The 2026-27 federal budget proposed the most significant changes to CGT settings since the 50% discount was introduced in 1999. For most individual, trust and partnership assets, the 50% CGT discount is proposed to be replaced by indexation and a 30% minimum tax. Negative gearing is proposed to be restricted for established residential property, and discretionary trusts face a new minimum tax. SMSFs were excluded from all three.
The practical effect is not a direct SMSF rule change. It is a relative tax shift. The budget makes several common non-super structures less concessional while leaving complying super funds outside the new measures.
Key Takeaways
- The budget proposed no direct changes to SMSF tax rates, the one-third CGT discount, pension-phase exemptions, or contribution caps.
- The 50% individual CGT discount is proposed to be replaced by cost base indexation and a 30% minimum tax on net capital gains from 1 July 2027. Super funds are excluded.
- Negative gearing for established residential property is proposed to be restricted from 1 July 2027. Super funds are excluded.
- A 30% minimum tax on discretionary trust income is proposed from 1 July 2028. Complying super funds are excluded.
- These measures are budget announcements, not yet law. Legislation must pass the Senate.
- For many trustees in accumulation phase, the relative tax advantage of holding growth assets inside super may widen under the proposed settings.
- Division 296, the additional tax on balances above $3 million, commences 1 July 2026 and was not changed. It remains the key counterpoint.
Contents
- The budget outcome for SMSFs
- CGT reform leaves super outside the net
- Negative gearing carve-out for SMSFs
- Trust minimum tax and the super exclusion
- The relative tax advantage in numbers
- Pension phase becomes relatively more valuable
- Division 296 is the counterweight
- Trustee priorities while measures are drafted
- Frequently Asked Questions
The budget outcome for SMSFs
The budget changed nothing directly for SMSFs.
The budget did not announce any changes to SMSF fund tax rates, the one-third CGT discount for complying super funds, pension-phase exemptions, or contribution caps. Contribution and transfer balance cap indexation already scheduled from 1 July 2026 was not altered. The concessional cap rises to $32,500, the non-concessional cap to $130,000, and the general transfer balance cap to $2.1 million. These are existing indexed changes, not new budget measures.
But the SMSF federal budget 2026 story is not that super rules changed. It is that the tax landscape around super shifted substantially. The budget proposes major changes to capital gains tax, negative gearing, and discretionary trusts. The major CGT, negative gearing and discretionary trust reforms all excluded super funds, including SMSFs.
These measures are budget announcements and are not yet law. They will require legislation to pass through Parliament, including crossbench support in the Senate.
When the settings outside super get worse while the settings inside super stay the same, the relative case for holding assets inside a fund changes. That is the story of this budget for SMSF trustees.
CGT reform leaves super outside the net
Not directly. That is the point.
From 1 July 2027, the government proposes to replace the 50% CGT discount for individuals, trusts and partnerships on most assets held for more than 12 months with cost base indexation, the system Australia used between 1985 and 1999, combined with a new 30% minimum tax on net capital gains.
Instead of automatically halving a capital gain, the asset’s cost base would be indexed upwards by CPI when calculating the taxable gain. The taxpayer would then pay tax only on the real gain above cumulative inflation, but at a minimum rate of 30%.
Income support recipients, including Age Pension recipients, would be exempt from the CGT minimum tax if they receive a payment in the financial year in which the capital gain is realised.
Assets affected by the CGT proposal
The changes would apply to all CGT assets held by individuals, trusts, and partnerships, not just property. Shares, managed funds, and business assets are all in scope. They would even apply to pre-1985 assets, which until now have been fully exempt from CGT. For those assets, gains arising before 1 July 2027 would remain exempt, but gains arising after that date would be taxable under the new rules.
The reforms may not increase tax in every case. Where an asset’s return is low relative to inflation, indexation can produce a lower taxable gain than the current 50% discount. The comparison depends on inflation, asset return, holding period and the taxpayer’s marginal rate.
Transition rules for existing assets
The changes would only apply to gains arising after 1 July 2027. For assets already owned, gains accrued up to that date would still receive the existing 50% discount. Taxpayers would be able to determine the asset’s 1 July 2027 value when the asset is eventually sold, either by obtaining a valuation, using quoted prices for listed assets such as shares, or using a specified apportionment formula.
Treatment of super funds
Two categories are explicitly excluded from the proposed changes: the main residence and superannuation funds.
Super funds, including SMSFs, would keep the existing one-third CGT discount in accumulation phase and the existing pension-phase exemption where fund assets support retirement-phase pension liabilities. This was confirmed in the budget papers, though formal legislation has not yet been drafted.
Negative gearing carve-out for SMSFs
Yes. The budget papers confirm that superannuation funds, including SMSFs, are carved out of the proposed negative gearing restrictions.
From 1 July 2027, investors who purchase an established residential property after 7:30pm AEST on 12 May 2026, budget night, would no longer be able to deduct rental losses against wages or other non-property income. Those losses could only be offset against residential property income, residential property capital gains, or carried forward to future years.
Properties held before budget night are grandfathered. New residential properties remain fully eligible for negative gearing, and investors in new builds would be able to choose between the 50% CGT discount or the new indexation model when they eventually sell.
While relatively few SMSFs hold negatively geared residential property, the exclusion is significant in principle. It means the SMSF structure retains tax treatment that is no longer available to individual investors for the same asset class.
For trustees considering property within their SMSF, the ATO’s guidance on SMSF investment strategies and the requirement to document why a property holding is appropriate for the fund remain essential reading. See also the Super Informed SMSF investment strategy guide and the SMSF property guide.
Trust minimum tax and the super exclusion
No. Complying superannuation funds are explicitly excluded.
From 1 July 2028, the government proposes a 30% minimum tax on the taxable income of discretionary trusts. The tax would be paid by the trustee, with beneficiaries generally still declaring the income and receiving a non-refundable credit for the tax paid, except corporate beneficiaries.
This measure targets the common practice of distributing trust income to lower-taxed family members. The government has announced three years of rollover relief from 1 July 2027 for businesses wishing to restructure out of discretionary trusts into companies or fixed trusts.
For SMSF trustees who also hold assets through a family discretionary trust, this creates a meaningful shift in the relative tax efficiency of the two structures. Trust distributions that were previously taxed at a beneficiary’s marginal rate, potentially as low as 0% using the tax-free threshold, would face a 30% floor. Inside a complying SMSF, the standard accumulation tax rate remains 15%, subject to the usual super tax rules and any Division 296 exposure. The pension-phase exemption remains available where fund assets support retirement-phase pension liabilities.
Summary: three proposed changes, three SMSF exclusions
| Proposed change | Starts | Applies to | SMSFs |
|---|---|---|---|
| CGT discount replaced by indexation + 30% minimum tax | 1 July 2027 | Individuals, trusts, partnerships | Excluded - one-third discount retained |
| Negative gearing restricted for established residential property | 1 July 2027 | Individuals, partnerships, companies and most trusts | Excluded - super funds including SMSFs carved out |
| 30% minimum tax on discretionary trusts | 1 July 2028 | Discretionary trusts | Excluded - complying super funds carved out |
Want SMSF updates from Super Informed?
The relative tax advantage in numbers
The following is a simplified illustration of how the proposed rules would compare, assuming these proposals are legislated as announced. It ignores Medicare levy, transaction costs, deductions, franking credits, state taxes and any Division 296 implications. It is a framework for understanding the proposed tax settings, not a recommendation to move assets into or out of super.
An individual on a 37% marginal rate buys shares for $200,000 and sells them five years later for $320,000. Cumulative inflation over the period is 20%.
| Current rules, individual | Proposed rules, individual | SMSF accumulation, unchanged | |
|---|---|---|---|
| Cost base | $200,000 | $240,000 indexed | $200,000 |
| Nominal gain | $120,000 | $120,000 | $120,000 |
| Taxable gain | $60,000, after 50% discount | $80,000, real gain after indexation | $80,000, after one-third discount |
| Tax rate | 37% | 37%, above 30% floor | 15% |
| Tax payable | $22,200 | $29,600 | $12,000 |
| SMSF saving | $10,200 | $17,600 |
Under the proposed settings, the individual’s tax bill rises while the SMSF’s stays the same. The gap between the two widens from $10,200 to $17,600.
Retirement timing under a 30% minimum tax
Timing a sale in a low-income year, such as the year after retirement, has been a common approach for decades. The proposed 30% floor would reduce that benefit for affected taxpayers, although income support recipients, including Age Pension recipients, are proposed to be exempt from the CGT minimum tax.
Inside super, the 15% rate in accumulation and 0% in pension phase remain available regardless of the member’s personal income in any given year, subject to the usual super tax rules and any Division 296 exposure.
This pattern will often favour SMSFs for growth assets, particularly where the individual investor is on a 30% or higher marginal rate. But the result depends on inflation, asset growth, holding period, personal tax rate, accumulation or pension phase, and Division 296 exposure.
Pension phase becomes relatively more valuable
For assets supporting retirement-phase pension liabilities inside an SMSF, capital gains may be fully exempt under the existing pension-phase rules. The budget did not alter this.
While individual investors would face indexation calculations, a 30% minimum rate, and valuation questions they have never had to consider before, the pension-phase exemption inside an SMSF continues to apply. That simplicity and that exemption are now relatively more valuable than they were before budget night.
For more on how pension phase works, including minimum drawdown requirements and the consequences of missing them, see the Super Informed guide to SMSF pension minimums and the broader SMSF pension guide.
Division 296 is the counterweight
Division 296, the additional tax on super earnings for balances above $3 million, commences on 1 July 2026. This was legislated in March 2026 and was not changed by the budget.
For affected members, Division 296 can produce an additional 15% tax on calculated super earnings above the $3 million threshold. That can bring the broad headline tax comparison closer to 30%, but the mechanisms are not equivalent to the proposed individual CGT changes. Division 296 can apply to unrealised gains annually, while CGT generally applies only when an asset is sold.
The Division 296 cost base reset election allows eligible SMSFs to reset the Division 296 cost base of all fund CGT assets to their 30 June 2026 value for Division 296 purposes only. This election is all-or-nothing. You cannot select individual assets. For trustees in scope, the election window and its implications are worth discussing with a qualified adviser. See the Division 296 CGT cost base reset guide for a deeper explanation of the election.
For the full list of SMSF deadlines including annual return lodgement dates, TBAR reporting, and the Division 296 timeline, see the SMSF Compliance Calendar.
Trustee priorities while measures are drafted
These budget measures have not been legislated. They are statements of intended policy. The government will need crossbench support in the Senate, and some design details remain unresolved and subject to consultation. The ATO is expected to release further guidance and tools once legislation and administrative design are settled.
That said, the direction is clear and the exclusion of superannuation is consistent across all three proposed measures.
Confirmed actions that do not depend on this legislation passing include:
- Contribution and transfer balance cap indexation from 1 July 2026, with the concessional cap rising to $32,500, the non-concessional cap to $130,000, and the transfer balance cap to $2.1 million
- The Division 296 cost base reset election window
- Payday Super commencing 1 July 2026
- EOFY pension minimum payments, covered in the pension minimum drawdown guide
For trustees weighing asset allocation between inside and outside super, the comparative tax position of super has strengthened under these proposals. How much it has strengthened depends on the trustee’s marginal tax rate, the expected growth rate of their assets, whether those assets sit in accumulation or pension phase, and whether their balance crosses the $3 million Division 296 threshold. That is a question for a qualified adviser, not a website article.
Frequently Asked Questions
Will the SMSF CGT discount change under the 2026-27 budget?
No. The budget proposals to replace the 50% CGT discount with indexation and a 30% minimum tax explicitly exclude complying superannuation funds. SMSFs retain the existing one-third CGT discount in accumulation phase and the existing pension-phase exemption where fund assets support retirement-phase pension liabilities.
When do the proposed CGT changes take effect?
The proposed changes would apply to gains arising from 1 July 2027. Gains on assets already held that accrued before that date would still receive the existing 50% discount under transitional arrangements.
Are SMSFs affected by the negative gearing changes?
No. The budget papers confirm that superannuation funds, including SMSFs, are excluded from the proposed negative gearing restrictions on established residential property.
Does the 30% discretionary trust minimum tax apply to SMSFs?
No. Complying superannuation funds are explicitly excluded from the proposed 30% minimum tax on discretionary trust income, which is proposed to commence from 1 July 2028.
What is the SMSF CGT rate in accumulation phase?
An SMSF in accumulation phase receives a one-third CGT discount on assets held for more than 12 months. Two-thirds of the capital gain is taxed at the fund’s 15% rate, producing an effective rate of 10% on the total nominal gain. This was not changed by the 2026-27 budget.
How does Division 296 interact with the budget CGT changes?
Division 296 is a separate measure that was legislated in March 2026 and commences 1 July 2026. It applies an additional 15% tax on calculated earnings for members with a total super balance above $3 million. Unlike CGT, Division 296 can apply to unrealised gains annually. Trustees with balances approaching $3 million should discuss the cost base reset election and contribution strategy with a qualified adviser.
What are the SMSF contribution caps for 2026-27?
From 1 July 2026, the concessional contribution cap is $32,500, the non-concessional cap is $130,000, and the general transfer balance cap is $2.1 million. These are indexed changes already confirmed and were not altered by the budget. See the full SMSF contribution caps guide.
Are these budget changes law yet?
No. The CGT, negative gearing, and discretionary trust measures are budget announcements and statements of intended policy. They will require legislation to pass through Parliament, including crossbench support in the Senate. Some design details remain subject to consultation.
Disclaimer
This article is for educational purposes only and does not constitute financial advice. It is a framework for understanding the proposed tax settings announced in the 2026-27 federal budget, not a recommendation to move assets into or out of super. Always consult a licensed financial adviser or SMSF specialist before making decisions about your fund.
Super Informed is a free weekly newsletter for Australian SMSF trustees. Clear compliance updates, rule changes, and practical actions, published every Thursday. Content is general information only, not financial advice. About the author.