Tranche 2 of CGT, negative gearing changes unveils new builds definition, apportionment measures

“A property will generally be considered ‘new’ where it genuinely adds to housing supply, provided the property was acquired within 24 months of a certificate of occupancy being issued. This extends the 12 months set out in the budget to provide builders and developers time to sell stock on hand,” Treasury said on Tuesday.

Speaking to Accountants Daily, Institute of Public Accountants senior tax adviser Tony Greco noted that through this second tranche of legislation, the government has committed to bringing one of the nine legislative instruments from tranche 1 legislation into the primary legislation, including the definition of “New Residential”, as well as housing investment negative gearing carve-outs for certain types of investments.

Jenny Wong, tax lead at CPA Australia, said: “The definition appropriately focuses on dwellings that genuinely add to housing supply. But the anti-avoidance rule is broad and self-executing. It applies where obtaining a tax benefit is merely one purpose, not necessarily the dominant purpose, and automatically removes access to the concession.”

Further, the draft amendments address the application of the CGT changes to attribution managed investment trusts (AMITs), ensuring that CGT changes apply appropriately to partial residents and ensuring changes do not inappropriately bring forward the taxing point for deferred gains as a result of certain CGT events.

“This draft brings clarity in key areas, including the negative gearing for new builds, the capital gains tax apportionment mechanism and the treatment of testamentary trusts. But clarity is not the same as certainty, and more work is needed to understand the full impact of the reforms,” CA ANZ tax lead Susan Franks told the brand.

“The changes to capital gains tax and negative gearing affect millions of Australians, including individual taxpayers and small businesses,” Franks added.

In a statement, Treasurer Jim Chalmers said: “These reforms will help level the playing field for first home buyers, preserve the gains investors have made, and support investment in new housing supply.”

“The government is continuing to implement the ambitious tax reform package announced in the budget to deliver tax cuts for millions of Australians, a fair go for first home buyers, and a fairer tax system that better aligns the treatment of labour and asset income,” Chalmers said.

Apportionment methodology

Greco noted that the apportionment methodology was released for the new CGT rules. 

“Taxpayers have two options to calculate a reset cost base – option 1: obtain a formal valuation at taxpayer expense or use the apportionment method contained in the legislative instrument.

“Based on what was tabled yesterday (4 August), the apportionment methodology adopts an even growth rate over the ownership period. If asset growth is uneven, taxpayers are more likely to opt for a formal valuation, particularly if most of the growth has occurred prior to 30 June 2027, as they can take advantage of the 50 per cent discount method and no minimum 30 per cent rate, he said.

CPA Australia expressed support for an alternative to a costly formal valuation. 

“For that choice to be real, taxpayers need to know what valuation evidence the ATO will accept, and that’s the missing piece of the puzzle. It should also be clarified whether simpler, lower-cost approaches will be recognised, or only a full formal valuation,” Wong said.

"The profession needs practical tools and certainty now, not shortly before Implementation.”

Consultation concerns

The Tax Institute's tax counsel, John Storey, said these measures are not new policy initiatives. 

“The need for these amendments so soon after the first tranche of legislation passed parliament highlights a broader concern about the process used to develop reforms of this scale [as they are] … corrections to unintended outcomes, technical deficiencies, and design issues that stakeholders identified after the legislation had already been enacted,” Storey said.

In its statement, Treasury concluded that it will release further tranches of legislation, including for interactions with CGT rollovers and similar concessions, and remaining aspects of the application of the CGT reforms to foreign, mixed and temporary residents, with any amendments required to ensure that rules apply appropriately for certain special cases such as tax consolidated groups.

“Treasury has … flagged that further tranches of legislation will be required to deal with additional issues that have not yet been resolved. This process is not how good tax policy should be implemented and adds to the uncertainty and costs that taxpayers and advisers already face with such significant tax reforms,” Storey said.

"A consultation window for this latest tranche of legislation of just over two weeks is extremely tight – a longer runway would produce better law and fewer problems down the track,” Wong said.

“Businesses need certainty to invest and grow, and CA ANZ looks forward to working constructively with the Government to get these reforms right," Franks said. 

“Chartered Accountants and tax agents will carry much of the load in helping taxpayers comply with the new rules. That makes clear guidance, sufficient implementation time and ongoing consultation essential,” Franks added.

Consultation closes on 21 August 2026.