Key Highlights

  • Property investors counting on rental losses to cut the tax on a future capital gain may get less benefit than they expect.
  • The example comes from the NTAA's Robyn Jacobson, who set out her reading of the law in Accountants Daily on 4 September 2026.
  • In her example, a taxpayer makes a $100,000 capital gain and has $100,000 of rental losses that are not quarantined.
  • "The losses deliver no tax benefit at all," Ms Jacobson said.

Property investors counting on rental losses to cut the tax on a future capital gain may get less benefit than they expect. According to the National Tax and Accountants' Association (NTAA), the 30% minimum tax on capital gains, which starts on 1 July 2027 under the Tax Reform No. 1 Act 2026, is not reduced by most deductions. In the NTAA's example, a $100,000 gain fully offset by $100,000 of rental losses still produces a $30,000 tax bill.

The NTAA's $30,000 example

The example comes from the NTAA's Robyn Jacobson, who set out her reading of the law in Accountants Daily on 4 September 2026.

In her example, a taxpayer makes a $100,000 capital gain and has $100,000 of rental losses that are not quarantined. The losses reduce the taxpayer's ordinary, or basic, tax on the gain to nil. But the minimum tax is calculated separately, at 30% of the "minimum tax capital gain", which the losses do not reduce. The result is a $30,000 minimum tax.

"The losses deliver no tax benefit at all," Ms Jacobson said. The NTAA has recommended that Division 119, the part of the law that contains the minimum tax, be amended.

Which losses are caught

The quirk concerns losses that can still be offset against other income, which the NTAA calls non-quarantined losses.

Under the new negative gearing rules, losses on established residential property bought after 7:30pm AEST on 12 May 2026 are quarantined from 1 July 2027, rather than offset against other income such as wages.

Non-quarantined losses include losses on grandfathered properties held at Budget night, on new residential properties and on other excluded property. According to the NTAA, these losses reduce basic tax but not the minimum tax capital gain. According to the ATO, grandfathering covers dwellings held at 7:30pm AEST on 12 May 2026.

How the minimum tax is calculated

The minimum tax is a floor, not a flat rate. "The 30 per cent rate is a minimum rate, not a flat rate," Ms Jacobson wrote in Accountants Daily on 3 July 2026.

It applies only to the indexed portion of a gain that accrues after 1 July 2027. Growth up to 30 June 2027 keeps the 50% discount through a deemed sale at market value, and that portion is not exposed to the floor. For assets held before then, separating the two portions depends on a 1 July 2027 value, set either by a valuation or by an apportionment formula in the year of sale.

the gain is treated as the last slice of a taxpayer's income under a new seven-step method statement. If ordinary tax on that slice comes to less than 30% of the minimum tax capital gain, the difference is payable as a top-up.