The Australian Government has announced significant proposed reforms to the Capital Gains Tax (CGT) system as part of the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026.

If enacted, these changes will reshape the way capital gains are taxed from 1 July 2027, affecting individuals, trusts and partnerships that invest in property, shares and other capital assets.

For decades, the 50% CGT discount has been a cornerstone of long-term investment strategies in Australia. Under the proposed reforms, that discount would no longer apply to newly acquired assets after 30 June 2027. Instead, investors would move to an inflation-based cost base indexation system, while a new minimum tax rate on capital gains would also be introduced.

For property investors, business owners and long-term wealth creators, these proposed reforms could influence investment decisions, ownership structures and the timing of future asset disposals.

It is important to note that, at the time of writing, these measures are proposed legislation and have not yet become law. Investors should monitor the progress of the legislation and seek professional advice before making investment decisions.

What Are the Proposed Capital Gains Tax Changes?

The proposed reforms would apply to individuals, trusts and partnerships, while companies and superannuation funds would generally continue under the existing CGT framework.

The key proposed changes include:

• Removal of the 50% CGT discount for assets acquired after 30 June 2027.
• Introduction of cost base indexation for assets purchased from 1 July 2027.
• Bringing pre-CGT assets (acquired before 20 September 1985) into the CGT system for future gains.
• Introduction of a minimum 30% tax rate on net capital gains, subject to limited exemptions.
• Transitional rules for assets already owned before 1 July 2027.

If implemented, these reforms would represent one of the most significant changes to Australia’s capital gains tax system since CGT was introduced in 1985.

The End of the 50% CGT Discount for New Investments

Under the current rules explained by the Australian Taxation Office (ATO), individuals and trusts that hold a CGT asset for at least 12 months can generally reduce their taxable capital gain by 50% before including it in their assessable income.

This concession has encouraged long-term investing in:

• Residential investment properties
• Commercial property
• Shares
• Managed funds
• Small businesses
• Other investment assets

Under the proposed reforms, this discount would no longer apply to assets acquired after 30 June 2027. Instead, investors would rely on cost base indexation to account for inflation over the ownership period.

Cost Base Indexation Replaces the CGT Discount

Rather than receiving a flat 50% discount, investors purchasing assets after 1 July 2027 would be able to increase the asset’s cost base by an indexed amount that reflects inflation. The objective is to tax only the “real” capital gain after inflation. While indexation may benefit investors during periods of high inflation and long ownership periods, investors experiencing rapid capital growth may find that the previous 50% discount produced a lower tax outcome.

The overall benefit will depend on:

• Inflation rates
• Holding period
• Asset performance
• Individual tax rates

Investors should model future scenarios before making major investment decisions.

Transitional Rules for Existing Investments

One of the most important aspects of the proposed legislation is how it treats assets already owned before the reforms commence.

Assets Bought and Sold Before 1 July 2027

These assets would continue under the existing CGT rules. Where held for more than 12 months, eligible taxpayers would generally continue to receive the 50% CGT discount.

Assets Purchased Before 1 July 2027 but Sold Afterwards

These investments would effectively be split into two periods.

Capital gains accumulated:

• Up to 30 June 2027 would generally be calculated under the current CGT rules.
• From 1 July 2027 onwards would be calculated using the new indexed cost base methodology.

This means investors holding long-term assets may need to obtain market valuations as at 30 June 2027.

Assets Purchased After 1 July 2027

All future capital gains would generally be calculated entirely under the new indexation rules.

Why Property Valuations Will Become More Important

One practical consequence of the transitional rules is the need to establish an accurate market value at 30 June 2027. For listed investments, market prices will generally be straightforward to determine.

However, for:

• Residential investment properties
• Commercial property
• Private companies
• Farms
• Unlisted investments

Professional valuations may become essential. Obtaining a qualified valuation will help establish the property’s market value when transitioning into the new CGT regime and may reduce future disputes with the Australian Taxation Office (ATO).

Proposed Changes for Pre-CGT Assets

Assets acquired before 20 September 1985 have historically been exempt from Capital Gains Tax. The proposed reforms would retain that exemption for gains accrued before 1 July 2027, but future gains would become taxable.

The proposal would work broadly as follows:

• Assets sold before 1 July 2027 would remain fully exempt.
• Assets retained beyond 30 June 2027 would receive a new market value cost base at 1 July 2027.
• Future gains above that market value would become subject to CGT using the new indexation rules.

For families holding long-term investment properties or farms acquired before 1985, obtaining an accurate market valuation will become particularly important.

New Proposed 30% Minimum Tax on Capital Gains

The proposed reforms would also introduce a minimum 30% tax rate on net capital gains for affected taxpayers. According to the Government, the objective is to reduce incentives for investors to defer selling assets until retirement or other low-income years purely to access lower marginal tax rates.

This proposal could affect:

• Retirement planning
• Succession planning
• Investment timing
• Trust distribution strategies

Investors may need to reconsider existing ownership structures and disposal strategies if the reforms proceed.

Special Concession for Newly Built Residential Properties

One notable feature of the proposed reforms is a concession designed to encourage investment in new housing supply. Investors who build or invest in qualifying new residential properties may be able to choose between:

• The existing 50% CGT discount; or
• The new indexed cost base method.

Importantly, eligible gains may continue to be taxed at the investor’s normal marginal tax rate rather than the proposed 30% minimum rate. If enacted, this concession could make new residential developments comparatively more attractive than established properties from a tax perspective.

What Does the Australian Taxation Office Say About CGT?

The Australian Taxation Office reminds investors that Capital Gains Tax is not a separate tax. Instead, any net capital gain is included in your assessable income and taxed at your applicable income tax rate.

The ATO also emphasises the importance of maintaining comprehensive records throughout the ownership period, including:

• Purchase contracts
• Settlement statements
• Stamp duty
• Legal fees
• Renovation costs
• Capital improvements
• Selling expenses
• Depreciation schedules
• Loan establishment costs where relevant

Good record keeping ensures an accurate calculation of your cost base and can significantly reduce the risk of disputes during an ATO review. The ATO also encourages taxpayers to seek professional advice where transactions involve trusts, inherited assets, mixed-use properties or complex ownership arrangements.

How Will These Changes Affect Property Investors?

If the legislation proceeds, Australian property investors may need to rethink many long-standing investment strategies. Some likely impacts include:

Greater emphasis on long-term tax planning

Investors may review whether acquisitions should occur before or after 1 July 2027.

Increased demand for professional property valuations

Valuations at 30 June 2027 may become critical evidence when calculating future capital gains.

Review of ownership structures

Trusts, partnerships and individual ownership may produce different tax outcomes under the new rules.

More detailed record keeping

Maintaining renovation records, acquisition costs and capital improvements will become even more important under an indexed cost base system.

Increased importance of professional advice

Tax modelling before buying or selling property is likely to become a standard part of investment planning.

What Should Investors Do Now?

Although the reforms are still proposed legislation, investors should begin preparing now by:

• Reviewing existing investment portfolios.
• Identifying assets that may be affected.
• Obtaining updated property valuations where appropriate.
• Ensuring all acquisition and improvement records are complete.
• Reviewing trust and ownership structures.
• Discussing future investment plans with their accountant or financial adviser.
• Monitoring the progress of the legislation.

Early planning provides greater flexibility should the reforms become law.

Conclusion

The proposed Capital Gains Tax reforms represent one of the most significant changes to Australia’s investment tax system in decades. The removal of the 50% CGT discount for future investments, the introduction of indexed cost bases and the proposed minimum tax on capital gains could materially affect investment returns for property investors and other asset owners.

While the legislation is not yet law, investors should not wait until 2027 to understand its potential implications. Reviewing investment structures, maintaining detailed records, obtaining appropriate valuations and seeking professional advice now can help position investors to respond effectively if the reforms are enacted.

As always, tax outcomes depend on individual circumstances, and decisions to acquire or dispose of assets should be made only after considering both the commercial and tax implications.

Frequently Asked Questions

Are the proposed CGT changes currently law?

No. The reforms are proposed legislation and will only apply if passed by Parliament. Investors should monitor legislative developments before making decisions.

Will the 50% CGT discount disappear?

Under the proposal, the 50% discount would no longer apply to assets acquired after 30 June 2027 by individuals, trusts and partnerships.

What is cost base indexation?

Instead of applying a flat discount, the purchase cost of an asset would be adjusted for inflation over the ownership period before calculating the capital gain.

Will existing investment properties be affected?

Yes. Assets owned before 1 July 2027 would generally be subject to transitional rules, with gains accrued before and after that date calculated under different methods.

Why is a property valuation important?

For assets held beyond 30 June 2027, a professional valuation may be needed to establish the property’s market value for transitional CGT calculations.

Do companies lose the CGT discount?

Companies generally do not receive the 50% CGT discount under the current rules, and the proposed reforms primarily affect individuals, trusts and partnerships.

What records does the ATO recommend keeping?

The ATO recommends retaining purchase contracts, legal costs, improvement expenses, depreciation schedules, selling costs and any documents affecting the property’s cost base.

Should investors review their ownership structures?

Yes. Given the proposed changes, reviewing ownership structures with a qualified tax adviser may help ensure future investments remain tax effective.

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

For decades, Australian property investors have relied on discretionary trusts and companies to build wealth, protect assets, and improve tax outcomes. These structures were often promoted as powerful tools for income streaming, estate planning, asset protection and long-term investment flexibility.

However, the landscape for property investment structuring changed significantly following the 2026 Federal Budget. The Federal Government’s proposed reforms to negative gearing, capital gains tax (CGT), and discretionary trusts have fundamentally altered the tax effectiveness of many traditional ownership strategies. Investors can no longer assume that a trust or company will automatically deliver better tax outcomes.

Instead, structure selection now requires far more careful consideration of:

• The type of property being acquired
• Whether the property is a new build or established dwelling
• Long-term exit strategy
• Expected rental cash flow
• Capital growth expectations
• Asset protection needs
• Future estate planning objectives

What worked well under the old tax rules may produce very different results under the proposed new framework

Why Investors Traditionally Used Trusts and Companies

Property investors have historically used discretionary trusts, unit trusts and companies for several strategic reasons, including:

• Asset protection
• Income streaming to family members
• Estate planning flexibility
• Land tax management
• Limiting personal liability
• Retaining profits at lower corporate tax rates
• Facilitating joint venture investments
• Succession planning across generations

In the right circumstances, these structures can still be highly effective. However, they also introduce additional complexity, compliance obligations and tax risks that many investors underestimate.

One of the most common mistakes is establishing a structure based on generic advice such as:

• “Trusts always protect assets”
• “Companies only pay 25% tax”
• “Everyone should buy property in a trust”

In reality, tax outcomes depend heavily on the investor’s broader financial position and the purpose of the investment.

The Traditional Advantages of Discretionary Trusts

Discretionary (family) trusts have long been popular because they provide flexibility in distributing income and capital gains among beneficiaries.

Historically, trusts allowed families to:

• Stream rental profits to lower-income beneficiaries
• Distribute capital gains tax-effectively
• Retain flexibility each financial year
• Access the 50% CGT discount for assets held longer than 12 months

For high-income professionals and business owners, trusts often delivered substantial long-term tax planning opportunities. Trusts also became popular for intergenerational wealth planning, particularly where families intended to hold property assets for many years.

However, trusts have never been universally suitable for all investors. Negatively geared properties held inside trusts can sometimes create trapped tax losses, particularly where the trust has insufficient income to absorb deductions.

Companies and Property Investment

Companies have traditionally appealed to investors seeking:

• Lower corporate tax rates
• Profit retention
• Development and trading flexibility
• Business asset separation
• Simpler ownership structures

Base rate entities may currently access company tax rates as low as 25%.

For investors generating positive cash flow or operating property development activities, companies can sometimes provide better short-term tax efficiency than personal ownership.

However, companies have always carried a major long-term disadvantage for passive property investors:

• Companies do not receive the 50% CGT discount available to individuals and trusts.

This has historically made companies less attractive for long-term capital growth assets.

How the 2026 Federal Budget Changes the Equation

The 2026 Federal Budget introduced some of the most significant proposed property tax reforms in decades, including:

• Restricting negative gearing on established residential property
• Replacing the 50% CGT discount with an inflation-indexation model
• Introducing a proposed 30% minimum tax framework for discretionary trusts
• Preserving concessions for qualifying new-build housing investments

The Government stated the reforms are designed to redirect investment toward increasing housing supply and improving affordability for owner-occupiers. Importantly, many existing investments are proposed to be grandfathered under transitional arrangements.

Negative Gearing Changes and Their Impact on Structures

Under the proposed reforms:

• Investors purchasing established residential property after Budget night may no longer be able to offset rental losses against salary and wage income from 1 July 2027.
• Instead, losses would generally be quarantined against future rental income or capital gains.
• New-build investments are expected to retain more favourable treatment.

This dramatically changes the economics of highly leveraged residential property investment.

Historically, many investors justified holding negatively geared properties in trusts or personal names because losses could reduce taxable employment income. Under the proposed system, that advantage may be substantially reduced.

Why Discretionary Trusts May Become Less Attractive

Discretionary trusts traditionally worked best where:

• Long-term capital growth was expected
• Future positive gearing was likely
• Families could benefit from income streaming
• Significant CGT concessions were available

However, the proposed 30% minimum tax on discretionary trust distributions has created uncertainty around whether traditional income-splitting benefits will continue in the same way.

For some investors, this may lead to:

• Higher effective tax rates
• Reduced flexibility
• Increased compliance complexity
• Less incentive to use discretionary trusts solely for tax planning

That does not mean trusts are obsolete. They may still remain highly valuable for:

• Asset protection
• Estate planning
• Family succession strategies
• High-risk professions
• Long-term intergenerational wealth planning

But the days of automatically recommending trusts for every property investor may be ending.

Why Companies May Become More Relevant

Interestingly, the Budget changes may make companies relatively more attractive in some situations. If the traditional 50% CGT discount is replaced by inflation indexation, the historical disadvantage companies faced may narrow for certain asset classes.

Companies may now become more attractive where:

• Investors want to retain profits
• Properties are positively geared
• Development or trading activities are involved
• Commercial property is being acquired
• Long-term capital growth is less important than cash flow

However, companies still present major challenges:

• Extracting profits personally may trigger additional tax through dividends
• Companies remain inefficient for some long-term passive investments
• Property development profits may be taxed on revenue account rather than under CGT rules
• Access to small business CGT concessions can become highly technical

New Builds Are Becoming Increasingly Important

One of the clearest policy themes emerging from the Budget is encouraging investment into new housing supply. The Government’s proposed rules preserve more favourable tax treatment for qualifying new-build investments. As a result, structure selection will increasingly depend on the specific type of property being acquired.

Different ownership structures may now be appropriate for:

• Established residential property
• New-build housing
• Commercial property
• Development sites
• Build-to-rent projects
• Property syndicates

This means investors should no longer assume one structure fits every investment strategy.

The Biggest Mistake Property Investors Make

The worst approach is choosing a structure based on generic online advice or social media commentary. There is no universally “best” structure.

A discretionary trust that works extremely well for a high-income business owner may create poor outcomes for a PAYG employee buying their first investment property. Likewise, a company may suit a property developer but become highly inefficient for a long-term buy-and-hold investor seeking CGT concessions.

And once a property is acquired in the wrong structure, fixing the mistake can trigger:

• Stamp duty
• Capital gains tax
• Refinancing costs
• Legal fees
• Accounting costs
• Loss of grandfathered tax treatment

Under the proposed 2026 reforms, those mistakes could become significantly more expensive than under the previous system.

Conclusion

The 2026 Federal Budget has fundamentally reshaped the conversation around property investment structures in Australia. Trusts and companies still have legitimate and important uses, but they are no longer automatic tax-planning solutions.

The proposed restrictions to negative gearing, the overhaul of CGT concessions, and new discretionary trust tax rules mean investors must now take a far more strategic and customised approach.

The optimal ownership structure will increasingly depend on:

• The type of property
• Investment time horizon
• Cash flow expectations
• Asset protection priorities
• Family circumstances
• Exit strategy
• Whether the investment qualifies as a new build

As tax rules become more complex, obtaining tailored legal and taxation advice before purchasing property has never been more important.

Frequently Asked Questions (FAQs)

Are trusts still good for property investment after the 2026 Budget?

Trusts can still provide asset protection and estate planning benefits, but the proposed discretionary trust tax changes may reduce some of the traditional tax advantages.

Will negative gearing still apply to investment properties?

Under the proposed reforms, negative gearing concessions are expected to remain for qualifying new-build properties, while established residential properties purchased after Budget night may lose access to offsetting losses against salary income.

Do companies receive the 50% CGT discount?

No. Companies have never received the 50% CGT discount available to individuals and trusts.

Could companies become more attractive under the new rules?

Potentially yes. If the CGT discount is replaced with inflation indexation, companies may become relatively more competitive for some investors, particularly those focused on cash flow or commercial property.

What is the proposed discretionary trust minimum tax?

The Budget proposes a 30% minimum tax framework for discretionary trusts from 1 July 2028.

Are existing investment properties affected?

Many existing holdings are proposed to be grandfathered under transitional arrangements, although detailed legislation is still evolving.

Is personal ownership becoming more attractive again?

For some investors, yes. Simpler ownership structures may become more efficient where the tax advantages of trusts and companies are reduced.

Can changing ownership structures later trigger tax?

Yes. Moving property between structures can trigger stamp duty, CGT, refinancing costs and legal expenses.

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

Australia’s property investment landscape has shifted dramatically following the 2026–27 Federal Budget delivered on 12 May 2026. The Federal Government announced sweeping reforms targeting negative gearing, capital gains tax (CGT), discretionary trusts and investment property concessions changes that are expected to significantly affect property renovators, flippers and developers.

At the same time, the ATO has intensified compliance activity around property transactions, GST obligations and profit-making property ventures.

For investors undertaking renovations, subdivision projects, duplex builds or short-term property flips, understanding how these new rules interact with existing ATO guidelines has become critical.

The difference between capital account treatment, ordinary income treatment and carrying on a property development business can now have a major impact on tax payable, access to deductions, GST obligations and overall profitability.

The 2026 Federal Budget: Major Tax Changes for Property Investors

The 2026–27 Federal Budget introduced some of the most significant property tax reforms in decades.

According to the official Federal Budget papers, the Government announced that negative gearing concessions for residential property will largely be limited to newly constructed properties from 1 July 2027. Existing investment properties held before Budget night are expected to be grandfathered under the current rules.

The Budget also confirmed major changes to capital gains tax treatment, replacing the long-standing 50% CGT discount model with an inflation-indexation approach for future investments.

In addition, discretionary trusts are expected to face new minimum tax rules and greater scrutiny around income distributions.

These reforms are aimed at:

• Redirecting investor demand toward new housing supply
• Improving housing affordability
• Reducing speculative investment activity
• Increasing tax integrity and compliance
• Raising additional government revenue

For property investors, the changes substantially alter the tax outcomes of renovation and development strategies.

Negative Gearing Changes and Property Investment

One of the biggest changes announced in the Budget relates to negative gearing.

Under the proposed reforms:

• Existing property investors who owned investment properties before Budget night are expected to retain current concessions
• New negative gearing benefits after 1 July 2027 will generally apply only to newly built residential properties
• Existing established properties purchased after the commencement date may no longer allow investors to offset rental losses against salary and wage income

The Government argues these changes are designed to encourage investment into new housing stock rather than established dwellings.

What This Means for Renovators and Flippers

The distinction between renovating an existing property and constructing new dwellings has become increasingly important.

For example:

• Cosmetic renovations to an existing dwelling may not qualify for the new-build concessions
• Substantial redevelopment projects involving new construction may still access favourable treatment
• Knockdown-rebuild projects may face complex eligibility rules

As a result, investors engaging in renovation and resale activities must carefully assess whether their projects qualify as “new residential premises” for tax purposes.

Capital Gains Tax (CGT) Changes After the Budget

Historically, Australian investors who held property for more than 12 months could access the 50% CGT discount.

The 2026 Federal Budget significantly reshapes this framework.

Under the proposed reforms:

• The 50% CGT discount will be replaced for future investments
• A new inflation-indexation model will apply to capital gains
• Transitional rules are expected to apply for existing holdings
• A minimum effective tax rate on certain gains may apply

These changes are intended to reduce speculative investment and reduce reliance on capital growth strategies.

Property Flipping: Why Many Investors Lose CGT Concessions

Many investors mistakenly assume that all property profits qualify for capital gains treatment.

However, the ATO has consistently maintained that where a property is acquired with a profit-making intention, the profits may instead be treated as ordinary income.

The ATO’s property renovation guidance states that tax outcomes depend on whether the taxpayer is:

• A passive investor
• Engaged in a profit-making undertaking
• Carrying on a business of property development or renovation
• If a project is classified as a profit-making venture:

• The 50% CGT discount may not apply
• Profits are taxed at marginal tax rates
• GST obligations may arise
• The activity may be treated as a business

Example: The Property Flipper

An investor purchases a distressed property, renovates it over six months and sells it for a substantial profit.Even if this is a one-off transaction, the ATO may determine the property was acquired primarily for resale profit.

In that situation:

• The gain may be taxed as ordinary income
• CGT concessions may be denied
• The main residence exemption may not apply
• GST may become relevant if substantial renovations occurred

The ATO has indicated that repeated flipping activity is now an increased compliance focus.

Renovation Tax Rules: Repairs vs Capital Improvements

For long-term investors holding rental properties, renovation expenses are not automatically deductible.

The tax treatment depends on whether the expenditure is:

• Repairs and maintenance
• Initial repairs
• Capital improvements

According to ATO guidance:

• Repairs restoring an existing item may be immediately deductible
• Structural upgrades or improvements are generally capital in nature
• Capital works deductions may apply over time
• Remaining costs form part of the CGT cost base (Australian Taxation Office)

Common ATO Audit Area

The ATO closely reviews investors who incorrectly classify capital improvements as immediate repairs.

Examples of capital improvements include:

• Kitchen replacements
• Bathroom upgrades
• Structural extensions
• New roofing
• Major landscaping projects

These costs generally cannot be fully deducted upfront.

Property Development and GST Obligations

Once projects become larger or more commercial, the tax treatment becomes significantly more complex.

Activities commonly treated as property development enterprises include:

• Duplex construction
• Townhouse developments
• Subdivisions
• Multi-dwelling projects
• Land development for resale

Under ATO rules, the sale of new residential premises is generally subject to GST.

This means developers may need to:

• Register for GST
• Lodge Business Activity Statements (BAS)
• Account for GST on sales
• Apply the margin scheme correctly
• Maintain extensive project records

The Margin Scheme

The margin scheme allows GST to be calculated on the “margin” rather than the full sale price of eligible developments.This can substantially reduce GST payable.

However:

• Eligibility depends on acquisition history
• Contracts must specifically allow the margin scheme
• It cannot normally be applied retrospectively
• Incorrect documentation can invalidate eligibility.GST mistakes remain one of the biggest financial risks for inexperienced property developers.

Trusts and Property Development After the 2026 Budget

Discretionary trusts have long been popular for property development and asset protection strategies.However, the 2026 Federal Budget proposes increased taxation and scrutiny of trust distributions.

According to budget commentary and Treasury announcements:

• New minimum tax rules may apply to discretionary trust income
• Distribution splitting strategies may face tighter limits
• Property development profits distributed through trusts may attract increased review
• ATO compliance activity involving trusts is expected to increase substantially

Why Trusts Still Matter

Despite increased scrutiny, trusts may still offer advantages including:

• Asset protection
• Estate planning flexibility
• Income distribution flexibility
• Joint venture structuring
• Separation of development risk

However, investors now need to carefully assess whether companies, trusts or hybrid structures are more appropriate under the new rules.

Interest Deductibility and Changing Intentions

A major risk area for property investors is where the intention of a project changes over time.

For example:

• A property initially acquired as a long-term rental may later become a development project
• An investor may decide to subdivide land or construct townhouses
• A “buy-and-hold” strategy may evolve into a resale strategy

When intention changes:

• Interest deductibility may change
• Trading stock rules may apply
• GST obligations may arise
• Tax treatment can shift from capital account to revenue account

This area has become a major focus for the ATO following increased compliance funding announced in the Budget.

Increased ATO Compliance and Data Matching

The ATO now uses extensive data matching across:

• State land titles offices
• Banks and lenders
• Airbnb-style platforms
• Building approvals
• AUSTRAC reporting
• Rental bond authorities
• Solicitor settlement data

Property investors undertaking undeclared flipping or development activities face increasing audit exposure.

The ATO is particularly focused on:

• Undeclared property profits
• Incorrect CGT claims
• Main residence exemption abuse
• GST avoidance
• Trust distribution arrangements
• Cash payments to contractors
• Incorrect repair deductions

Final Thoughts

The 2026 Federal Budget has fundamentally reshaped the tax environment for Australian property investors.Negative gearing reforms, CGT changes and new trust taxation measures mean renovation, flipping and development projects now require far more careful planning than in previous years.

At the same time, the ATO has significantly expanded its compliance focus around property-related activities.

Investors undertaking renovations, subdivisions or development projects should obtain professional advice before commencing projects to ensure they:

• Structure projects correctly
• Understand GST obligations
• Maximise legitimate deductions
• Manage trust distribution risks
• Avoid losing CGT concessions
• Remain compliant with evolving tax laws

With billions of dollars in additional compliance funding now directed toward property tax enforcement, proactive planning is becoming essential rather than optional.

Frequently Asked Questions (FAQs)

Will negative gearing be abolished in Australia?

No. Under the 2026 Federal Budget proposals, negative gearing is expected to remain available for newly constructed residential properties, while existing investment properties held before Budget night are expected to be grandfathered.

Are property flipping profits subject to CGT?

Not always. If the ATO determines the property was acquired with the intention of resale for profit, the profits may be taxed as ordinary income instead of capital gains.

Can I still use a trust for property development?

Yes, but trusts are expected to face greater scrutiny and potentially new minimum tax rules following the 2026 Budget reforms.

Does GST apply to property developments?

Generally yes, where new residential premises are sold or substantial renovations occur.

What is the margin scheme?

The margin scheme allows GST to be calculated on the profit margin rather than the full sale price, potentially reducing GST payable.

Will the 50% CGT discount still exist?

The 2026 Budget proposes replacing the existing 50% CGT discount with an inflation-indexation model for future investments. Transitional rules are expected for existing assets.

Can renovation expenses be immediately deducted?

Only genuine repairs and maintenance are generally immediately deductible. Capital improvements are usually depreciated or added to the CGT cost base.

Why is the ATO targeting property investors?

The Government has expanded ATO compliance funding to improve tax integrity, increase revenue collection and address perceived misuse of property-related tax concessions.

Sources:

• ATO
• Budget Papers 2026-7
• The Guardian

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

In Australia, franked dividends provide a unique tax advantage for investors by allowing them to receive a tax credit for the tax already paid by the company distributing the dividends. This system, known as dividend imputation, ensures that profits are not taxed twice, ultimately benefiting shareholders.

Traditionally, a company would pay tax on its profits, and the remaining amount would be distributed as dividends, which were then taxed again in the hands of the recipient, resulting in double taxation. The current system eliminates this double taxation by providing the recipient with a franking credit equal to the tax paid by the company. When you receive a franked dividend, you get a tax credit for the corporate tax already paid, reducing your personal tax liability and making your investment more tax-efficient.

Who Benefits from Franked Dividends?

Franked dividends are particularly beneficial for various types of investors and business owners:

• Individual Investors: Especially retirees and pre-retirees looking to maximize their investment income and manage tax liabilities.
• Business Owners: Small business owners and corporate executives seeking ways to supplement income and optimize personal investments.
• SMSF Trustees: Self-Managed Super Fund trustees aiming to enhance super fund returns through franking credits.
• High Net Worth Individuals: Those looking to optimize investment portfolios for tax efficiency.
• Stock Market Enthusiasts: Active traders or investors in the Australian stock market, where franked dividends are common.
• Dividend Investors: Investors targeting companies that pay dividends to build a steady income stream.

The Difference Between Franked Dividends and Franking Credits

Understanding these terms is key to maximizing their benefits:

• Franked Dividends: These are dividends paid to shareholders that include a tax credit for the tax the company has already paid on its profits.
• Franking Credits: These are the tax credits attached to franked dividends, which shareholders can use to offset their own tax liabilities. If the franking credits exceed your tax liability, the excess can be refunded by the Australian Taxation Office (ATO).

Why Franked Dividends Matter

For both individual investors and business owners, understanding and leveraging franked dividends can significantly enhance your financial strategy. Here’s why:

• Tax Efficiency: Franked dividends come with franking credits, which can be used to offset your personal tax liabilities, meaning more of your investment returns stay in your pocket.
• Refundable Tax Credits: If the franking credits exceed your tax payable, the excess can be refunded, boosting your overall returns.

How Franked Dividends Work: A Practical Example

Imagine an Australian company declares a fully franked dividend of $70. The franking credit attached is $30, representing the tax already paid. The grossed-up dividend, or the total taxable amount, is $100. When you complete your tax return, you include both the dividend received and the franking credits. This helps the ATO determine your correct tax liability and any potential refunds.

Franked dividends offer substantial tax advantages for Australian investors and business owners. However, navigating the complexities of dividend imputation and tax credits can be challenging. Engaging with financial advisors can help you make the most of this unique aspect of the Australian financial landscape. Whether you aim to reduce your tax liability, optimize your investment strategy, or plan for retirement, tailored advice can support you every step of the way.

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We offer a 10-minute no obligation consultation to existing property investors, first home buyers and small business owners who are looking at property investments, business and asset protection. To Book an Appointment simply click here and pick a time and date.

BOOK YOUR ZOOM APPOINTMENT HERE

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

Investment property can be a lucrative way to set your family up for a future nest egg. However, if you’re looking to maximise the value of your property investments, you need to be aware of the costs that come along with it.

The biggest cost you’re likely to face comes from capital gains tax (CGT), which occurs when you sell your property. The good news is that there are several exemptions available for CGT which reduce the amount of tax you’re required to pay. In this article, we look at the six-year exemption rule on CGT, and what this means for your investments.

What is capital gains tax?

A capital gain refers to the profit you make on the sale of an asset. And, because your property is considered an asset, you’re required to pay tax on the profit you make from this sale. This is your Capital Gains Tax. It is worth noting that capital gains tax is not a separate tax and is included in your annual income tax return.

How to define your ‘main residence’

Your main residence, or principal place of residence (PPOR), is the property you live in full time. If you buy a property to rent out as an investment, this is considered a rental investment property.

How the ATO defines your principal place of residence (PPOR)

The Australian Taxation Office (ATO) exemptions consider that your property is your main residence. That’s why it’s important to understand what it actually means for a property to be your main residence, and how you achieve this.

The ATO considers several factors during their review of your property, and there’s no single criterion that is the determining factor.

The ATO will typically determine that a property is your principal residence when:

• You and your family live there, and you keep your personal possessions there
• This is your main residential mailing address
• You’re enrolled on the electoral bill at this address
• Your property has all the usual utilities connected, in your name

If you only satisfy some of these criteria, then the ATO will need to review your situation individually to make a qualified decision.

Determining when your home stops being your main residence

When you stop satisfying most of the main residence criteria mentioned above, a property is no longer considered your main residence. Typically this will happen the day you move out for an extended period of time.

Does the 6-year CGT exemption apply to your main residence?

The six-year exemption rule applies to your main residence and reduces the CGT you pay upon selling it.

Whichever category your property falls into, you may still be required to pay CGT when it comes time to sell. And if your property has increased in value, your CGT will also increase.

Does the 6-year CGT rule apply to investment properties?

Yes. The ATO’s six-year CGT exemption rule applies to investment and rental properties.

What is the 6-year capital gains tax exemption?

A common question surrounding CGT on property investment is around when a property’s main residence status starts and finishes. When you stop living in your house, then sell it at a later date, how does this get treated? This is where the six-year CGT exemption rule comes into play.

Once your property no longer meets the ATO’s main residence criteria, you can still claim it as your principal place of residence for up to six years. This is known as the six-year absence rule or six-year exemption.

The CGT exemption period can vary depending on how you utilise the property after you leave:

• If you’re renting it out, it can remain your main residence for up to six years
• If you don’t rent the property, it can remain considered your main residence indefinitely

The six-year CGT exemption for the main residence is counted on a daily basis; if you get to six years minus one day and stop renting the property out, you can continue to own and treat it as your principal residence indefinitely.

Further, there’s no hard limit on the number of times you can access this exemption. See an example of how this works in practice below.

Example

You buy a property in 2005 and live in it for four years. In 2009, you get a new job interstate, so you move out of your home and rent it out. You rent the property until 2013, but then you return to Victoria and move back into your original home.

You stay here until 2016 when you see another job appear interstate. You’re allowed to move out again and access another six-year absence period.

Throughout this entire time, your property has been classified as your main residence for CGT purposes, so you’re completely exempt from paying CGT on its sale.

In this second time away, your property would be considered your main residence up until 2022, or until you buy a new property that’s considered your main residence during this time.

It’s best to get a thorough market valuation of your property at the close of this six-year period. This provides you with an accurate price and clear documentation outlining the capital gain you’ll make during the time your property isn’t your main residence.

When you move back into your property, the ATO doesn’t have a clear answer as to when it technically becomes your main residence again. However, common sense would consider a period of six months or more to be a good starting point. And the longer you live on your property, the better.

Can you have two primary residences in Australia?

Yes, you can, but things can get complicated when you own more than one property. This gets even more complicated when you live in more than one property for an extended period of time.

Does the ATO 6-year rule apply to two main residences?

While you may functionally have two principal residences, you can only designate one as your principal place of residence for CGT purposes.

For example, say you’ve lived in one property and then moved into a second property for an extended time. Under the six-year absence rule, both properties could technically be considered your main residence for the first six years after you move out of the first property. This leaves you with the dilemma of determining which property is considered your main residence for CGT purposes when you sell either property.

You don’t actually need to make this decision until you’ve sold your property and lodged your tax return. In this case, you have the chance to determine the capital gain on both properties and decide which one will have the most benefit of being considered your main residence.

Can foreign residents benefit from the 6-year CGT rule?

Recent rulings from the government affect the ability of foreign residents to claim this exemption.

Under this new ruling, from 1 July 2020, if you’re classed as a foreign resident, any sale will be fully taxable, even if it’s technically classed as your main residence during this time.

So, if you’re looking to sell your home but are likely to become a foreign resident in the near future, you should consider the CGT implications.

6 facts about the 6-year primary residence exemption rule

1. When claiming a six-year principal residence exemption on your CGT, you can only do this under your individual name. Properties that are held within trust or company structures aren’t able to access this exemption.
2. As an individual, you can only have one main residence at a time. The exception to this rule is when you’re moving house. In this instance, certain provisions are in place that allow you to have two main places of residence. However, this is only available for a six-month period.
3. If you use your main residence to derive income, you might be disqualified from claiming the exemption, or may only be eligible for a partial exemption. So if you rent out your property, or run a business directly from the premises, you may not qualify for the exemption.
4. Operating from a home office is different, as you’re not actively running a business or deriving income from your home. In this case, you can still claim the exemption. But as soon as you use your property as business premises — such as a workshop, garage, or salon — you’re likely to receive only a partial exemption.
5. Another thing to be aware of is that the main residence exemption is only available for land with property. You can’t claim the principal residence exemption on a vacant block.
6. ‘Main residence’ only accounts for up to 2.5 hectares of land. If your property is greater than 2.5 hectares, then you can only receive an exemption on your home and the surrounding 2.5 hectares.

The final word: how to apply for the 6-year CGT exemption

Navigating CGT can be confusing at the best of times, so it’s crucial to understand when exemptions of any kind come into play.

Capital gains tax exemptions in Australia

The six-year exemption isn’t the only way to minimise your main residence CGT obligations. Here are a few more tips and tricks that you might like to read up on:

• Remember the date of purchase – properties acquired before 20 September 1985 are exempt from CGT.
• Purchase properties using your super fund – if you have a self-managed superfund and have owned your property for at least 12 months, you can claim a CGT discount if you’re still in your super accumulation phase. If you’re retired and claiming your pension, you won’t have to pay CGT at all.
• Increase your asset cost base – the cost base is the amount you pay to purchase, own, improve and sell your property: the higher your cost base, the lower your CGT obligations.

—————BOOK YOUR EXCLUSIVE 15 MINUTE ZOOM CONSULTATION————-

We offer a 10-minute no obligation consultation to existing property investors, first home buyers and small business owners who are looking at property investments, business and asset protection. To Book an Appointment simply click here and pick a time and date.

BOOK YOUR ZOOM APPOINTMENT HERE

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

Property values, as history demonstrates always increase over time. Indeed, through all financial crises and economic difficulties Australia has faced. The one thing constant that has continued to yield returns is property investment. If you’re not investing in property, you are seriously missing out. Many Australians have become financially independent by investing in real estate and the process of building a property portfolio has important consequences for investors including:

• Achieving high capital growth to build a solid asset base
• Secure income, which increases over time (helping you pay the mortgage)
• Significant tax advantages

With proper research and smart property management, you can create a passive income and build sustainable wealth. This is why property investment is the surest way to create wealth.

Investing in property offers plenty of tax benefits, too. You can have tax deductions on your loan interest, property taxes, insurance, and more. Effective property tax planning ensures you get the full benefits and all the deductions you are entitled to. Buying a rental property is an exciting investment, but to make the most of it, you also need to understand how to maximise the tax benefits.

And while terms such as ‘negative gearing’ and ‘capital gains exemption’ may seem complicated, it is important to take the time to do the research and see how this can be applied to your property. You may just discover some deductibles you have overlooked.

1. How can you reduce your CGT liability?

Capital gain is the difference between what you paid for an asset (plus fees incurred during the purchase) and what you sold it for (less fees incurred during the sale). Capital gains tax (CGT) is the tax you pay on the capital gain made from the sale of that asset. It applies to property, shares, leases, goodwill, licences, foreign currency, contractual rights, and personal use assets purchased for more than $10,000.

No CGT applies if the property sold is a person’s main residence, i.e. their primary home.

Main Residence Exemption

If the property you are selling is your main residence, there is no CGT. However, this exemption may not fully apply if your residence has been used to produce income. In this case, a portion of the capital gain will be taxable.

6 Year Exemption Rule

The capital gains tax property six-year rule allows you to use your property investment, as if it was your principal place of residence, for a period of up to six years, whilst you rent it out. This means that you would be able to sell the property within the six-year period and be exempt from paying capital gains tax.

Timing Capital Gain

A simple strategy to reduce CGT is to consider the timing of when you make a capital gain or loss. If you know your income will be lower in the next financial year, you can choose to delay selling until then, so that your lower marginal tax rate results in you paying less CGT.

2. Keep accurate records of expenses to maximise deductions

The ATO will require of your expenses. Verbal assurances nor pictures of a newly mown lawns to prove that you have indeed incurred expenses for lawn mowing, for example, will not fly.

Keep your receipts, contracts and other supporting documents to claim all your deductions without problems. All records pertaining to your property maintenance must be kept for at least five years.

If you decide to dispose of your property investment, insurance, rates notices, settlement letters, stamp duty receipts, legal costs receipts, purchase contract, and all other expenses incurred right from the beginning should be kept at least five years after the property was sold.

3. Prepay Interest

If your income is likely to place you in the next income tax bracket, as a result of a pay increase and you have fixed rate loans, consider paying the interest for 12 months in advance. This will allow you to claim deductions in the same income year you are lodging your tax return. You are only permitted to do this once only.

4. Hold the property for 12 months or longer

When a property is sold and a capital gain is made, a 50% discount on the capital gain for individual Australian residents is allowed, so long as the property is owned for 12 months or more. As an individual, your CGT forms part of your income tax so your personal tax rate will become a factor in your total tax liabilities. Capital gains tax is not considered as a separate tax for individuals even though it’s still referred to as CGT.

5. Make personal deductible superannuation contributions

If you make an after-tax super contribution, you can claim a tax deduction and reduce your taxable income. Personal deductible contributions are taxed at 15% rate instead of the marginal tax rate of up to a maximum of 47%.

Employed, self-employed, and individuals earning taxable income from other sources like property investments can make personal deductible contributions.

6. Claim depreciation deductions

Claim deductions for depreciating assets and make sure you have a depreciation schedule.

Depreciation helps you make money without spending anything, yet many investors fail to claim it. It’s a non-cash deduction that can be a valuable tool for investors creating wealth because it allows you to get tax deductions and claim the wear and tear of a building without spending any money.

7. Avoid CGT by refinancing and investing equity in a new property

Consider refinancing your property instead of selling it to avoid a CGT event. You can refinance and buy a new property instead with your equity. This strategy means you’ll be able to avoid paying CGT until you finally sell the property.

Refinance and access the equity you have in your property and use that money for a new investment.

It’s best to have your property revalued first before you approach your lender. Your new loan will be based on the new value of your property and since your Loan-to-Value Ratio (LVR), or the amount of your loan compared to the value of your property would be much lower, you would be able to borrow additional money. You can use the additional money to finance a new property investment. Not only will you have a new investment with this strategy, you’ll also be able to avoid CGT. Just make sure that when you refinance, it’s kept as a separate loan so you don’t complicate interest deductions for each.

8. Apply for PAYG Variation

Ask the ATO for a PAYG withholding variation every year. Deductions for expenses related to owning an investment property can be received throughout the year instead of at the end of the financial year using the PAYG withholding variation.

This strategy allows you to receive and use your tax breaks earlier so you can use them for property repairs, improvements, etc. A PAYG withholding variation can be a big help for property investors to have a regular cash flow.

9. Purchase a property in the name of person with a lower tax rate

For couples and people in partnership or other relationships, consider purchasing the property in the name of the person with the lower tax rate. You pay capital gains tax based on your personal tax rate. Thus, having the property held in the name of a person with a lower tax rate will effectively lower your CGT.

10. General Tax Benefits

Investing in real estate also grants you several tax benefits.

Common tax deductions you can claim includes:

• Interest on the money you have borrowed for your investment property
• Tenancy costs – the costs of advertising your property and any letting fees paid to property managers
• Repairs and maintenance costs are usually tax deductible in the tax year they are incurred. There is a distinction between repairs and maintenance expenditure, which can be described as restoring an item to its previous condition or standard, and the cost of capital works which result in an improvement in condition, such as a kitchen renovation.
• Depreciating assets – Depreciation can be summed up as a write off of the cost of an asset over its estimated economic life which can allow investors to claim a deduction on the amount of tax payable
• Holding costs – this is money you spend on owning a property and include body corporate fees, gardening costs, building and contents insurance and pest control. These costs are generally tax deductible.

How can we help?

If you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au  or arrange a time for a meeting so we can discuss your requirements in more detail.

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

The small business capital gains tax (CGT) concessions allow you to reduce, disregard or defer some or all of a capital gain from an active asset used in a small business. The concessions are available when you dispose of an active asset and meet eligibility requirements. Small business owners who sell business assets may be eligible for tax concessions on capital gains and may be able to contribute an amount into superannuation to help fund their retirement.

Note: The eligibility rules are complex and specialist advice from a registered tax agent should be obtained to understand the rules to your situation.

Benefits

Investing in superannuation boosts your savings to help meet your retirement goals. The rate of return inside superannuation may be higher after-tax than investing outside superannuation. This is because earnings inside superannuation are taxed at a maximum rate of just 15%, whereas earnings from non-superannuation investments are generally taxed at your marginal tax rate (plus Medicare levy) which could be up to 47%. This could help your savings to grow faster.

• Your tax-free component will increase. T
• his amount can be withdrawn tax-free at any age and is also tax-free if paid as a death benefit lump sum to dependants (including a person who is a non-tax dependant such as an adult child) after your death.

How it works

Qualifying for the small business CGT tax concessions

To be eligible for the small business CGT tax concessions, certain basic conditions must be met such as:

• The net value of assets owned by your business and related entities is less than $6 million, or the (aggregated) turnover of the business is less than $2 million each year
• The asset being sold is being used in running a business or it is held ready to be used in running a business (i.e. is an active asset).
• Additional rules apply if the asset being sold is a share in a company or an interest in a trust, including there must be a ‘significant individual’ and the entity claiming the concession must be a ‘CGT concessional stakeholder’ of the company or trust.

The following table outlines other CGT tax concessions which are available but which have further eligibility conditions attached.

Concession	Details
15-year exemption	If the business asset being sold had been owned for at least 15 years, the entire capital gain may be exempt from tax under the 15-year exemption. The entire sale proceeds maybe contributed into superannuation using the CGT cap (up to the lifetime limit).
Small business 50% active asset reduction	This provides a small business/individual with a 50% reduction to their capital gain. You may also be eligible to apply the small business retirement.
Retirement exemption	Up to $500,000 (lifetime limit) of assessable capital gain can be exempted from tax using the retirement exemption. If you are under age 55, you must contribute this amount to superannuation. If you are over age 55, you can take it in cash or choose to contribute it to superannuation. The superannuation amount is contributed under the CGT retirement cap. Amounts contributed under the CGT retirement cap reduce you’re remaining CGT lifetime cap.
Small business rollover relief	This allows a person/entity to defer a capital gain arising from the sale of one or more small business asset(s) where a replacement asset is acquired within a certain time period. To be eligible you generally need to meet all the ‘basic conditions’ for small business CGT concessions, and acquire a replacement asset by the end of the ‘replacement asset period’. You still may be able to claim the concession if you do not acquire a replacement asset within this time but some/all of the capital gain may be assessable

If the 15-year exemption applies, this reduces the assessable gain to zero and no further concessions are applied.

If ineligible for the 15-year exemption, the other concessions apply to reduce the assessable gain. For individuals and trust beneficiaries, the standard CGT discount (for individual taxpayers) is applied to the assessable capital gain.

For all eligible individuals, the 50% active asset reduction is then applied, followed by the retirement exemption. It is not compulsory to claim the 50% active asset reduction and, in fact, it can sometimes be beneficial not to claim it as it can reduce the amount that can be contributed into superannuation using the CGT cap.

Contributing the proceeds into super

The amount you can contribute into superannuation is limited by contribution caps. The CGT cap may enable small business owners who are eligible for CGT tax concessions to contribute larger amounts into superannuation closer to retirement. Capital gains from the disposal of active assets are exempt from CGT up to a lifetime limit of $500,000.

If you are under 55, the exempt amount from the proceeds on disposal of the asset must be paid into a complying superannuation fund or a retirement savings account. You may be able to use amounts from the small business retirement exemption as contributions to your super fund without affecting your non-concessional contributions limits.

Depending on your individual circumstances, there are certain timing requirements that must be adhered to when applying Small Business CGT concessions and making super contributions under the CGT cap. At the time of making the contribution you need to complete a ‘Capital Gains Tax election form’ and give it to the superannuation fund on or before the contribution is made.

Risks and Consequences

As the CGT cap is a lifetime limit, in some cases it may be beneficial to use the non concessional contribution cap first and retain the CGT cap for future use. However, you should consider your eligibility to make non-concessional contributions in the future under the contribution rules.

• The eligibility criteria for the small business CGT concessions are complex and you must seek tax advice to determine your eligibility
• Time limits apply to be eligible to use the small business CGT concessions and the CGT cap
• If you exceed your CGT cap, the excess contributions will count towards your non concessional contribution cap. Tax penalties may apply if you exceed your non-concessional contribution cap
• You need to be eligible to contribute to superannuation including to make contribution assessed against the CGT cap. If you are age 67 – 74, you need to satisfy the work test in the year the contribution is made to superannuation or be eligible to utilise the work test exemption
• The work test means you have been gainfully employed for at least 40 hours over 30 consecutive days in the financial year the contribution is made
• All contributions to superannuation are preserved until you meet a condition of release
• Fees may be charged for your superannuation contributions. You should check the details in the fee section of your Statement of Advice and the Product Disclosure Statement (PDS) for your superannuation fund.

If you want to discuss CGT concessions that apply to your business, please contact our office.

Source: ATO

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General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.