The biggest change to Capital Gains Tax in a generation starts on 1 July 2027, but for foreign residents and temporary residents who own Australian property or shares, the rules that will apply to them have not yet been written. In a submission to the Senate inquiry examining the latest Tranche of the changes, The Tax Institute says taxpayers and advisers need a clear timetable, with eight months to go and committee hearings this week.

What is already law

The first tranche of the changes is already enacted. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026.

From 1 July 2027 it replaces the 50% CGT discount with cost-base indexation plus a 30% minimum tax, for gains accruing from that date. It is not a "30% discount"; the indexation and the minimum tax work together.

The same Act limits negative gearing to new builds for properties bought after 7:30pm AEST on 12 May 2026, from 1 July 2027, with existing holdings grandfathered.

What is in the bill now before the Senate

The second tranche sits in the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026, which passed the House on 29 October.

According to the Treasurer's second reading speech, Schedule 4 of the bill is the second CGT tranche and covers more complex cases, including trusts. Schedule 5 defines a "new residential dwelling" for the negative gearing changes and sets out exemptions, including for affordable and public housing.

The bill is not law. It is before the Senate, and the Senate Economics Legislation Committee is scheduled to hold hearings on 5 and 6 November, with its report due on 13 November.

The Tax Institute's submission, lodged on 29 October, the closing date, points to paragraph 4.179 of the bill's explanatory memorandum.

That paragraph indicates later tranches are expected to cover CGT roll-overs, foreign and temporary residents, tax consolidated groups, employee share schemes and demergers.

In other words, some of the most technical parts of the system, and the treatment of non-residents, are not in either the enacted law or the current bill. They are expected in future legislation that has not yet been introduced.

The Tax Institute's case

The Tax Institute's first proposal is that the government publish a timetable for the remaining tranches, together with a consolidated status summary of the whole package.

Its concern is practical. With changes rolling out tranche by tranche, it is difficult for taxpayers and advisers to tell which parts are law, which are in Parliament and which have not yet been drafted.

The Institute also criticised the short consultation and review timeframe for the bill. Its more detailed technical recommendations on Schedules 4 and 5 are set out separately in its submission.

How non-residents are treated today

Under long-standing rules, foreign residents are generally taxed on capital gains only from taxable Australian property, which includes Australian real estate. They have not been entitled to the 50% CGT discount on gains accrued after 8 May 2012.

Temporary residents are also generally taxed only on gains from taxable Australian property, and they too have lost access to the discount for gains accrued after that date. Foreign residents are also generally unable to claim the main residence exemption, subject to limited exceptions.

That starting point is why the missing tranche matters. The new regime replaces a discount many non-residents could not use, and it is not yet clear how indexation and the minimum tax will apply to them.

Hypothetical example: two investors each make a $200,000 capital gain on an Australian property held for more than 12 months, with all of the gain accrued before 1 July 2027. One is an Australian resident individual, the other a foreign resident.

Under current law, the resident applies the 50% discount, so $100,000 is included in assessable income. The foreign resident gets no discount, so the full $200,000 is included.

For gains accruing after 1 July 2027, the resident's position moves to indexation plus the 30% minimum tax under the enacted law. How the foreign resident's post-2027 gain will be calculated is exactly the question later legislation is expected to answer. This example is illustrative only and ignores other income, losses and costs.

Why timing matters in a falling market

For foreign and temporary residents, decisions about selling, holding or changing residency status can depend on how gains will be taxed. Without draft rules, advisers cannot model outcomes with confidence.

Employers with employee share schemes, corporate groups that are tax consolidated, and businesses planning demergers or roll-overs face a similar gap, with 1 July 2027 approaching.

The uncertainty comes as the property market turns. The RBA lifted the cash rate to 4.85% on 3 November, saying "housing prices have fallen significantly" and flagging uncertainty about the extent of the downturn.

Cotality's October index showed combined capital city values down 8.1% over seven months, the fastest pace in 40 years of its data. In Melbourne, values are 7.3% below their level five years ago, Cotality said.

For some owners, including non-residents who bought in recent years, the question may be whether there is a gain at all. How capital losses will interact with the new regime is not yet settled, particularly where a property is now worth less than its purchase price.

What is clear is that a decision to sell before or after 1 July 2027 could have different tax consequences, and for foreign and temporary residents those consequences cannot yet be fully mapped.

Key dates to watch

  • 5–6 November: scheduled Senate committee hearings on Tax Reform No. 3 and the trust rates bill.
  • 13 November: committee report due.
  • Coming months: any government timetable or exposure draft for the remaining CGT tranches, including foreign and temporary residents.
  • 1 July 2027: cost-base indexation and the 30% minimum tax begin for gains accruing from that date, and the negative gearing limit takes effect.