Treasury rolls out negative gearing, CGT Tranche 2 consultation

Treasury has launched part two of the negative gearing and capital gains tax (CGT) reforms, hoping to clarify some more of the "complex issues" that apply to a range of specific circumstances and structures.

Among the key measures, the government has proposed preserving eligibility for negative gearing and access to new-build concessions in specific situations, including where residential properties are acquired from a spouse as a result of inheritance or relationship breakdown.

Capital gains distributed through genuine testamentary trusts, deceased estates and special disability trusts are set to be exempt from the new minimum tax on capital gains. The treatment aligns with exemptions already available to discretionary trusts.

How CGT changes to Attribution Managed Investment Trusts (AMITs) should be applied is also up for discussion. Further consultation will be undertaken to examine options that could reduce compliance costs for fund managers.

The reforms also address taxpayers who were Australian residents for only part of the period they held an asset and seek to prevent certain CGT events from unintentionally triggering earlier taxation of deferred gains.

Additionally, the package includes a proposed definition of a "new residential dwelling", which is a key element in determining eligibility for concessions under the revised negative gearing regime.

Currently, a property will generally be considered "new" if it genuinely adds to housing supply, provided the property was acquired within 24 months of a certificate of occupancy being issued. This extends the 12 months set out in the Budget to provide builders and developers additional time to sell stock on hand.

The materials for consultation include a draft legislative instrument specifying the method for apportioning capital gains and losses for real property and assets without a readily ascertainable market value.

The consultation period ends on August 21.

Treasurer Jim Chalmers said the draft materials reflect the government's commitment to consult on more complex elements of the tax reforms announced in the Budget.

"These reforms will help level the playing field for first home buyers, preserve the gains investors have made, and support investment in new housing supply," he said.

Three core pieces of legislation received Royal Assent on June 26 under the Treasury Laws Amendment (Tax Reform No.1) Act 2026 and Income Tax Rates Amendment (Tax Reform No. 1) Act 2026.

From 1 July 2027, the CGT discount of 50% for individuals, trusts and partnerships will be replaced with cost base indexation so that only real gains are subject to tax; the 30% minimum tax on capital gains will take effect; and new arrangements applying to all capital gains accruing on and after this date will come into effect.