Monthly technical briefing - September 2026

In this update, we’ll aim to answer key questions we’ve received from advisers. We’ll also help you get up to speed with technical developments for the period from 28 July 2026 to 24 August 2026, including a summary of the latest technical developments impacting the advice provided to clients.

In this edition, the Adviser query of the month considers the taxation of investment bonds and the 10 year rule.

Adviser query of the month

Question

The new tax landscape following the recent Budget tax amendments have resulted in a renewed consideration of different investment vehicles for clients, including investment bonds (also known as insurance bonds).

Do investment bonds become tax free investment vehicles once held for at least 10 years?

Answer

In short, they don’t.

The two levels of taxation for an investment bond are:

1. Tax paid on withdrawals from the bond
2. Tax paid within the bond

Tax on withdrawals

The tax paid on withdrawals from the investment bond is affected by the length of time the bond has been held at the time of the withdrawal. 

Withdrawals from a bond can include bonuses. Bonuses are effectively the earnings of the bond. 

Withdrawals that contain bonuses are taxed differently depending on the point in time the bonus is paid within the ‘eligible period’. The eligible period is 10 years and usually starts when the first investment is made. This period is reset where contributions made in a year exceed 125 per cent of the immediately preceding policy year. 

The taxation of bonuses is as follows:

Importantly, where a bonus is received as part of a withdrawal within the first 10 years, the taxpayer receives a non-refundable tax offset equal to 30 per cent of the portion of the bonus that’s included in assessable income. For instance, where the taxpayer receives a bonus of $10,000 during the 10^th year, only $3,333 will be included in assessable income. They will receive a tax offset of $1,000, being equal to 30% of the assessable portion of the bonus.

This offset represents the tax paid by the bond provider and aims to avoid the double taxation of these earnings.

Tax paid within the bond

Investment bonds pay tax at a headline rate of 30%. This rate isn’t affected by the length of time the bond is held and therefore continues after the point the investment bond has been held for 10 years.

For this reason, investment bonds aren’t a tax free investment after they’ve been held for 10 years.

CGT and negative gearing – Tranche 2 consultation

On 4 August the Government commenced consultation regarding several tax proposals announced in the 2026-27 Budget. 

1. Apportioning Capital Gains and Capital Losses from 1 July 2027

Background – laws have been amended to remove the 50 per cent discount on capital gains that accrue from 1 July 2027 for individuals (including individual partners in a partnership) and distributions from trusts to individuals. Capital gains accruing before this time remain subject to the 50 per cent CGT discount regime. These reforms also mean pre-CGT assets will be subject to CGT on any gains that accrue from 1 July 2027.

For gains that accrue from 1 July 2027, capital gains will be calculated using a cost base that is indexed with inflation (CPI).  

For assets acquired before 1 July 2027 and disposed of after this date, a deferred capital gain/loss is to be calculated for the gain up to the end of 30 June 2027. The value used for this purpose is either:

• the market value as at the end of 30 June 2027, or
• an amount calculated under the apportioning method determined by Government

This value is also used as the starting component of the cost base for gains made from 1 July 2027.

Consultation – This consultation contains draft rules for the apportioning method, for particular CGT assets. This method divides an overall capital gain (or capital loss) between: 

• the ownership period prior to 1 July 2027, which continues to benefit from the existing 50 per cent CGT discount if applicable; and 
• the ownership period from 1 July 2027, where capital gains are taxed after allowing for inflation through CPI indexation.

It’s proposed that the apportionment method will be limited to:

• real property, and
• a CGT asset that, at the time of the deemed sale and reacquisition, does not have a readily ascertainable market value and its cost base is not worked out by reference to market value under certain parts of the law.

The apportioning method will estimate the CGT asset’s value as at the end of 30 June 2027, by assuming the CGT asset grew at a compounding daily growth rate (or declined in value at a negative daily compounding rate) over the entire ownership period. The capital proceeds on the deemed sale at the end of 30 June 2027 are determined using this growth rate.

The method contains a nine step process as taken from the consultation:

Example 1. Apportioning capital gains

Zoe acquires a piece of artwork for $520,000 to display in her home on 1 July 2016. At the time, Zoe incurs auction and broker fees of $2,000 as part of the purchase. The artwork is not a depreciating asset. 

On 30 June 2034, Zoe sells the artwork for $1,500,000. At that time, and as part of the disposal, Zoe incurs auction and broker fees of $3,000. 

Assumptions: CPI index number for the quarter in which 1 July 2027 occurs is 105.54 (start date). CPI index number for the quarter in which Zoe sells the artwork is 125.45. 

Apportion the capital gain using the determined method by applying the method statement: 

Further information can be found here:

Exposure draft – Income Tax Assessment (Method for Apportioning Capital Gains and Capital Losses) Determination 2026

Exposure draft – Explanatory Statement - Income Tax Assessment (Method for Apportioning Capital Gains and Capital Losses) Determination 2026

2. CGT adjustments

Background – The Government has been consulting on a range of issues contained in a number of Budget measures legislated via Treasury Laws Amendment (Tax Reform No.1) Act 2026 and Income Tax Rates Amendment (Tax Reform No. 1) Act 2026:

• replaced the 50 per cent CGT discount for individuals, trusts and partnerships with cost base indexation to ensure only real gains are subject to taxation 
• introduced a 30 per cent minimum tax on capital gains, with an exemption for recipients of certain government payments, to ensure gains are subject to a tax rate closer to the tax rate individuals faced during their working life and commensurate with the tax rate paid by most workers, and 
• applied the new arrangements prospectively to all capital gains accruing on and after 1 July 2027, including gains accruing on pre CGT assets, while retaining access to the CGT discount to maintain support for new and affordable housing, and maintaining existing CGT concessions for small business.

Consultation – The changes in this consultation aim to address the following issues:

• exempt capital gains arising for genuine testamentary trusts, deceased estates and special disability trusts from the 30 per cent minimum tax on capital gains
• ensure that foreign residents and temporary residents receive CGT discount and indexation outcomes that are pro-rated to the number of days that they are Australian residents
• prevent taxpayers with deferred gains or losses in relation to a CGT asset from becoming liable to pay or being entitled to benefit from those losses where the CGT asset is subject to a CGT event that does not represent a substantial realisation of the asset 
• extend the application of the CGT reforms to attribution managed investment trusts (AMITs)
• clarify the operation of the CGT reforms relating to trusts (including managed investment trusts (MITs) and AMITs), including: 
  • allowing trusts that have no beneficiaries entitled to indexation to choose not to use indexation, and
  • ensuring trusts can apply the CGT discount for new residential dwellings and affordable housing, and
• make other technical amendments to ensure the CGT reforms operate as intended.

This consultation also notes the intent to make further amendments in future tranches, such as the application of CGT rollovers for a beneficiary of a deceased estate or relationship breakdown and additional changes for foreign, mixed and temporary residents. 

Further information can be found here:

Exposure draft - Treasury Laws Amendment (Tax Reform No. 3) Bill 2026: CGT adjustments (tranche 2)

Exposure draft – Explanatory Memorandum - Treasury Laws Amendment (Tax 4 Reform No. 3) Bill 2026: CGT 5 adjustments (tranche 2)

3. Negative gearing

Background – Restrictions regarding negative gearing in residential property were legislated as part of the Budget reforms. 

Consultation – The changes aim to ensure that certain properties that were acquired before the Budget announcement on 12 May 2026 (i.e. properties that can continue to be negatively geared and are considered grandfathered) and ‘new residential dwellings’, continue to be grandfathered in certain situations, including:

• death of spouse – a spouse who inherits the deceased’s share of the property because they are a joint tenant or as a beneficiary of the deceased’s estate
• death of co-owner - a co-owner, who is not the spouse of the deceased, inherits the deceased’s share of the property because they are a joint tenant or as a beneficiary of the deceased’s estate 
• a spouse acquires the interest in the property due to relationship breakdown, and
• the property is the individual’s main residence and is subsequently used to produce assessable income.

Further information can be found here:

Exposure draft - Treasury Laws Amendment (Tax Reform No. 3) Bill 2026: Negative gearing (tranche 2)

Exposure draft –Explanatory Memorandum - Treasury Laws Amendment (Tax Reform No. 3) Bill 2026: Negative gearing (tranche 2)

4. New residential dwellings

Background – The new laws have separate rules for properties that are considered to be ‘new residential dwellings’. In particular, new residential dwellings can continue to be negatively geared and can use the 50 per cent discount method or CPI indexation method when calculating capital gains.

Consultation – The new law allows the Government to determine the requirements for determining if a property is a new resident dwelling. The consultation paper outlines for scenarios where the property will qualify, these are:

• Basic Case: which covers circumstances where a person acquires an ownership interest in land where there was no residential dwelling and constructs or installs a residential dwelling on that land. Under this case, the constructed or installed residential dwelling is a new residential dwelling for its owner.
• Special Case: Adding more residential dwellings to a parcel of land - which covers circumstances where a person acquires an ownership in land on which there is already a residential dwelling (or residential dwellings) and then, at a later time, there is a greater number of residential dwellings on the same land. Under this case, any of those additional dwellings that are newly constructed residential dwellings are new residential dwellings for their owner or owners.
• Special Case: converting a building to residential dwellings - which covers circumstances where a person acquires an ownership interest in land which has a building that is not a residential dwelling on it and then converts that building into a residential dwelling. Under this case, that converted residential dwelling is a new residential dwelling for its owner.
• Special Case: Acquiring a dwelling before a time no more than 24 months after certificate of occupancy issued’ – which covers circumstances where a person acquires a residential dwelling was a new residential dwelling for the seller under one of the above three cases, and that acquisition happens no more than 24 months after a certificate of occupancy has been first issued for that dwelling. Under this case, the acquired residential dwelling is a new residential dwelling for its owner.

The consultation also outlines the certain activities or purposes for which a residential dwelling could be used or held for which will exempt it from the negative gearing restrictions and allow the choice of the 50 per cent discount for capital gains tax purposes. 

Further information can be found here:

Exposure draft - New residential dwellings & residential dwellings used for certain determined activities or purposes not subject to loss quarantining

Exposure draft – Explanatory material - Exposure draft - New residential dwellings & residential dwellings used for certain determined activities or purposes not subject to loss quarantining

The consultation closed on 21 August 2026.

Further information can be found here: Treasury - Capital Gains Tax and Negative Gearing – Tranche 2 Legislation

Announcements

Government - Protecting Consumers and the Promise of Superannuation in an Evolving Financial Ecosystem

The Albanese Government has announced a package of reforms aimed at strengthening consumer protections and building resilience within the Australian superannuation and financial system. The goal is to safeguard Australians from conduct that could diminish savings and reduce financial security in retirement.

These reforms are a response to the high-profile collapses of several managed investment schemes. Additionally, broader losses within the Self-Managed Superannuation system (SMSF) have strained the Compensation Scheme of Last Resort (CSLR), highlighting poor member outcomes due to insufficient consumer protection. These incidents demonstrated how consumer harm can propagate and intensify across various parts of the financial system, from lead generators and advisers, to investment products, and compensation arrangements.

The reform package aims to improve consumer protections and ensure the superannuation system delivers on its purpose. Key objectives of the reforms include:

• Making the financial system safer by reinforcing protections across the superannuation, advice, and investment ecosystems.
• Improving access to safe and secure financial advice to help Australians navigate the complex retirement system with greater confidence.
•  Placing the CSLR on a firmer and fairer footing to provide meaningful protection when other safeguards fail.

Further implementation details of the reforms include:

1. Protections for Members of APRA-Regulated Superannuation Funds:

• Legislating an obligation for trustees to set and enforce caps on advice fee deductions from member accounts.
• Increasing maximum civil penalties to 50,000 penalty units (from 2,400 units) for core breaches of trustee obligations under the Superannuation Industry (Supervision) Act.
• Granting APRA the authority to establish risk-based capital requirements for superannuation trustees offering higher-risk investment options.
• Empowering ASIC to direct superannuation trustees to initiate remediation processes when an investment option fails and trustee obligation breaches are suspected.

2. Protections in the Self-Managed Superannuation Fund (SMSF) Sector:

• Empowering the ATO to prevent rollovers to new SMSFs if there are investigations into fraud, financial abuse, misconduct, or potential harm.
• Introducing mandatory trustee education prior to SMSF registration.
• Requiring SMSFs to hold uniquely identifiable bank accounts.
• Mandating that SMSFs have a written investment strategy upfront and consulting on ways to improve their quality.
• Enabling the ATO to collect additional information on financial advisers and other entities involved in SMSF establishment and ongoing advice fee deduction arrangements.
• Increasing the SMSF supervisory levy from $259 to $295, aligning it with fund establishment, to fund stronger consumer protection measures.
• Supporting the ATO to provide SMSF trustees, especially those with low balances, greater visibility of their returns compared to APRA regulated funds.

3. Reforms to Address Harmful Lead Generation:

• Banning unlicensed real-time communication with consumers about superannuation, with targeted exemptions for advocacy, educational, and employment communications.
• Enhancing consumer consent requirements for real-time contact.
• Strengthening anti-hawking protections by limiting the exemption for financial advisers to existing client relationships and consulting on targeted exemptions.
• Introducing civil penalty provisions for breaches of the anti-hawking regime to support more timely and scalable regulatory action.
• Requiring licensees to take reasonable steps to ensure lead generation activities comply with regulatory and legal requirements, including due diligence, record-keeping, and ongoing oversight.
• Undertaking further consultation on data harvesting and data broking in the financial sector to identify high-risk forms of lead generation and consumer harm.

4. Enhancing Governance of Managed Investment Schemes (MIS):

• Granting the Auditing and Assurance Standards Board (External Reporting Australia) the authority to establish mandatory audit and assurance standards for auditors of MIS compliance plans.
• Requiring Responsible Entities of MISs to notify ASIC when they freeze or limit an investor’s ability to make redemptions.
• The Government will also consult on options to improve data collection on the MIS sector.

5. Financial Advice:

• Proceeding with changes to intra-fund charging, targeted superannuation prompts, and statements of advice.
• Introducing a New Class of Adviser regime to APRA-regulated superannuation and life insurance entities, supported by safeguards against vertical integration such as prohibitions on commissions, bonuses, and volume-based payments. This measure will be reviewed three years after commencement.
• Simplifying the Best Interests Duty by maintaining the existing obligation and safe harbour steps, while removing the broadest safe-harbour step that acts as a barrier to scaled advice.
• Reviewing the Financial Planner and Adviser Code of Ethics 2019 to ensure it is fit for purpose and supports scaled advice.
• Progressing reforms to adviser education requirements to create a sustainable pathway for new advisers.
• Supporting ASIC’s ongoing work on fee deductions and superannuation to improve outcomes for superannuation fund members and SMSF trustees.

6. Compensation Scheme of Last Resort (CSLR):

• Limiting CSLR payments to actual losses for applications made to AFCA after 30 June 2027.
• Establishing a more predictable framework for funding exceptional losses through a waterfall special levy mechanism.
• Including all SMSFs as Tier 3 levy payers in the waterfall model for future special levies, with the total sector levy scaled relative to assets under management and a flat levy amount applying to all funds.
• Allocating the FY2026-27 special levy according to the waterfall model.
• Supporting the Productivity Commission’s business dynamism inquiry, including its consideration of insolvency frameworks, to inform government decisions on how these frameworks interact with the CSLR.
• Targeted reforms to improve the efficiency of the CSLR, including expanding recovery rights, allowing early notification of revised estimates, reducing the disallowance period for CSLR levy instruments, removing the requirement for consumers to notify AFCA of non-payment if already known, allowing compensation to multiple payees, developing a retail-facing metric for securities and futures exchange participants, fixing firm-level levy metrics, amending the securities-dealer metric, and correcting the special levy formula.

Further information can be found here:

Treasury Media Release

Fact sheet

Government - Indexation and increase to deeming rates

The Government has released the new Centrelink and DVA rates commencing from 20 September 2026.

Part of these changes includes a 0.5% increase to the upper and lower deeming rates. The current and new deeming rates are as follows: