Australia's CGT and Negative Gearing Tranche 2 Consultation Closes 21 August 2026: What Property Investors Must Know Now

Key takeaway: Australia's Treasury is consulting on Tranche 2 of Capital Gains Tax and Negative Gearing legislation, closing 21 August 2026 — property investors and self-employed borrowers with investment portfolios should review their financing structure before the rules are finalised.

What Is the CGT and Negative Gearing Tranche 2 Consultation?

The Australian Treasury has opened a public consultation on the second tranche of legislation amending Capital Gains Tax (CGT) and negative gearing rules. Submissions close on 21 August 2026 — the window opened on 4 August, leaving less than two weeks for stakeholders to respond.

This follows the first tranche of the reform package, which introduced initial changes affecting how investment property income and losses are treated for tax purposes. Tranche 2 carries further amendments with direct implications for property investors, self-employed borrowers, and those with complex income structures.

Why These Rules Matter for Property Investors and Borrowers

Negative gearing allows investors to offset rental property losses against other income, reducing overall tax liability. Combined with the 50% CGT discount for assets held more than 12 months, these two provisions have long underpinned Australian residential property investment strategy.

Any change to either provision alters the after-tax economics of owning investment property — affecting decisions about which properties to hold, how long to hold them, how much debt to carry, and whether individual, company, or trust ownership makes more sense.

"Tax reform doesn't wait for investors to be ready. Understanding your financing position before legislation is finalised is not just prudent — it may determine whether a deal still makes sense."

Who Should Be Paying Close Attention

If you fall into any of the following categories, the Tranche 2 developments are worth monitoring closely before the consultation closes:

• Self-employed investors who use negative gearing to offset variable business income
• Borrowers with investment loans currently on interest-only terms
• Property developers considering bridging finance or construction lending for upcoming projects
• Investors whose current holdings are approaching the 12-month CGT discount threshold

For self-employed investors in particular, changes to how net taxable income is calculated can flow through unexpectedly into major bank serviceability assessments — reducing what a big bank will lend even if the investor's underlying cash position is strong.

What This Means for Your Financing Strategy

Non-bank lenders like MPFG Capital assess income using documentation that goes beyond taxable income: BAS statements, business bank statements, accountant-prepared financials, and accountant letters. This matters because changes to how taxable income is calculated — whether through negative gearing restrictions or CGT discount adjustments — don't necessarily reflect an investor's actual capacity to service a loan.

If you're considering refinancing an investment property, securing bridging finance ahead of development, or establishing new investment lending before any rule changes take effect, clarifying your borrowing capacity now is the logical first step. Visit MPFG Products to explore investment and commercial lending options.

FAQ

What is Tranche 2 of Australia's CGT and negative gearing legislation?

It is the second tranche of legislative amendments to Australia's Capital Gains Tax and negative gearing rules, currently open for public consultation by Treasury. Submissions close 21 August 2026, after which the legislation will be finalised and proceed through parliament.

How could CGT or negative gearing changes affect my borrowing capacity?

If the CGT discount is reduced or negative gearing availability is restricted, your declared taxable income may fall even if your actual cash income remains the same. Major banks assess serviceability primarily on taxable income, which can reduce your approved loan limit. Non-bank lenders who assess income from BAS statements and business accounts are often less affected by this gap.

Should I lock in investment property finance before the new rules take effect?

Whether refinancing or new borrowing makes sense depends on your individual circumstances and loan structure. The key is to understand your current borrowing capacity before legislation changes the calculation. Speak with a mortgage broker specialising in investment and non-standard lending to assess your options.

This article is general information only and does not constitute financial or credit advice. All applications are subject to credit assessment by MPFG Capital (ACL 553698).