The Budget CGT and Negative Gearing Reforms Are Now Law: What Australian Expats Need to Recheck

If you’re an Australian living overseas with property back home, a share portfolio, a trust interest, a business sale on the horizon, or an SMSF with a property strategy, the big Budget tax story has just moved from “they’re planning to” to “they’ve done it.” That’s a meaningful shift, and it’s worth understanding properly rather than through the panicked version doing the rounds on social media.

Here’s the headline: the centrepiece of the Government’s tax reform package is no longer a proposal waiting on the Governor-General’s signature. It’s law. So if you’ve got an old adviser note, a half-read news article, or a mental filing card that still says “pending Royal Assent,” you can update it. The waiting is over.

But (and this is the part that actually matters for you) “it’s now law” is not the same as “everything changes tomorrow.” The commencement dates and, crucially, your residency position still decide what you should actually do. Let’s walk through it calmly.

What actually happened, and when

The reform package was passed by both houses of Parliament and received Royal Assent on 26 June 2026. The main vehicle is the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026), supported by the related Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (Act No. 50 of 2026), which deals with the rates side of the minimum-tax changes. Between them, they contain the capital gains tax changes, the negative gearing changes, a new standard deduction for work-related expenses, a modest permanent tax offset for workers, and a targeted change to what SMSFs can borrow to buy.

This article focuses on the three things most likely to affect an expat’s actual money: capital gains tax, negative gearing, and SMSF borrowing. If you want the wider Budget picture, we keep it current in our 2026 Budget guide for expats.

One thing to set aside up front: the Budget also announced a separate 30% minimum tax on discretionary trusts from 1 July 2028, which (as at the time of writing) is announced but not yet law and deserves its own treatment. Trusts are mentioned here only where they interact with the CGT and property reforms in the Act that has passed.

The single most important thing to understand is this: Royal Assent changed the legal status of the package, but it did not switch every measure on at once. Different parts start on different dates. Getting those dates right is most of the game.

“Now law” doesn’t mean “changes today”

This is where a lot of people are going to tie themselves in knots, so let’s be blunt about it.

The negative gearing and capital gains tax changes are not retrospective, and they don’t rewrite your 2025-26 tax return. The main changes are timed to start from 1 July 2027 (the 2027-28 income year). So the property investor panicking that their deductions vanished overnight has misread the situation. They haven’t. Not yet, and in many cases, not in the way they fear.

Two protections matter enormously here. First, the negative gearing changes are aimed at established residential property bought after Budget night, and property you already held at 7:30pm ACT legal time on 12 May 2026 is broadly grandfathered from the new limits. Second, the CGT changes apply only to gains that accrue from 1 July 2027, not to the growth your assets have already banked. So this is a long way from “negative gearing has been abolished and your CGT bill just doubled.” The reality is more surgical, and the details are everything.

The CGT change: from a flat discount to taxing “real” gains

Here’s the policy shift in plain English. For Australian resident individuals, and for trusts in relevant cases, the familiar 50% CGT discount is being replaced for many post-1 July 2027 gains with a decidedly more complex system: cost-base indexation, new residential and non-residential gain categories, deemed sale-and-reacquisition mechanics for assets held at 30 June 2027, and a 30% minimum tax on the relevant gains. Partnership interests can also be affected where the gain flows through to an individual partner. The old “held it twelve months, halve the gain” reflex is no longer enough on its own.

What does that actually mean? The old 50% discount was beautifully simple: hold an asset more than a year, halve the taxable gain, done. The new approach is fussier but has a logic to it. Indexation lifts your cost base in line with inflation, so you’re taxed on the “real” gain (the bit above inflation) rather than the paper gain that’s really just the dollar losing value over time. Alongside that sits a 30% minimum tax on the relevant gains for certain taxpayers, so the gain can’t be whittled away to almost nothing. Gains that accrued before 1 July 2027 are generally preserved through that transitional deemed sale-and-reacquisition mechanism, with the pre-1 July 2027 component deferred until the eventual sale, provided the taxpayer is otherwise eligible for the relevant treatment. Valuations or approved apportionment methods may be needed when the asset is finally sold. (There’s also a useful carve-out worth knowing: for eligible new residential dwellings, and for certain affordable housing gains, a discount outcome can continue to be available after 1 July 2027, with indexation potentially available as an alternative. The exact result depends on whether the gain is made directly or through a trust, whether the foreign or temporary resident rules apply, and which provision is doing the work.)

The practical takeaway for an expat with Australian assets: do not leave your record-keeping until the year you sell. Purchase contracts, settlement statements, receipts for capital improvements, valuations, share registry records, trust deeds and your historical residency dates could all become important. If a market value around 1 July 2027 ends up mattering for your asset, you really don’t want to be reconstructing it from memory in an airport lounge three years later.

The bit the domestic explainers get wrong for expats: foreign resident CGT still applies

Here’s where most of the coverage you’ll read falls down, because it’s written for Australians living in Australia. If that’s not you, the picture is genuinely different, and the difference can be worth a fortune.

The reform package does not sweep away the existing foreign-resident CGT rules. Those rules still sit underneath everything, and for an expat they often matter more than the new Budget measures do. The key one: foreign residents are generally only subject to Australian CGT on “taxable Australian property,” which is mainly Australian real estate, certain indirect interests in Australian land, and business assets tied to an Australian permanent establishment. Ordinary Australian shares, held by a foreign resident, generally aren’t caught at all.

So an expat foreign resident selling an Australian rental property is in a completely different position from an Australian resident selling a parcel of listed shares. Your residency status at the moment of sale can be the whole ball game. Three traps deserve a spotlight:

• The main residence exemption is generally denied to foreign residents for property sold under contracts entered into after 30 June 2020, unless you fit a narrow “life events” test. If you’re overseas and thinking of selling your former Australian home, do not assume the old six-year absence rule quietly saves you, because for a foreign resident at the time of sale, it often doesn’t.
• Foreign and temporary resident periods already reduce or deny the 50% CGT discount for periods after 8 May 2012, with the discount apportioned for the days you were a non-resident. The reform doesn’t make that problem vanish: the new indexation rules are aimed at Australian resident individuals and trusts and exclude foreign and temporary residents. So an expat sale after 1 July 2027 can involve both the existing foreign-resident discount rules and the new CGT framework. Two rulebooks, one asset. Naturally.
• Foreign resident capital gains withholding hits your cash flow at settlement. Since 1 January 2025, a 15% withholding applies to relevant property sales with no minimum value threshold, and it applies to all vendors, so even Australian-resident sellers need a clearance certificate to avoid having 15% skimmed off the sale proceeds and sent to the ATO. Get this wrong and a big chunk of your sale price disappears into the Tax Office until you sort it out later.

The blunt version: reading a domestic Budget explainer and assuming it answers your expat question is a great way to make an expensive mistake.

Negative gearing: what expat property owners should recheck

The new negative gearing rule targets residential property, and it’s built around a “quarantining” idea rather than an outright ban.

For affected established residential property (broadly, property bought after Budget night that isn’t a new residential dwelling), from the 2027-28 income year you generally won’t be able to freely offset a rental loss against your other income (like your salary) the way you can today. Instead, the way the Act works (through a new section 26-155), where your deductions for using or holding residential dwellings as residential accommodation exceed your assessable income from those dwellings, the excess is quarantined. It can be carried forward and applied against future residential property income, including certain residential capital gains, rather than wiped against your wage this year. So the deduction isn’t destroyed; it’s deferred and ring-fenced. Genuine new residential dwellings are treated more generously, which is the whole point of the policy, to push investment toward adding housing rather than just bidding up the existing stock. And notably, complying superannuation entities (including SMSFs) and widely held unit trusts are carved out of these particular section 26-155 quarantining rules.

One more trap worth flagging: the denied residential-dwelling expenditure doesn’t quietly sneak into your cost base later. The Act specifically stops expenditure denied under section 26-155 from forming part of the cost base or reduced cost base. The loss is quarantined under the new rules, not recycled into a different tax bucket. Tax law is many things; a rewards program isn’t one of them.

For an expat, the useful questions aren’t philosophical, they’re practical. Go property by property and ask:

• Did you hold this property before 7:30pm ACT legal time on 12 May 2026? If so, it’s broadly carved out from the new negative gearing limits. If you acquired under a contract, the Act generally treats you as holding the ownership interest from when you entered the contract, not settlement.
• Is it residential property, or something else (commercial property and shares sit under the existing rules)?
• If you’re buying now, does it genuinely qualify as a “new residential dwelling” under the Act and the legislative instrument still to be made? “The agent called it new” is not the test. Tax law doesn’t read glossy brochures. (As a flavour of how strict this may get: the explanatory material suggests knocking down one dwelling and replacing it with one won’t count as genuinely adding supply, whereas replacing it with two separately-titled dwellings might.)
• Are you an Australian resident or a foreign resident for the relevant income year? This interacts with everything, and remember that a foreign resident generally can’t negatively gear shares anyway, because the income side is largely not assessable.
• Are your rental, interest and foreign-exchange records clean enough to actually support your position if the ATO asks in a few years?

If you own more than one Australian property, you’ll need to classify each dwelling carefully, because one may be carved out while another isn’t. But don’t assume the arithmetic is then a tidy property-by-property spreadsheet: the Act works by reference to your residential dwellings as residential accommodation across the board, with modifications for non-quarantined dwellings and certain gains. So classify property by property, then model the calculation across the portfolio properly. Of course it’s more than one step.

SMSFs: the deadline that’s closest, 10 August 2026

If there’s one date in this whole package that’s urgent rather than years away, it’s this one.

The package includes a change (in new Schedule 5, amending section 67A of the Superannuation Industry (Supervision) Act 1993) to what an SMSF can borrow to buy using a limited recourse borrowing arrangement (an LRBA, the structure that lets a fund borrow to purchase an asset while keeping the lender’s claim limited to that one asset). The change commences on the 45th day after Royal Assent, which lands on 10 August 2026. From that date, an SMSF can generally only use a new LRBA to acquire real property if that property is “business real property” within the meaning of the SIS Act. In plain terms: new SMSF borrowing to buy residential property is the strategy being closed off.

Borrowing to buy real property that qualifies as business real property, where all the other superannuation rules are met, remains possible. But don’t translate that as “any commercial-looking property is fine.” Mixed-use property, vacant land, residential components, related-party use and lease arrangements all need proper SMSF advice. Business real property is a legal definition, not a vibe with a warehouse roller door.

Existing arrangements aren’t torn up. Broadly, the new requirement applies to arrangements entered into on or after commencement under which money is borrowed, or borrowings are maintained, to acquire assets. It doesn’t apply to the extent the arrangement is merely maintaining or refinancing a borrowing under an arrangement entered into before commencement. If you have an SMSF residential-property purchase, a refinance, a pre-approval, a bare trust being set up, or a settlement in train, it needs reviewing against the exact transitional wording, because this is one of those areas where “near enough” is exactly far enough to be expensive. It’s not a “read a Facebook post and wing it” situation.

A word of realism, too: even before the legal deadline, the lenders may move first. When a similar policy was floated years ago, the major banks pulled their SMSF residential lending products before any law passed. So the practical window may be shorter than the calendar suggests. That said, please don’t let a deadline stampede you into a bad purchase, a property that only makes sense because of a cut-off date usually doesn’t make sense at all. This is a reason to get advice promptly, not a reason to panic-buy.

What expats should actually do now

Here’s the calm, methodical version, which beats the panicked version every time.

Start with your residency. Work out whether you’re an Australian resident, a foreign resident, or a part-year resident for the relevant income year, because it drives everything else. Visa status, citizenship and tax residency are three different things, and only one of them decides your tax position. If you’re unsure, our guide to being an Australian resident for tax purposes is the place to start.

Then list the assets that might be affected, and separate them by type: Australian residential property, commercial property, shares, trust interests, business assets, SMSF assets and foreign assets. The rules don’t treat them all the same, and lumping them together is how mistakes happen.

Next, map the dates for each asset: when you acquired it, whether you held it at Budget night (7:30pm on 12 May 2026), your departure and return dates, your expected sale date, and whether a CGT event might fall after 1 July 2027. Dates are doing an enormous amount of work in these rules.

Then gather your records. Unglamorous, yes, but it’s where future tax pain is quietly avoided. And finally, don’t make irreversible decisions just because the law has now passed. Selling, transferring, refinancing, restructuring a trust, changing an SMSF borrowing arrangement, or timing your return to Australia can all trigger tax consequences under the current rules as well as the new ones. “The law changed so I panic-sold” is not a strategy anyone enjoys explaining later.

The bottom line

The Budget CGT and negative gearing reforms are now law, and any expat guidance still saying “pending Royal Assent” needs updating today. But “now law” is the start of the planning conversation, not the end of it.

For an Australian expat, the answer is still entirely fact-specific, and it turns on a handful of questions: your residency status, the type of asset, when you acquired it, whether a dwelling is grandfathered or a genuine new residential dwelling, whether a sale falls after 1 July 2027, whether the foreign-resident CGT rules already limit your discount or indexation, whether a trust or partnership is involved, and whether an SMSF borrowing arrangement is caught by that fast-approaching 10 August 2026 date. Get those right and the reforms are manageable. Get them wrong, or rely on a domestic explainer that never considered your residency, and they can be expensive.

If any of this touches a planned property sale, a purchase, a return to Australia, a trust restructure or an SMSF borrowing arrangement, the smart move is to get advice before you act, not after.

Affected by any of this?

This is exactly what we do. We work out your residency position, map your assets and the dates that matter, model how the new rules and the existing foreign-resident CGT rules interact for your situation, and make sure you’re not blindsided by a deadline or a withholding surprise. We work remotely with expats all over the world, and our fee is always an upfront quote.

Book an appointment with our specialist team today, especially if a sale, purchase or SMSF borrowing decision is anywhere on your horizon. Better to plan around the change than be ambushed by it.

General information only. This article is current as at 30 June 2026 and doesn’t consider your personal circumstances. It isn’t tax, financial or legal advice, and nothing in it is a recommendation to buy, sell, transfer, refinance or restructure any asset or arrangement. Several measures in the package commence in future income years, and important details (including the definition of a “new residential dwelling” and various carve-outs) are being settled by regulation and guidance and may change. Decisions about superannuation, borrowing and investments should be made with a licensed financial adviser where relevant. Your outcome depends on your residency and circumstances. Speak to our specialist expatriate tax team today, or to another registered tax agent, before acting.