2026-06-26-莱坊-CGT_Report_June_2026_5页_931kb

2026–27 Australian Budget: CGT Changes and Their Impact on Commercial Real Estate

Core Content

The Australian Government introduced significant changes to the Capital Gains Tax (CGT) and Negative Gearing rules in the 2026–27 Budget, with the new CGT system set to take effect from 1 July 2027. These changes aim to shift private capital from residential to commercial real estate (CRE) by making the latter more tax-efficient under the new rules.

Key Changes

Capital Gains Tax (CGT)

• Abolition of 50% Discount: From 1 July 2027, the 50% discount on capital gains for assets held for 12 months will be removed for individuals, partnerships, and trusts. Companies are unaffected.
• Inflation Indexation: The new system adjusts the original purchase price using the Consumer Price Index (CPI). Only real capital gains (above inflation) are taxed.
• Minimum Tax Rate: A 30% minimum tax will apply on real capital gains, reducing the benefit of deferring asset sales until low-income years.
• Pre-1985 Assets: Assets acquired before 20 September 1985, previously exempt from CGT, will now be subject to the new regime. Capital gains from these assets post-1 July 2027 will be taxed, but pre-2027 gains remain untaxed.

Negative Gearing

• Residential Properties: Negative gearing is no longer available for investors who purchased established residential property after 12 May 2026. Losses can only be offset against other residential income.
• Commercial Properties: Negative gearing remains available for commercial property and other asset classes, allowing investors to offset rental losses against their primary income.

Discretionary Trusts

• Mandatory 30% Minimum Tax: From 1 July 2028, discretionary trusts will be subject to a 30% minimum tax on taxable income. Beneficiaries will receive non-refundable credits for this tax.
• Exemption for Testamentary Trusts: Testamentary trusts managing income for deceased estates may be exempt from the proposed tax.

Impact on Commercial Real Estate

• Tax Advantage: CRE typically generates more income returns than capital gains, and the new system is more favorable to assets with capital growth below 4.5% p.a. (the midpoint of the RBA's target band).
• Historic Performance: Analysis shows that CRE would have been better off under inflation indexation 70–80% of the time since 2000, while residential assets were more favorable under the 50% discount.
• Return Composition: CRE relies more on income (around 70–80% of total returns), while residential assets depend heavily on capital growth (60–70% of total returns).
• Shift in Investor Behavior: The new tax system is expected to encourage private investors to move capital to CRE, which is more aligned with the new rules and their return characteristics.

Implications and Outlook

• Increased Demand for CRE: The tax changes are likely to boost demand for commercial assets, including strata office and industrial units, medical centres, and service stations.
• Professional Structures: New investors may prefer professionally managed structures like REITs, unlisted property trusts, and syndicates to reduce complexity and upfront costs.
• Super Fund Investment: A review of the performance test for super funds may lead to increased investment in housing development, including build-to-rent (BTR) and social housing.
• Depreciation Benefits: Commercial properties continue to benefit from significant depreciation deductions, which improve after-tax cash flow compared to residential assets.

Additional Changes

• Instant Asset Write-Off: The $20,000 instant asset write-off is now permanently legislated, encouraging investment in equipment and improving commercial property efficiency.
• Depreciation Deductions: CRE investors can claim both Division 43 (Capital Works) and Division 40 (Plant and Equipment) deductions, which are not available to residential investors.

Summary

The new CGT system and related reforms are expected to have a positive impact on commercial real estate, making it more attractive for private investors. By taxing only real capital gains, the system favors income-driven investments like CRE, which have historically underperformed in capital growth compared to residential assets. The removal of negative gearing for post-2026 residential properties and the shift to a 30% minimum tax on discretionary trusts are likely to lead to a re-evaluation of investment structures and strategies, with a greater focus on CRE. The changes also provide incentives for investment in commercial spaces through depreciation and the instant asset write-off, supporting long-term growth in the sector.