With the Federal Budget set for 12 May 2026, Capital Gains Tax (CGT) is firmly back in focus, and property investors across Australia should be paying close attention. Recent government commentary suggests that changes to the CGT discount are being actively considered, potentially marking one of the most significant tax shifts for investors in decades Treasurer Jim Chalmers has indicated that reform is on the table, stating that all tax options remain under consideration ahead of the Budget.
Proposed Change
Currently, Australian investors receive a 50% CGT discount on assets held for more than 12 months.
However, proposals being discussed include:
- ·Reducing the CGT discount from 50% to as low as 25–33%
- ·Removing the discount entirely and taxing gains as income
- ·Adjusting gains for inflation instead of applying a flat discount
As Treasurer Jim Chalmers noted in a recent interview:
“We have indicated publicly for some time now… that we have an open mind to tax reform… there’s certainly appetite for more tax reform if we can land it.”
Why Is the Government Considering CGT Changes?
A recent Senate inquiry highlighted concerns that current tax settings:
- ·Encourage investment in existing property over productive assets
- ·Contribute to housing affordability challenges
- ·Disproportionately benefit higher-income investors
The report also found that when combined with negative gearing, CGT settings may influence property ownership patterns and investment behaviour. The government is assessing whether tax reform could reshape investor behaviour and improve housing outcomes.
What Could This Mean for Property Investors?
If CGT changes are introduced, the impact could include:
1. Higher Tax on Property Sales
Reducing the CGT discount means a larger portion of your capital gain becomes taxable.
Eg: A $500,000 gain currently taxed on $250,000 could be taxed on $330,000+ under new rules.
2. Shift Toward Long-Term Strategies
Investors may be less inclined to:
- ·Buy and sell frequently
- ·Rely on short-term capital growth
Instead, there may be a stronger focus on:
- ·Long-term wealth accumulation
- ·Sustainable rental income
3. Changes to Market Behaviour
Policy changes could:
- ·Reduce speculative investor activity
- ·Slightly improve access for owner-occupiers
However, property experts suggest any price impact is likely to be around 1–4%.
Frequently Asked Questions about Capital Gains Tax Proposed Changes 2026
Q: When will CGT changes be announced?
A: Potential changes may be announced in the Federal Budget on 12 May 2026.
Q: What changes are being proposed?
A: Reducing the discount (50% → 25–33%), removing it, or adjusting gains for inflation.
Q: Will existing properties be affected?
A: Possibly not, “grandfathering” may allow current investments to keep existing tax treatment. This means: Existing properties may retain current tax rules, while new purchases could fall under updated rules
Need Help Reviewing Your Property Tax Strategy?
At Cashflow Financial, we help property investors navigate changing tax rules and build long-term, tax-effective strategies.
If you’d like clarity about tax and your property investments, book a consultation with our team today.