The 2026 tax reforms: CGT, trusts and SMSF borrowing — the dates that matter

Australia's first tranche of tax reform is now law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and its companion rates Act received Royal Assent on 26 June 2026, reshaping how capital gains, negatively geared property and SMSF borrowing are taxed — and a separate, announced measure will bring a minimum tax to discretionary trusts. The headline question for most people is simply: when does each change start, and what still works? Here are the dates that matter.

The key dates at a glance

• 12 May 2026 — Budget 2026–27. The discretionary-trust minimum tax is announced, and this is the cut-off date for the testamentary-trust exclusion and the negative-gearing grandfathering.
• 25–26 June 2026 — both Bills pass Parliament; Royal Assent on 26 June 2026.
• 10 August 2026 — the SMSF residential LRBA ban commences (the 45th day after Assent).
• 1 July 2027 — the 50% CGT discount is removed (indexation + 30% minimum tax on capital gains begins); negative-gearing limits take effect; the restructure-rollover window opens.
• 1 July 2028 — the 30% minimum tax on discretionary trusts begins.
• 30 June 2030 — the discretionary-trust restructure-rollover window closes.

When is the 50% CGT discount removed?

The 50% CGT discount for individuals, trusts and partnerships is removed for capital gains accruing from 1 July 2027. The change is prospective, not retrospective. Gains accruing from that date are taxed using cost-base indexation — broadly, the cost base is multiplied by CPI at sale divided by CPI at purchase, so you are taxed only on the real, above-inflation gain — together with a 30% minimum tax on the gain. Indexation applies to the cost-base elements except the third element (ongoing costs of ownership), where the asset has been held at least 12 months.

The 30% minimum means many gains face a minimum effective rate of 30% regardless of the taxpayer's normal marginal rate. It targets taxpayers who realise large gains in a year when their other income is low; recipients of government payments are exempted.

Assets you already hold get split treatment. Assets held on 30 June 2027 (including pre-CGT assets) are deemed to be sold just before 1 July 2027 and reacquired at market value. The notional pre-1 July 2027 gain or loss is deferred until you actually sell; at that point the pre-2027 portion is taxed under the old rules (including any 50% discount) and only the post-2027 growth uses indexation and the 30% floor. A market-valuation method at 1 July 2027 may be available as an alternative. In short, the discount you have already earned up to 1 July 2027 is preserved — only future growth moves to the new regime.

Two concessions survive: the up-to-60% CGT discount for qualifying affordable housing is fully retained, and the four small business CGT concessions remain in place.

Don't confuse the two "30% minimum taxes". One applies to capital gains from 1 July 2027 and is already law. A separate one applies to discretionary trust income from 1 July 2028 and is an announced measure still being finalised.

When do the negative gearing changes start?

The negative-gearing restriction applies from 1 July 2027 and bites on residential property purchased after 7:30pm on 12 May 2026 (Budget night). For affected established residential property, rental losses can only be offset against residential rental income or future capital gains from rental property — no longer against salary or other personal income.

Grandfathering is generous and date-based. Property held as at 7:30pm on 12 May 2026 — including property under contract but not yet settled at that time — can keep being negatively geared under the current rules until it is sold. New builds remain exempt, with investors retaining both negative gearing and the 50% CGT discount for eligible new dwellings. Widely held trusts and superannuation funds, build-to-rent developments and investors supporting government housing programs are also exempt.

What is an LRBA?

A Limited Recourse Borrowing Arrangement (LRBA) is the only way a self-managed super fund (SMSF) can borrow to buy an asset. The fund borrows to acquire a single asset — most commonly property — which is held in a separate holding trust (a "bare" or custodian trust) until the loan is repaid. The lender's recourse is limited to that one asset, so if the loan defaults the fund's other assets are protected. This is the structure that has allowed SMSFs to buy residential property with borrowed money.

When do the SMSF LRBA changes take effect?

The reform prohibits SMSFs from entering new LRBAs to acquire residential property, and it commences on 10 August 2026 — the 45th day after Royal Assent on 26 June 2026. Business real property (as defined in section 66 of the SIS Act 1993) can still be acquired under an LRBA, so commercial and industrial property is unaffected; outright residential purchases without borrowing are also unaffected.

What is grandfathered: all existing residential LRBAs continue, refinancing an existing LRBA to another lender is allowed, and contracts exchanged before 10 August 2026 are protected even if settlement happens after that date. The protection trigger is the contract-exchange (acquisition) date, not the settlement date. Any SMSF mid-purchase of residential property should, before 10 August 2026, ensure the contract is exchanged and that all entities — particularly the holding trust — are correctly established.

When does the 30% minimum tax on discretionary trusts start?

This is a separate measure from the CGT change. Announced in the 2026–27 Federal Budget on 12 May 2026, it imposes a 30% minimum tax on discretionary trust income from 1 July 2028 (first calculated and paid via the trust's 2028–29 return), applying at the trustee level. Non-corporate beneficiaries who are presently entitled to trust income receive a non-refundable tax credit for the tax the trustee paid, so they are not taxed twice but the overall rate cannot fall below 30%. Corporate beneficiaries get no credit — a deliberate rule to stop "bucket company" structures sidestepping the minimum. The CGT discount still applies to capital gains realised inside the trust and allocated to an individual; the minimum tax is then applied to the discounted gain.

This measure is an announced policy still being developed through consultation, so some design details remain unsettled. Treat 1 July 2028 as the planning date, but expect refinement before it becomes law. The minimum tax does not apply to fixed trusts, widely held trusts, complying super funds (including SMSFs), charitable trusts, special disability trusts or deceased estates. Carved-out income includes primary production income, certain income of vulnerable minors, amounts already subject to non-resident withholding tax, and income of testamentary trusts in existence on 12 May 2026.

Why do testamentary discretionary trusts remain the effective structure?

Because of that final carve-out. A testamentary discretionary trust — one created under a will, on death — that existed on 12 May 2026 is excluded from the 30% minimum tax and keeps its current flow-through taxation. That includes the long-standing "excepted trust income" rule, which lets distributions to minor beneficiaries be taxed at ordinary adult marginal rates rather than the penalty rates that apply to minors in ordinary family trusts.

That combination leaves the pre-12 May 2026 testamentary discretionary trust as the standout — arguably the last broadly effective — discretionary structure for splitting income to low-rate (including minor) beneficiaries. By contrast, new inter vivos (family) discretionary trusts will be caught by the 30% minimum from 1 July 2028. Two important uncertainties remain, pending the exposure draft: the treatment of testamentary discretionary trusts created after 12 May 2026 (expected to be in scope), and whether amending a will executed before the announcement affects grandfathered status. So "remains effective" applies most safely to established, pre-Budget testamentary trusts.

Is there relief to exit a discretionary trust — and by when?

Yes. Alongside the trust minimum tax, the Government is introducing a time-limited three-year restructure rollover that runs from 1 July 2027 to 30 June 2030. It allows assets to be transferred out of a discretionary trust into a company, a fixed trust or another non-discretionary entity, deferring the income tax and CGT consequences of the transfer (a rollover, not an exemption). It is bespoke to this reform and operates more broadly than the existing Subdivision 328-G small business restructure rollover and the Subdivision 122-A company rollover.

Eligibility and integrity rules are being finalised through consultation, so expect requirements around ownership continuity and business continuation — this will not be a simple administrative election, so plan early. Businesses that still meet the small business CGT concession conditions on an eventual sale continue to access the 15-year exemption, the 50% active asset reduction, the retirement exemption and the rollover, so exiting is not the only option. The three years to 30 June 2030 are the planning runway to decide whether to restructure and, if so, to use the rollover.

Sources

• Parliament of Australia — Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, Bills Digest
• Treasury — Second reading speech (Treasurer Jim Chalmers)
• ATO — Boosting home ownership: reforming negative gearing and capital gains tax
• ATO — Introducing a minimum tax on discretionary trusts
• Pitcher Partners — A fundamental shift in CGT: pre-CGT assets, indexation and minimum tax
• Grow SMSF — SMSF borrowing banned: what the Labor–Greens LRBA deal means