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
Key Dates
| Date | Event |
|---|---|
| 12 May 2026 | Budget announcement |
| 25-26 June 2026 | Legislation passed Parliament and enacted |
| 1 July 2027 | New CGT regime commences |
| 1 July 2027 | Transitional split of gains begins |
| 1 July 2028 | Discretionary trust minimum tax proposed start |
Who Does This Affect?
High-net-worth investors
Investment property owners
Large share portfolios
Family investment trusts
Business owners
Future business sale transactions
Succession planning
Property investors
Particularly those considering:
buying established residential property
selling properties after July 2027
restructuring entities before disposal.
Largely Unaffected
Main residence (family home) exemption remains intact.
Companies continue under separate CGT rules and do not receive the individual 50% discount today anyway.
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.
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.
6. Special Treatment for New Residential Builds
The Government wants capital to flow into housing supply.
Accordingly, investors in new builds receive more favourable treatment.
Investors in qualifying new residential construction can choose either:
the traditional 50% CGT discount, or
the new indexed cost-base system.
This exception does not generally extend to established residential property acquired after the reform date.
7. Pre-CGT Assets Brought Into the CGT Net
Historically:
Assets acquired before 20 September 1985
Were CGT exempt forever.
That changes.
Future gains accruing after 1 July 2027 on pre-CGT assets will be subject to CGT, while historical gains remain protected.
For many wealthy families this is one of the most significant parts of the reform package.
Affected assets often include:
Family businesses
Rural land
Commercial property
Long-held investment structures
acquired decades ago.
8. Impact on Trusts
The reforms directly affect trusts because the existing 50% CGT discount is extensively used in trust structures.
In addition, the Budget announced a separate reform introducing a 30% minimum tax on discretionary trusts from 1 July 2028, subject to exceptions and restructuring relief.
For many family groups, CGT planning and trust planning will now need to be considered together.
9. Related Foreign Resident CGT Changes
Separate to the Budget's domestic CGT reforms, the Government has continued progressing reforms strengthening the foreign resident CGT regime, including:
Expanding assets subject to foreign resident CGT
Introducing a 365-day principal asset testing rule
Requiring notification of certain large transactions exceeding $50 million.