they respond. Some investors might, for example, decide to sell assets before 1 July 2027 to use the current CGT rules.
Gemma Dale, Director of SMSF and Investor Behaviour, nabtrade
Key takeaway: Follow the legislative process for Budget changes, seek advice.
The Budget tax changes are yet to be legislated. If you look at the history of other major Budget investment reforms, such as the introduction of Division 296 (tax on large superannuation balances, announced in the 2023-24 Budget), the Federal Government required the support of the crossbench and it took a few years for the change to be enacted. So, there is a very real possibility that the proposed changes on CGT, negative gearing and discretionary trusts will require a lot of parliamentary consultation and negotiation and may be amended.
It’s important that investors follow the legislative process for these reforms before acting on them. I’ve seen a lot of social media after the Budget telling investors what they should and shouldn’t do. Tax is complex, so get advice from an expert before changing your investment strategy.
Most of all, don’t panic. There is time to make changes, if required, given the CGT and negative gearing changes don’t start until 1 July 2027. Also, think about your super. Superannuation was largely carved out of changes in this Budget. Super is already an attractive investment structure, but the Budget changes, if passed, make it even more attractive, in my view.
Rachel Waterhouse, CEO, Australian Shareholders’ Association (ASA)
Key takeaway: Implications for younger investors, concerns about the minimum CGT rate.
Intergenerational fairness is an important objective, but reform needs to work in practice. Many younger Australians are investing in shares and ETFs because entering the housing market has become harder. Changes that increase the tax burden on long-term investment outside property risk making it harder for young Australians to build wealth, rather than improving intergenerational equity.
The ASA is also concerned about the proposed 30% minimum tax rate on net capital gains. A flat minimum rate may be a blunt tool for investors with variable income, self-funded retirees or others whose marginal tax rate is below 30% in the year they sell an asset.
Shane Oliver, Chief Economist, AMP
Key takeaway: Investors may reassess the relative role of different income and growth assets.
The changes to negative gearing, the CGT discount and the minimum tax on trust distributions have potentially significant implications for many investors. Since shares (and all assets apart from property) are not affected by the changes to negative gearing, some experts suggest the changes could influence how investors assess the relative role of different asset classes. The CGT change could boost the appeal of high-dividend stocks over growth stocks. Super could also benefit as an investment destination versus property, as its tax rules are unchanged.
In AMP’s view, the Budget is unlikely to change the rising trend for the Australian dollar. On bonds, the projection for smaller medium-term Budget deficits implies slightly less upward pressure on bond yields. The Budget has no major implications for cash and term deposits.
Alex Vynokur, CEO, Betashares
Key takeaway: Minimum CGT provision could adversely affect retirees.
In Betashares’ opinion, the minimum tax provision is punitive for those it should least affect. A retired investor on a 16% marginal rate selling a long-held equity portfolio currently faces 8% tax on nominal gains, as opposed to 30% on indexed gains under announced changes. That is not a minor adjustment. It is a fundamental change to the way many Australians who have lived within their means and invested for decades have built a nest egg for a secure retirement. It is also worth remembering that every dollar invested in shares was earned, taxed as income, and then invested again. The so-called asset-rich are not the recipients of an unearned windfall - they are people who made a deliberate choice to save and invest after-tax income over a lifetime.
Also, for younger Australians in particular, this change (extending CGT changes to shares, ETFs and investment funds) sends the wrong signal. Investing for long-term capital growth is exactly how they should be building wealth, especially when property is out of reach. The CGT discount in its current form corrects for inflation, addresses the distortion of multi-year gains taxed in a single year, and rewards good investing habits. The 30% minimum tax compounds that problem further, penalising young aspiring investors getting started in life and retirees who want a secure retirement.
Andrew Porter, Chief Financial Officer, Australian Foundation Investment Company (AFIC)
Key takeaway: Investment structures and income reliability could matter more in assessing long-term portfolio outcomes in a changing tax environment.
In AFIC’s opinion, Budget changes to CGT could increase investor focus on structures (investment vehicles) that can provide reliable income and tax-effective returns over the long term.
For listed investment companies (LICs), the direct impact [of the Budget] appears limited. LICs already pay tax at the corporate rate of 30%, with profits distributed as franked dividends. As a result, the introduction of a 30% minimum tax on capital gains is not expected to materially change how LICs operate or how returns flow to investors.
Under the current proposals, the LIC capital gains discount that can be provided by LICs through their dividends should continue for all gains made up to 1 July 2027, regardless of when they are ultimately realised or distributed.
In AFIC’s opinion, LICs could continue to provide access to franked income streams, supported by longstanding mechanisms that allow portfolio gains to be potentially converted to consistent dividend payments. More information on the risks and benefits of investing in LICs is available here.
Ian Irvine, CEO, Listed Investment Companies and Trusts Association
Key takeaway: Greater focus on long-term income investing after Budget changes.
Following the proposed Budget measures, I expect the investment pendulum to swing a little towards long-term income-investment strategies, and a bit away from short-term strategies focused on high-growth stocks and momentum plays. Investors who have chased growth stocks and made substantial short-term gains will pay a lot more CGT after 1 July 2027, if the changes are passed.
LICs are typically long-term income-focused investment vehicles that operate through a company structure to pass through franked dividends to their shareholders. They tend to appeal to buy-and-hold investors who seek more conservative investments rather than high-growth momentum stocks. I believe we could see more interest in LICs and other income-focused assets after the Budget changes.
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References
[1] Australian Government, Statement 4: Tax Reform for Workers, Businesses and Future Generations, Budget 2026-27, p. 129.
[2] Capital gains tax: federal budget a win for 19 million Australians with super - ASFA.
[3] Australian Government, Statement 4: Tax Reform for Workers, Businesses and Future Generations, Budget 2026-27, p. 155.
[4] Challenger, Federal Budget Report 2026-27, 13 May 2026, p.1.
[5] Australian Government, Statement 4: Tax Reform for Workers, Businesses and Future Generations, Budget 2026-27, p. 156.
[6] Challenger, Federal Budget Report 2026-27, 13 May 2026, p.1.
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