Tranche 2 of CGT and negative gearing legislation

Jul 15
2 min read

The draft materials address many of the gaps that were identified by practitioners following the release of the initial legislative package. Key points to note from the draft legislation include:

• Individuals can potentially retain access to existing negative gearing rules if they acquire an interest in a property from a spouse or former spouse due to death or relationship breakdown

• Certain affordable and social housing, NDIS housing, public housing and build-to-rent developments will be exempt from the negative gearing changes

• Existing negative gearing treatment can continue to apply when an existing main residence that was purchased before 12 May 2026 is first used to produce rental income after 12 May 2026

• Certain testamentary trusts, deceased estates and special disability trusts will be excluded from the minimum 30% tax on capital gains

• An apportionment method has been introduced so that taxpayers can determine the portion of a capital gain or loss that arose before and after 1 July 2027, rather than having to obtain a valuation at 1 July 2027

• Specific rules will be introduced to clarify how the CGT changes apply to trusts, including attribution managed investment trusts

• Specific rules will be introduced to ensure the changes apply correctly to people who are Australian residents for only part of the time they own the relevant asset

• Ensuring certain CGT events do not trigger tax earlier than intended for deferred capital gains.

The changes also provide definitions to clarify the meaning of ‘new residential dwelling’ for purposes of the negative gearing rules. For example, where someone acquires a non-residential building and converts it into a residential dwelling, this is considered a ‘new residential dwelling’. Further, where a dwelling is acquired within 24 months of the occupancy 3 certificate being issued, it can be a ‘new residential dwelling’ for the new owner. It is important to remember that this is just draft legislation and could change before relevant Bills are introduced into Parliament

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