Capital Gains Discount 2026
Estimated reading time: 5 minutes
You may have heard whispers that the government might change the capital gains tax (CGT) discount in the 2026 Federal Budget. See recent news here. If you’re a property investor or thinking about becoming one in New South Wales it’s worth understanding what this means and whether it should affect how you buy property.
Let’s start from the beginning…
What is Capital Gains Tax (CGT)?
Capital gains tax (CGT) is a tax you pay on the profit you make when you sell an asset, like an investment property. Imagine you bought a property for $700,000 and later sold it for $900,000. Your profit, or “capital gain,” is $200,000. CGT is the tax you pay on that $200,000.
Here’s where it gets interesting: the Australian tax system currently offers a CGT discount for people who own an asset for more than a year. If you’re an individual or hold property in a trust, you only pay tax on half of your profit. Using our example, instead of paying tax on $200,000, you’d only pay it on $100,000. That’s a big saving.
Companies, on the other hand, do not get this discount. Any profit made by a company is taxed at the corporate rate, which is generally around 25% for smaller businesses.
What could change with the capital gains tax (CGT) in 2026?
The speculation is that the personal capital gains tax (CGT) discount could be reduced from 50% to somewhere between 25% and 33%. If that happens, individual investors would pay tax on a larger portion of their capital gain, meaning your tax bill when selling could increase.
This possibility has got investors thinking about whether it still makes sense to buy property in their own name, or whether it would be better to use a company or trust instead.
Can buying in a company solve the problem?
It might sound simple: “If the personal capital gains tax discount is reduced, I’ll buy in a company and pay a flat 25% tax rate instead.” But the reality is more complicated. Companies do not get the CGT discount at all, so they’re already paying tax at the corporate rate on any profit. And if you later take money out of the company, for example as dividends to yourself, you may have to pay additional tax.
In other words, buying through a company doesn’t automatically save money. You could end up paying more in taxes, or at least facing extra steps and complications, compared with buying in your personal name.
What about Trusts?
Trusts are another option that can be attractive for some investors. Trusts can distribute profits to beneficiaries, who may then access the capital gains tax discount. This flexibility can sometimes be useful for managing taxes. But trusts come with their own challenges. Banks often apply stricter lending rules for trusts, which could make it harder to get finance. Transferring property into a trust may also trigger CGT immediately, as well as stamp duty—a significant upfront cost in NSW. These costs can easily outweigh any potential tax advantage.
What about people already owning property?
Many smaller to medium investors in NSW already hold property in their personal names. If you’re thinking of moving property into a company or trust, it’s important to know that this is not free or simple. Transferring property can trigger CGT immediately, because the transfer is treated as a “sale” for tax purposes. It can also trigger stamp duty, which is essentially a tax on buying property and can be quite expensive.
Land tax is another factor. Land tax rules differ depending on whether a property is owned personally, in a company, or in a trust. That affects the ongoing costs of owning investment property. Even asset protection and lending rules vary depending on the ownership structure.
What should investors do?
The takeaway is clear: a potential reduction in the capital gains tax discount does not automatically make companies or trusts the better option. The costs and complexities of restructuring property often outweigh any potential savings.
For anyone planning to buy or sell investment property, the smartest move is to speak with a qualified accountant or tax advisor before making changes. They can help you understand:
- How a potential capital gains tax discount reduction could affect your tax bill.
- Whether restructuring into a company or trust makes sense for you.
- The costs of transferring property, including stamp duty and potential CGT triggers.
- How banks may treat your borrowing differently depending on the ownership structure.
Why the capital gains tax discount matters now
Even if the capital gains tax discount does not change, it is still timely and valuable for investors to review their strategy. Understanding the rules, and asking the right questions, ensures you’re making informed decisions instead of reacting to rumors or assumptions.
Changes to the capital gains tax discount may create opportunities for some, but they also highlight how important it is to get professional advice. There is no “one-size-fits-all” solution. Each investor’s situation is different, and understanding how CGT, lending rules, land tax, and ownership structures interact is essential to making smart property investment choices in NSW.
A potential reduction in the capital gains tax discount is a reminder that property investment involves more than just picking a property. Understanding tax, lending, land tax and ownership structures is essential. Working with professionals, including your accountant and a buyers agent, ensures that you make informed choices tailored to your circumstances, and not just decisions based on assumptions or hearsay.
If you’re a property investor and want to make confident decisions around ownership structures, potential capital gains tax changes, or new property purchases, Buyers Agent Hotline can help. With expert knowledge of the Newcastle and Central Coast property markets, we provide guidance on property selection, ownership strategies and market insights that protect your investment and maximise returns. Contact us to discuss your investment goals, explore your options, and ensure you’re making smart, informed choices for the future.
