Quick Summary

The key CGT reforms are:

• The 50% CGT discount is being abolished from 1 July 2027

• Cost base indexation (inflation adjustment) is returning

• A new minimum 30% tax on capital gains is being introduced

• Pre-CGT assets (owned before 20 September 1985) lose their perpetual exemption for future gains

• Special concessions apply to new residential builds

• Grandfathering and transitional rules apply to existing investments

• Related housing reforms restrict negative gearing on many future property purchases

1. End of the 50% CGT Discount

Current Rules

Today, if an individual or trust:

• Holds an asset for more than 12 months, and

• Sells it at a gain,

they generally receive a 50% CGT discount.

Example:

• Capital gain: $500,000

• Taxable gain after discount: $250,000

Only the discounted amount is included in taxable income. [pwc.com.au], [hrblock.com.au]

New Rules

From 1 July 2027, the 50% discount will be replaced by an inflation-indexation approach for affected taxpayers.

This means future capital gains are no longer automatically halved.

2. Return of Cost Base Indexation

Instead of the 50% discount, the cost base will be increased for inflation.

Example

You buy shares for Purchase price: $100,000

Inflation over holding period: 20%

Indexed cost base becomes: $120,000

Sale proceeds: $200,000

Under the new system:

• Gain = $200,000 - $120,000

• Taxable gain = $80,000

The intent is to tax only the real gain above inflation rather than nominal growth.

3. Introduction of a 30% Minimum Tax on Capital Gains

This is arguably the most controversial reform.

The Government is introducing a minimum 30% tax rate on capital gains from 1 July 2027.

Why?

Historically, high-net-worth investors could:

• Sell assets in retirement

• Sell in low-income years

• Use deductions and offsets

to significantly reduce the effective tax rate on capital gains.

The new regime imposes a floor to prevent effective CGT rates falling below 30% in many situations.

Practical Impact

Investors who were expecting:

• 0%

• 16%

• 19%

• 22%

effective CGT rates may now face a minimum 30% outcome on gains covered by the new rules.

4. Transitional Rules for Existing Assets

This is extremely important.

The Government did not fully grandfather the existing CGT system.

Instead:

Gains up to 1 July 2027

Continue to receive the old treatment.

Gains after 1 July 2027

Fall under the new regime.

Therefore, many assets will effectively have:

• a pre-1 July 2027 gain component

• a post-1 July 2027 gain component

calculated separately.

Example

Investment property purchased in 2018.
Value:

• 1 July 2027: $1.5m

• Sold in 2032: $1.9m

The gain accumulated before July 2027 may receive old-rule treatment.
The later gain may be subject to indexation and the new minimum tax regime.

5. Valuation Issues Coming in 2027

A major planning opportunity exists.

The Government indicates taxpayers may need either:

• Independent market valuations as at 1 July 2027, or

• An ATO-approved apportionment methodology

to determine how much gain belongs to each period.

For clients with:

• Investment properties

• Large share portfolios

• Business interests

• Units in trusts

I expect many advisers will recommend obtaining formal valuations around June 2027.