Schrödinger's New Build

Why a new build bought before budget night is, for now, both eligible and undefined

There's a specific kind of client question doing the rounds at the moment. It goes something like: “I bought a new build in March, before the budget; does that mean I've missed out on the new build CGT treatment, or does it not matter because I bought it early?”

The honest answer is that the new build sits in both states at once. It's eligible for the carve-out, and it isn't defined well enough yet for anyone to confirm that with certainty. It won't collapse into a single answer until the government tells us what “new build” actually means in law.

The part that's settled

Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026, Royal Assent 26 June 2026), the CGT discount-versus-indexation choice for new builds has nothing to do with when the property was bought. Section 115-102 gives investors in a “new residential dwelling” the right to keep the 50% discount on gains realised from 1 July 2027, or elect cost base indexation instead if that works out better. There is no test anywhere in that section asking whether contracts were signed before or after 7:30pm on budget night.

That acquisition-date test only applies to the negative gearing quarantine under Schedule 2; a separate mechanism aimed at established properties. It has no bearing on the new build CGT election. If a build genuinely qualifies as a “new residential dwelling,” it makes no difference that it was bought in March 2026 rather than 2028. The same discount-or-indexation choice applies either way.

The part that isn't

Here's the catch, and the reason for the headline. The Act doesn't define “new residential dwelling” itself. Section 26-160 hands that job to the Minister, by way of a legislative instrument that hasn't been made yet. That instrument is what will actually decide questions like:

- whether you need to have been the original builder or a subsequent purchaser

- whether knockdown-rebuilds and substantial renovations count

- whether the dwelling needs a separate title or equitable interest

Until that instrument lands, we can say with total confidence that the new build carve-out exists and isn't date-restricted. We can't yet say with the same confidence that any specific property will fall inside the final definition. That's the cat in the box: eligible and undetermined at the same time, and it only resolves once the Minister opens it.

Worth knowing

Section 26-160(5) lets the Minister write requirements that reach back to “circumstances existing before the commencement of this section.” In plain terms, the eventual instrument could still attach conditions tied to build or purchase timing, even though the primary legislation doesn't.

What we're telling clients right now

- Don't restructure or make sale/hold decisions on the assumption of either outcome.

- The “pre-budget vs post-budget” framing circulating in general commentary applies to negative gearing, not to the new build CGT choice. The two get conflated constantly, it's worth checking whenever it comes up.

- We're tracking the legislative instrument and will follow up the moment it's made.

For now, the property is both things. That's not us hedging (well it is); it's genuinely where the law sits until the box gets opened.

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