After months of debate, the changes to capital gains tax and negative gearing have now been locked in. For brokers, the question has shifted from “will this happen?” to “what do my clients do now?” The answer depends on who your client is, and for SME investors there are some real opportunities to consider.
An overview of what changed
From 1 July 2027, two significant tax reforms take effect.
On capital gains tax: the 50 per cent discount is being scrapped. Instead of automatically halving the taxable gain, investors will only pay tax on the portion of their gain above inflation, with a minimum tax rate of 30 per cent applying regardless of income. This applies to all CGT assets held by individuals, trusts and partnerships. Gains made before 1 July 2027 stay under the current rules.
On negative gearing: from 1 July 2027, anyone who bought an established residential property after 12 May 2026 can no longer use rental losses to reduce their taxable wages or other income. Those losses can still be claimed, but only against other residential property income, with any leftover carried forward to future years. Properties bought before the announcement aren’t affected.
A different equation for self-employed investors
Much of the reform coverage frames the affected property investor as a salaried employee using negative gearing to cut their tax bill. But that’s hardly the full scope of Aussie investors.
Business owners, sole traders, and investors operating through companies or trusts have a more complex picture. Their income is less consistent and their property exposure often broader, so the way these changes land for them is also different.
Rethinking residential
For investors considering established residential purchases, rental losses can no longer offset wages, but they can still be claimed against future property income. That puts yield and cash flow front and centre in any acquisition decision, a familiar framework for business owners. And for clients with a mixed portfolio, it’s worth noting that the main residence exemption remains intact — these changes only affect investment assets.
Meanwhile, new builds* are in a stronger position on both fronts. Negative gearing stays intact regardless of purchase date, and upon sale, investors can choose whichever CGT method works out better for them: the existing 50 per cent discount or the new indexation model. For clients still keen on residential exposure, it’s the more protected path.
There’s also a noteworthy carve-out for SMEs: businesses with turnover under $10 million retain a 50 per cent CGT discount on the sale of active business assets. The eligibility threshold was lifted from $2 million to $10 million as part of the legislation, bringing 98 per cent of active Australian businesses into scope. It doesn’t apply to investment properties, but it’s relevant for clients restructuring a broader portfolio of business assets.
Commercial property is having a moment
For many self-employed investors, the more interesting question is where capital goes from here. Commercial property retains full negative gearing, entirely unchanged. CommBank Director of Commercial Property Research Kevin Stanley observes the significant possibility that “formerly residential investors will start to look increasingly at commercial property,” describing the current environment as prompting “once-in-a-generation type decisions.”
The appeal of commercial property is straightforward: stronger yields, longer lease tenure, and greater income stability. And with the RBA holding the cash rate steady at 4.35 per cent through June, and CBA economists tipping no change for the rest of 2026, conditions are about as settled as they’ve been all year for investors weighing their next move.
Where Prime Capital fits
Prime Capital’s lending products, from Business Basics through to Business Jumbo, are designed for businesses with strong assets and the ambition to grow. We accept self-declared income, lend from $250k to $25M, and deliver approvals in as little as 24 hours. No unnecessary paperwork. No locked-in contracts.
Whether your SME client wants to fund a new build to keep negative gearing in play, unlock equity for business needs like equipment or working capital, or explore a commercial property acquisition, we’re set up to move at their pace.
Speak to your Business Development Manager today, or submit your next scenario via Prime Approve.
*Eligibility criteria apply to what constitutes a new build under the legislation. For a full breakdown, refer to page 4 of the Government’s budget tax reform factsheet here.
Sources
● Australian Government, Negative Gearing and Capital Gains Tax Reform, Budget 2026–27, May 2026 (budget.gov.au)
● Prime Minister of Australia, ‘Tax Reform Implementation for Small Business and Startups’, June 2026 (pm.gov.au)
● SBS News, ‘Everything You Need to Know About Labor’s Latest Tax Changes’, June 2026 (sbs.com.au)
● Kevin Stanley, Director of Commercial Property Research, Commonwealth Bank of Australia, ‘As housing tax breaks end, investors set to turn to commercial property’, June 2026 (commbank.com.au)
● Reserve Bank of Australia, Statement by the Monetary Policy Board, June 2026 (rba.gov.au)
