From 1 July 2027 – changes to apply – CGT discount
BEFORE
- Individuals who hold an asset for more than 12 months often qualify for a 50% discount to reduce the taxable gain made on sale of the asset … which is usually added to other income on the tax return
- A similar outcome can arise when a trust makes a capital gain and this is distributed to an individual beneficiary.
AFTER
- from 1 July 2027 the CGT discount will be replaced for individuals and trusts with:
- Cost base indexation (inflation adjustment), and
- A 30% minimum tax on capital gains.
This change will apply across all CGT asset categories—including
- residential and
- commercial property,
- shares,
- business assets and
- even pre-CGT assets.
CONCESSION – Importantly,
- gains that accrue up to 1 July 2027 will still receive the existing CGT discount or benefit from the existing exemption for pre-CGT assets.
- It will be necessary to determine the market value of assets at that date so that CGT calculations can be performed.
- What does this mean?
- Where a property is owned before budget date 12/5/26 and sold after 1/7/2027
- there will be a hybrid calculation of capital gains
- A – one for gains up to 1/7/2027 – with 50% discount
- B – another for gains from 1/7/2027 to point of sale – with indexation and 30% tax on the real gain after CPI
- HOW – messy calculation and higher fee?
For new residential properties, investors can choose either the
- existing CGT discount
- or
- the new indexation /
- whichever is the minimum tax method.
Companies will NOT have access to indexation and
Complying super funds will continue to enjoy the benefit of the existing 1/3 CGT discount.
FOREIGN + TEMPORARY RESIDENTS
- Indexation will NOT be available to individuals who have been classified as a foreign resident or temporary resident for tax purposes during the ownership period of the asset.
Example
Michael owns an investment property purchased before Budget night that is currently negatively geared.
He can continue offsetting rental losses against his salary … no time limit – grandfathering
When he sells:
- The portion of the gain attributable to ownership before 1 July 2027 receives the 50% CGT discount.
- The portion accruing after that date is subject to indexation plus the 30% minimum tax.
Michael’s overall tax outcome will depend on his marginal rate and how long he holds the property, but in a situation like this we would typically
- expect Michael to pay more tax overall as a result of these changes compared with the current rules.
Practical issues
While it isn’t time to panic, a review of your investment portfolio is essential.
Existing assets bought before Budget night will typically receive more favourable tax treatment compared with newer assets, but the overall impact of the proposed changes will vary depending on your situation.
CONSIDERATIONS could include
- Strategy – cash flow or capital gain
- Years to retirement – sell now or later or how much later
- Investing or developing – manufacturing growth or business profit
- Family – subdividing to house children
- Inheritance – deceased estates
Do you have a tax or property topic you want decoded or another part of the budget investigated?
Tell us what you’re curious about — from investment property deductions to land tax, CGT or rental compliance — and we’ll research it and publish a summary in an upcoming newsletter.
