In May we wrote about how the 2026 Budget CGT changes could affect your property settlement. At the time they were proposals. Parliament has since passed them, and the final law differs from the announcement in ways that matter to separating couples.
This post sets out what became law, what changed between Budget night and the final Acts, and what that means for dividing property after separation. It replaces the "if legislated" parts of the earlier post with the rules as they now stand.
What has actually become law?
Two Acts carry the changes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026 followed on 26 August 2026. Most of the new rules start on 1 July 2027.
The first Act replaces the 50 percent Capital Gains Tax discount with inflation indexation for Australian resident individuals and trusts, adds a 30 percent minimum tax on capital gains for resident individuals, and limits negative gearing on established residential property bought after Budget night. The second Act fills gaps the first one left, including one that directly affects separating couples.
One Budget measure has not become law. The proposed 30 percent minimum tax on discretionary trusts is still in draft, which we cover below.
How does the new CGT regime work?
On 1 July 2027 every asset an individual or trust holds is treated as if it were sold and bought back at its market value. No tax is payable on that deemed sale. Instead, the gain to that date is set aside and only counted when the asset is actually sold later.
That deferred gain keeps the old treatment. If the asset would have qualified for the 50 percent discount, the gain built up before 1 July 2027 still gets it, whenever the asset is eventually sold. Sections 112-155 and 112-160 of the Income Tax Assessment Act 1997 set this out for individuals, and sections 112-165 and 112-170 do the same for trusts.
Growth after 1 July 2027 is taxed differently. Instead of halving the gain, the cost base is indexed to inflation, so only the real increase in value is taxed. A 30 percent minimum tax then applies to resident individuals: if the tax worked out on a capital gain at your own rate is less than 30 percent of it, you pay the difference.
New residential dwellings are treated more generously. Their owners can choose between the old 50 percent discount and the new indexation method, and gains from them are kept out of the minimum tax. The main residence exemption is not changed by either Act, so the family home is generally unaffected.
Does settling before 1 July 2027 still matter?
Much less than it first appeared. In May it looked as though gains might lose the 50 percent discount from 1 July 2027, which made settling and selling before that date look urgent. The final law protects gains made before that date whenever the asset is sold, so the pressure to rush is largely gone.
Timing still matters in narrower ways. If an investment property or share portfolio is going to be sold as part of the settlement, any growth after 1 July 2027 will be taxed under the new rules, which for most people means a higher rate on that later portion. And from 1 July 2027 the holding costs of some investment properties change, which we cover in the negative gearing section.
The more important point is the one the earlier post made: do not let a tax date push you into an agreement you have not properly considered. A fair settlement reached carefully is worth more than a rushed one.
How is future tax valued in the property pool?
The Family Law Act 1975 sets out the steps for dividing property in section 79 for married couples and section 90SM for de facto couples. The first step is identifying and valuing the property pool, and that includes deciding how to treat tax that will fall due when an asset is eventually sold.
Courts have not taken a single approach to future tax. Where an asset is going to be sold, or a sale is likely, the expected tax is often deducted from its value. Where a sale is uncertain or a long way off, the tax may be given less weight or none. The new rules do not change that approach, but they change the size of the number.
Two things follow. First, the tax on an investment asset is now made up of two parts, the pre-2027 portion with the discount and the post-2027 portion with indexation and the minimum tax, so an accurate estimate needs an accountant rather than a rule of thumb. Second, every investor will need a market value for 1 July 2027 for their own tax records, and that same valuation can help both parties understand what an asset is really worth to whoever keeps it.
Does the marriage breakdown rollover still apply?
Yes. Neither Act changes Subdivision 126-A of the Income Tax Assessment Act 1997. When an asset is transferred from one spouse or former spouse to the other under a court order, a Binding Financial Agreement or another arrangement listed in section 126-5, no CGT is payable at the time of the transfer.
The rollover defers the tax rather than removing it. The person who receives the asset takes on its cost base and its tax history, so the tax arrives when they eventually sell. Under the new rules that history may include a deferred pre-2027 gain as well as later growth taxed under indexation and the minimum tax. Exactly how those pieces carry across in your circumstances is a question for your accountant.
The rollover only applies where the transfer is made under one of the formal arrangements the section lists. An informal handover of an asset, with nothing documented, does not qualify. That is one of the practical reasons to formalise an agreement as Consent Orders or a Binding Financial Agreement.
What happens to negative gearing after separation?
From 1 July 2027, losses on an established residential property bought after 7:30pm (AEST) on 12 May 2026 can no longer be deducted against wages or other income. They are carried forward and used against future residential rental income or gains. New builds, and properties bought before the cut-off, keep the existing treatment.
As first passed, the law had a gap for separating couples. A property transferred to a former spouse after Budget night could have been treated as a new purchase, even though the couple had owned it for years, and lost its protected status. The second Act closes that gap.
Under section 26-158, if you take an ownership interest in a residential dwelling from your spouse or former spouse under an order, agreement or award of a kind listed in section 126-5, and they acquired it before the cut-off, you are treated as having acquired it before the cut-off too. If the property counted as a new dwelling for them, it counts as one for you, and section 26-159 carries that through to the CGT treatment. This protection depends on the transfer being made under one of those formal arrangements.
What about family trusts?
The proposed 30 percent minimum tax on discretionary trusts is not law. The Australian Taxation Office describes it as announced, with draft legislation released for consultation in September 2026 and a proposed start date of 1 July 2028. Its final shape may change before it passes.
Even so, trusts already matter in a property settlement. Both parties have a duty to disclose trust structures they control or benefit from, including distribution history. Where one party relies on trust distributions as income, it is sensible to model what those distributions might look like if the minimum tax passes in its current form, and to treat that figure as uncertain rather than settled.
What should you do now?
Start with full disclosure. Both parties owe a duty of full and frank disclosure, which now sits in the Family Law Act 1975 itself, and that includes investment properties, shares, trust interests and the purchase dates and costs needed to work out the tax on each of them.
Then get the numbers modelled. An accountant can estimate the tax on each asset under the new rules, for each realistic way of dividing the pool, including who keeps which asset and what is sold. Those figures are what turn a tax change from a source of worry into something both of you can plan around.
In Family Dispute Resolution, you can bring that work into the room. Each person can share the accountant's figures and test proposals against them, and the practitioner assigned to your matter helps keep the discussion focused on the decisions you need to make. The practitioner does not give tax advice or decide how the pool is divided. Nothing is binding until the agreement is formalised, which is also what makes the rollover and the negative gearing protection available.
Book a free discovery call to talk through your situation and how FDR could help you reach an informed property settlement.
Common questions
Are the 2026 CGT changes law?
Yes. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026, and the Treasury Laws Amendment (Tax Reform No. 2) Act 2026 followed on 26 August 2026. Most of the changes start on 1 July 2027. The proposed minimum tax on discretionary trusts is not yet law.
Do pre-2027 gains keep the 50 percent discount?
No. Assets are treated as sold and bought back at market value on 1 July 2027, and the gain to that date is deferred until the asset is actually sold. If it would have qualified for the discount, it keeps the discount. Only growth after 1 July 2027 is taxed under the new rules.
Is CGT payable when property changes hands in a settlement?
Yes. Subdivision 126-A of the Income Tax Assessment Act 1997 is unchanged. A transfer between spouses or former spouses under a court order or Binding Financial Agreement does not trigger CGT at the time, but the person who receives the asset takes on its tax history and pays the tax when they sell.
Does a transferred property keep its negative gearing?
It can. Under section 26-158, if your former spouse bought the property before 7:30pm on 12 May 2026 and it is transferred to you under a court order, Binding Financial Agreement or similar formal arrangement, you are treated as having bought it before the cut-off. An informal transfer does not get this protection.
This article is general information only and was correct to the best of our knowledge at the time of writing. It is not legal, tax, or financial advice and does not take account of your personal situation. The law changes, some measures mentioned may be proposals that are not yet in force, and fees and figures can change over time, so check anything that matters and get advice for your own circumstances from a family lawyer, an accredited Family Dispute Resolution Practitioner, or a qualified tax or financial professional before acting. If you or someone else is in immediate danger, call 000. For confidential support with family violence or concerns about a child's safety, contact 1800RESPECT on 1800 737 732.