CGT Discount for Affordable Housing in Australia: 2025-26 Guide

If you hold a qualifying affordable housing investment, the 2026 Federal Budget worked in your favour. While the standard 50% capital gains tax discount is being abolished from 1 July 2027, the 60% CGT discount for qualifying affordable housing investments has been explicitly retained in full. Confirmed by the ATO, Treasury, and multiple independent tax analysis firms including Ashurst and Baker McKenzie.

For most property investors, the 2026 budget represents the biggest CGT shake-up since 1999. Standard established property buyers who purchased after 7:30pm AEST on 12 May 2026 will face a completely different tax treatment when they sell. Affordable housing investors operate under a different set of rules, and those rules have now become relatively more valuable.

This guide explains what the affordable housing CGT discount is, who qualifies, what changed in the 2026 budget, and what steps Adelaide property investors should take before the new rules take effect on 1 July 2027.

What Is the Affordable Housing CGT Discount?

The affordable housing CGT discount is a concession under Division 115 of the Income Tax Assessment Act 1997 that allows eligible investors to access a 60% capital gains tax discount, rather than the standard 50% discount that applies to most individual investors.

In practice, this means: if you make a $200,000 capital gain on the sale of a qualifying affordable housing property that you have held for more than 12 months, only 40% of that gain ($80,000) is included in your assessable income and taxed at your personal marginal rate. Under the standard 50% discount, $100,000 would be included.

The additional 10% discount was introduced as part of the National Housing and Homelessness Plan to incentivise private capital into the community housing sector. The scheme is administered through registered Community Housing Providers (CHPs), who manage the tenancy and issue the required certification to investors.

The full details of the concession and current ATO guidance are available on the ATO page on capital gains tax property concessions.

The 2026 Federal Budget: What Changed, and What Did Not

The Standard 50% CGT Discount Is Being Abolished

The 2026-27 Federal Budget, handed down by Treasurer Jim Chalmers on 12 May 2026, announced the most significant change to Australian CGT since 1999. From 1 July 2027, the 50% CGT discount available to individuals, trusts, and partnerships for assets held more than 12 months will be replaced by:

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  CPI-based cost base indexation: the asset's purchase price is adjusted upward by inflation, so only the real (above-inflation) gain is taxed
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  A 30% minimum tax on net capital gains: even if the indexed gain is calculated correctly, the effective tax rate on the real gain cannot fall below 30%

This change applies broadly to investment assets, including investment properties and shares. For the full details, see the Treasury tax reform fact sheet and our article on the 2026 Federal Budget for Adelaide investors.

The 60% Affordable Housing Discount Is Fully Retained

This retention was confirmed across multiple independent authoritative sources, including Ashurst, Baker McKenzie, and GoodwinChivas. The government's stated rationale was to maintain incentives for private investment in affordable rental housing while removing concessions for standard property speculation.

The practical effect is significant: from 1 July 2027, a qualifying affordable housing investor will pay marginal-rate income tax on 40% of their capital gain, while a standard established property investor will pay at least 30% on their real (post-indexation) gain, and potentially more depending on their marginal rate and the holding period.

New Residential Builds Get a Choice

Investors who purchase a new residential property after 12 May 2026 can, when they eventually sell, choose between applying the 50% CGT discount at their marginal rate or applying the new indexation method with the 30% minimum tax, whichever produces a better result. If the new build also qualifies as affordable housing, the 60% discount may apply as the best available option.

This structural advantage means that purpose-built affordable housing that qualifies under the CHP framework now sits at the intersection of two favourable policy positions: retained 60% discount plus negative gearing still available for new builds.

How the CGT Rules Compare From 1 July 2027

The table below summarises the CGT treatment for different investor types under the new regime.

Who Qualifies for the 60% Affordable Housing CGT Discount?

Eligibility for the additional 10% CGT discount requires meeting all of the following conditions. These are set by the ATO under the affordable housing provisions and have not changed as a result of the 2026 budget.

Who Can Claim It?

The capital gain eligible for the 60% discount must be either:

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  Made by an Australian resident individual directly; or
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  Recognised or distributed to the investor directly from a trust or Managed Investment Trust (MIT); or
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  Distributed indirectly through a trust via an interposed partnership

Importantly, companies do not access the CGT discount at all (standard or affordable housing), so the concession is primarily relevant to individual investors, family trusts, and qualifying MIT structures.

The Minimum Period Requirement

The property must have been used as affordable housing for at least 3 years (1,095 days) from 1 January 2018. This period can be met continuously or in aggregate. The ATO requires that the CHP document the days of affordable housing use through the annual certification process.

Properties that were converted from standard residential use to affordable housing use mid-ownership can still qualify, provided the 1,095-day threshold is eventually met before disposal.

Community Housing Provider Reporting Requirements

If you hold a qualifying affordable housing property, you will rely on your Community Housing Provider (CHP) to issue annual certificates confirming that the property was used for affordable housing during the income year. Without a valid certificate, you cannot claim the additional 10% discount.

The CHP is legally required to:

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  Lodge an annual report with the ATO electronically, disclosing all certificates issued during the income year
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  Include details of all certificates issued, intermediary details, and provider and investor information
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  Meet reporting deadlines set by the ATO for each income year

As an investor, you are obligated to retain the CHP certificates for each income year the property was used as affordable housing. These certificates are the primary evidence the ATO uses to verify eligibility for the enhanced discount when you lodge your individual tax return or when the trust or MIT distributes the gain

Important: The original article on this page referenced a 31 July 2021 deadline for CHP annual reports covering the 2020-21 income year. That deadline has long passed. If you are currently receiving affordable housing rental income and your CHP has not been lodging annual reports, this needs to be investigated urgently with your CHP before any sale or trust distribution is made.

What About the National Rental Affordability Scheme (NRAS)?

The National Rental Affordability Scheme (NRAS) was a separate government program that provided tax-free incentive payments to investors who rented properties to eligible tenants at below-market rates. NRAS closed to new entrants in 2014, and the final 10-year incentive periods are now expiring.

Properties with active NRAS incentives may still qualify for the affordable housing CGT discount if they also meet the CHP management requirements. However, as NRAS incentive periods expire, many properties will lose their qualifying status unless the investor transitions to a standard CHP arrangement.

If your investment originated under NRAS, confirm with your CHP whether your property continues to meet the affordable housing definition and whether the CHP is still issuing the required annual certificates.

What Adelaide Property Investors Should Do Before 1 July 2027

The transition to the new CGT regime creates genuine decisions for property investors. The window before 1 July 2027 is real and material. Whether selling before or after that date changes the tax calculation significantly for many investors. For those with affordable housing investments, the transition is less acute, but there are still planning steps worth taking.

If You Hold Qualifying Affordable Housing

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  Confirm with your CHP that all required annual certificates have been issued and the annual reports lodged with the ATO.
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  Review your records to confirm the 1,095-day minimum period has been met or is on track to be met.
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  If you are considering selling, model the CGT under both the 60% discount and the transitional arrangement rules before making any decision. Capital gains tax advice from a registered tax agent ensures you are using the correct method.
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  Check that the property still meets all eligibility conditions as at the date of any planned disposal.

If You Hold Standard Investment Property

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  If you purchased before 7:30 pm AEST on 12 May 2026 and are considering selling in the next 2-3 years, model the pre-July 2027 versus post-July 2027 outcome. For many investors with substantial long-held gains, selling before 1 July 2027 and accessing the full 50% discount may produce a materially better result.
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  The transition rules require a valuation of your property as at 1 July 2027 (either a formal valuation or the ATO apportionment formula). If you plan to sell after that date, start thinking about the valuation process now.
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  For property investment planning across your portfolio, speak with our team about the full picture, including the interaction of the CGT changes with the negative gearing restrictions for established dwellings purchased after budget night.

How The Kalculators Can Help

The 2026 budget CGT changes are the most significant property tax reform in 26 years. Whether you hold affordable housing, standard investment property, or a mixed portfolio, the right answer depends on the specific numbers for your specific assets. There is no general answer, only your answer.

Our team at The Kalculators are registered tax agents who work with Adelaide property investors individual taxpayers, trust structures, and SMSFs. We can model the CGT outcome for your portfolio under both the pre- and post-2027 rules, review your affordable housing certification records, advise on the timing of any planned disposals, and ensure your tax returns are lodged correctly for any capital gain you realise.

Call (08) 7480 2593, Monday to Friday, 9:00 AM to 6:00 PM, or visit our offices at 182 Salisbury Highway, Salisbury; 315 Prospect Road, Blair Athol; or 280 Main South Road, Morphett Vale. Online services available for clients in Murray Bridge, Woodville, Melrose Park, Port Augusta, Prospect, and Brighton via info@thekalculators.com.au.