The 50% capital gains tax discount has shaped how Australians invest since 1999. From 1 July 2027 it is replaced, for individuals and trusts, by cost base indexation and a 30% minimum tax on capital gains. This is no longer a proposal. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026.
Gains you have already built up are protected. How they are protected is where the planning sits.
The CGT changes at a glance
- The 50% CGT discount stops applying to gains that accrue from 1 July 2027 for individuals, trusts and partners in partnerships
- In its place, the cost base of an asset held for at least 12 months is indexed for inflation
- A 30% minimum tax applies to those post-2027 gains for Australian resident individuals
- Gains accrued up to 30 June 2027 keep the 50% discount, whenever you eventually sell
- Your main residence, super funds and the small business CGT concessions are not affected
How cost base indexation works
Under indexation you are taxed on the real gain: the sale price less a cost base that has been lifted in line with the Consumer Price Index. It works much like the system that applied between 1985 and 1999. Indexation applies to the purchase price, incidental costs and capital improvements, but not to ownership costs such as interest and rates. It cannot create or increase a capital loss.
Whether you end up better or worse off than under the discount comes down to one question: how much of your gain is just inflation?
| Sold for $600,000 | Sold for $700,000 | |
|---|---|---|
| Purchase price on 1 July 2027 | $500,000 | $500,000 |
| Indexed cost base (CPI up 15% over the period) | $575,000 | $575,000 |
| Taxable gain under indexation | $25,000 | $125,000 |
| Taxable gain under the old 50% discount | $50,000 | $100,000 |
The rule of thumb: indexation beats the discount only when inflation accounts for more than half of your gain. Slow, steady assets come out ahead. High-growth assets, and assets with a low or nil cost base such as founder shares or business goodwill, come out behind.
The 30% minimum tax on capital gains
This is the part most people have not noticed. From 1 July 2027, if the tax on your post-2027 capital gain works out at less than 30%, a top-up brings it to 30%. If your marginal rate on the gain is already 30% or more, it has no effect.
Treasury’s own example: Jack has taxable income of $25,000 and realises a $10,000 capital gain. At his 14% marginal rate the tax would be $1,400. The minimum tax adds $1,600, for a total of $3,000.
So the minimum tax lands on people who used to realise gains in low-income years:
- Retirees outside super who are not on income support
- A spouse with little other income who holds the family share portfolio
- Adult children and other low-income beneficiaries who receive capital gains through a family trust
- Anyone who planned to sell in a year between jobs or after finishing work
People who receive a means-tested income support payment, such as the Age Pension or JobSeeker, in the year of the gain are exempt.
What happens to assets you already own
Assets you hold on 30 June 2027 are treated as sold and reacquired at that point, but no tax is triggered on the day. When you eventually sell, the gain is split in two:
- Gain to 30 June 2027 is taxed under the current rules, with the 50% discount if you qualify
- Gain from 1 July 2027 is taxed under indexation and the minimum tax
The split depends on what the asset was worth at 1 July 2027. You can use its market value at that date, or an apportionment formula that assumes the asset grew at a constant rate for the whole time you held it. You make the choice in the tax return for the year you sell. If you want market value available as an option, you need evidence of that value, and it is far easier to obtain around the date than to reconstruct years later.
What does not change
- Main residence exemption. Your home remains CGT-free.
- Small business CGT concessions. All four remain. From 1 July 2027 the turnover threshold for the 50% active asset reduction rises from $2 million to $10 million.
- Super funds. They keep their existing one-third discount.
- Companies. They were never entitled to the discount and do not get the new indexation.
- New residential builds and affordable housing. Investors can choose the 50% discount (60% for qualifying affordable housing) instead of indexation and the minimum tax.
Assets acquired before 20 September 1985 are a separate story. They lose their pre-CGT status from 1 July 2027, with only the growth after that date becoming taxable.
Should you sell before 30 June 2027?
Usually not for tax reasons alone. Because the gain to 30 June 2027 keeps the discount whenever you sell, there is no cliff edge. Selling early brings the tax forward, costs you future growth and, for property, means agent fees now and stamp duty on whatever you buy next.
It deserves a closer look if you were going to sell in the next couple of years anyway, if you expect to realise the gain in a low-income year where the minimum tax would bite, or if you hold a high-growth asset with a low cost base. If you do sell, remember that the CGT event generally happens on the contract date, not at settlement.
What to do now
- List every CGT asset you hold outside super: property, shares, managed funds, crypto and business interests.
- Find the cost base records. Indexation and the 1 July 2027 split both depend on them.
- Decide which assets warrant a formal valuation at 1 July 2027. Property with strong growth, renovated property and private business interests are the obvious candidates.
- Review who holds what. An asset held by a low-income family member, or distributed through a trust, no longer gets the low-rate outcome on future gains.
- Look at carried-forward capital losses. The order in which losses are applied against the different categories of gain changes, so model it before you crystallise anything.
Common questions about the 2027 CGT changes
Does the 50% CGT discount still apply to gains made before 1 July 2027?
Yes. The part of the gain that accrued up to 30 June 2027 is taxed under the current rules, including the 50% discount where you meet the usual conditions.
Do the CGT changes apply to shares and crypto?
Yes. They apply to all CGT assets held by individuals, trusts and partnerships, not only property. If you hold crypto, our article on crypto and ATO data matching covers the records you need.
Is 30 June 2027 a deadline to get a valuation?
No. The choice between market value and the formula is made when you lodge the return for the year of sale. But the evidence for a market value is best gathered at the time.
Does indexation apply to foreign residents?
No. Foreign and temporary residents are not entitled to indexation, and the rules for people who change residency while holding an asset are still being refined in follow-up legislation. If you have spent time living overseas, get advice before you sell.
Need a hand with this?
If you hold investment property, shares or a business interest outside super, the period before 1 July 2027 is the time to get your records and valuations in order. We can map your assets, model the discount against indexation and tell you which valuations are worth paying for. We are Chartered Accountants and registered tax agents in Cairnlea, in Melbourne’s west.
Related reading
- Rental property tax mistakes: why the ATO says 9 in 10 landlords get it wrong
- Depreciation schedules: when they’re worth it and when they’re not
- Crypto and the ATO: what data matching means for your tax return
- The 30 June tax planning checklist
- Our full range of services
Sources
- ATO – Tax reform: reforming negative gearing and capital gains tax
- Budget 2026–27 – Tax explainer: negative gearing and capital gains tax
- Treasury – Consultation on next tranche of tax reform legislation
This article is general information only and does not take your personal circumstances into account. It reflects the law and announced measures as at October 2026. Measures described as draft or proposed may change before they are enacted. Speak to us before acting on anything you read here.
