What investment strategies are still tax effective?

Part of the Budget changes have passed legislation. We now know that:

1. The 50% CGT general discount will be abolished from 1/7/27. You get to keep the 50% discount up until that date, and from then on, you need to use indexation. We will discuss valuation requirements with our clients in April-June 2027.
2. There will be a minimum 30% tax on all capital gains, regardless of where the gain came from, or what your individual income level or tax bracket is. This hurts the lower income earner much more than the higher income.  The high-income earner will effectively pay 5% more tax on their capital gains; the lower income earner will pay 16-30% more tax.
3. No negative gearing allowed on NEW existing residential property purchased from 1/7/27. 

So, what investments remain tax effective?

Super

1. Big picture – Investment within any superfund is the most tax effective investment strategy you can get. This includes industry funds, retail funds or SMSF’s.  Superfunds still get their “1/3^rd CGT discount” which means you as a member only pay 10% tax on capital gains whilst in accumulations phase (not yet retired), and 0% if you are in pension phase (retired).  These rates apply to all capital gains (for assets held greater than 12 months) regardless of how they were generated. The rates mentioned are subject to maximum member balance thresholds i.e. if you have a very high super balance, you may pay more.
2. Specifically – from the 10^th of August SMSF’s can no longer lend to buy residential property, but they can still buy residential properties for cash, and they can still lend to buy commercial/industrial property and certain other assets.

Outside Super

1. Your primary place of residence (PPR) remains unaffected by the changes and is totally tax free up to ANY amount.  It seems inequitable to me, that the mega rich could have a 100M house, with the likelihood of large tax-free gains, yet the average worker with a 1M house, sure they get their modest PPR tax free, but they don’t get any tax breaks on their little nest egg investment property.  Seems out of whack to me. But it is what it is, so keep this PPR exemption in mind as part of an overall investment thesis.
2. Pay down your mortgage.  If you save 6% on your home loan, this is the same wealth creation effect as getting a 9-10% pre tax investment return.  Given the perhaps unattractive nature of other capital gains, getting a simple yet equivalent 10% return just by paying down your mortgage might make sense (and make life easier and save you accountants CGT advice fees).
3. Negative Gearing – still available for all properties held prior to the announced changes 12/05/26, new residential builds, commercial and non-resi property, and all other assets.
4. Move country – except for Scandinavian countries, nearly any other country in the world will have better CGT concessions than Australia i.e. you will get wealthier faster.  

• Switzerland (0% CGT)
• New Zealand (0% for most assets held longer than 2 years)
• Singapore (12% for assets held under a year scaling down to 0% for assets held longer than 3 years)
• Canada (has the 50% discount we just abolished, and no min rate)
• Italy (26% flat rate generally however real estate held over 5 years 0%)
• Germany (26.375% flat rate however investment property held over 10 years 0%)
• USA (for assets held longer than 12 months – 0% for low income earners, 15% for most tax payers, 20% for those on or above 545K USD income) ….etc

Sorry bit of a long one today.

We hope this information might assist you in making financial decisions however please remember this is all tax advice, not financial advice.  It does not consider your personal circumstances or your risk profile. You should consult your financial advisor if you wish to discuss your financial planning options further.