Expat Tax Realities
New Australian Tax Law Replaces CGT Discount and Limits Rental Deductions, Minimizing Expat Impact
Anonymous
Key Points
1
The reform was enacted as Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, which passed Parliament on 25 June 2026 and received Royal Assent on 26 June 2026.
2
From 1 July 2027, the reforms replace the 50% capital gains tax discount with cost-base indexation and impose a 30% minimum tax rate on gains, for disposals going forward.
3
The legislation tightens negative gearing by limiting the deduction of rental losses against wage income to newly built properties, with pre-budget-night holdings grandfathered.
4
Non-residents already did not benefit from the full 50% CGT discount since 2012, and the main residence exemption was removed for non-residents in 2020, so the headline changes are less impactful for non-resident expats than for residents.
Australia's most talked-about tax overhaul is now law. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed Parliament on 25 June 2026 and received Royal Assent the following day, according to ODIN Tax. From 1 July 2027, it scraps the 50% capital gains tax discount for individuals and replaces it with cost-base indexation, while also imposing a 30% minimum tax on gains.
But for Australians living abroad and taxed as non-residents, the law changes less than the headlines suggest. Many of the benefits the reform targets were already removed for non-residents years ago.
What the New Law Actually Changes From 2027
Starting 1 July 2027, investors can no longer use the 50% CGT discount when they sell an asset held for more than 12 months. Instead, they can index the cost base — meaning they adjust the original purchase price for inflation. A 30% minimum tax rate will apply to any remaining gains. These rules cover disposals going forward only, according to ODIN Tax.
The law also tightens negative gearing. Negative gearing is when rental costs exceed rental income — the loss can be deducted from other income like wages. Under the new rules, that deduction only applies to newly built properties. Properties held before Budget night are grandfathered, meaning the old rules still apply to them.
Non-Residents Already Lost These Benefits Years Earlier
The 50% CGT discount was removed for non-residents all the way back in 2012. The main residence exemption — which lets homeowners pay no tax when selling their family home — was taken away from non-residents in 2020. So the two biggest changes in this reform are things non-resident expats had already lost, according to ODIN Tax.
That means the reform does not eliminate benefits that non-resident expats still hold. It changes how gains are calculated on future sales, but it does not strip away anything new. Non-residents are taxed from the first dollar of Australian-sourced income anyway, so the 30% minimum tax rule mostly hits residents, not expats living overseas.
Grandfathering Protects Existing Property Holders
Anyone who held property before Budget night keeps access to the old rules for that asset. This grandfathering provision is one of the most important parts of the law for existing investors. It means the reform is largely forward-looking — it targets new investments and future disposals, not existing portfolios, according to ODIN Tax.
For non-residents with existing Australian property, the practical impact is narrow. The way gains are calculated will shift from 2027 onward, but the core tax position for most non-resident expats remains largely as it was before the bill passed.
What Expats Should Watch Before July 2027
The 1 July 2027 start date gives investors just over a year to review their Australian assets. Cost-base indexation will replace the 50% discount, so the tax outcome on a future sale will depend heavily on how much prices have risen since purchase. Investors holding assets with large gains should model both scenarios before the new rules kick in, according to ODIN Tax.
Non-resident expats should also check whether any rental properties qualify under the new negative gearing rules. Only newly built properties will allow rental losses to be offset against wage income after the law takes effect. Existing properties bought before Budget night remain under the old system.
Sentiment
Mostly NegativeNEGATIVENEUTRALPOSITIVE
Publishers
13
Articles
17
Reach
30
A
AnonymousAuthor
