What’s Changing with CGT?
The 50% CGT discount that many Australians rely on will be replaced from 1 July 2027 by an inflation-adjusted indexation method and a minimum tax rate of 30% on real capital gains. Gains for assets held before that date and accruing after will use the market value at 1 July 2027 as a new cost base. (pm.gov.au)
Key rules & carve-outs:
- New builds: For residential property, only new-builds will maintain both the old discount and new indexation/minimum tax options. (pm.gov.au)
- Existing investments: Those made before 7:30pm AEST on 12 May 2026 will be grandfathered, preserving the old discount under prior rules until approximately disposal. (pm.gov.au)
Who will be most affected?
- Individuals holding assets purchased prior to 2026 who expect modest gains—indexation may reduce their taxable profit substantially.
- Property investors and discretionary trust beneficiaries facing higher effective tax rates, especially for high-growth assets.
- Start-ups and small businesses concerned about future exit valuations and capital raising.
Comparing Scenarios: Old vs New
| Scenario | Under 50% Discount | Under Indexation + 30% Minimum Tax |
|---|---|---|
| Sell after 5 years an asset bought at $100,000 that has nominally doubled, inflation total 20% | Capital gain = $100,000 → Discounted to $50,000 taxable, taxed at your marginal rate | Cost-base indexed to $120,000 → Real gain = $80,000 taxed at a minimum of 30% = $24,000 (versus 15%×$50,000 = $7,500 for low bracket) |
Action Steps You Can Take Now
- Review your asset portfolio to see which holdings may be impacted hardest by losing the discount.
- Consider locking in opportunities: Selling assets before 1 July 2027 may help use the old discount. Weigh selling vs holding with an adviser.
- Re-evaluate use of trusts: Discretionary trusts lose discount benefits and face minimum tax (30%) from 1 July 2028. Might be better to restructure. (pwc.com.au)
- New property investment: If you plan on investing, focus on new builds; might still benefit from discounts. Existing properties bought though may lose broader benefits.
Practical Example
Sarah bought shares in Company X back in 2018 for $50,000. By 2027 they’ve increased to $120,000. Inflation since 2018 = 25% cumulative.
- Under old rules: gain = $70,000; discounted 50% → taxable = $35,000.
- Under new rules (post-indexation): indexed cost base = $62,500 → real gain = $57,500, taxed at 30% = $17,250.
-- These reforms mark a paradigm shift: CGT is moving from nominal gains to real gains and a floor to prevent aggressive tax arbitrage. For many this means integrating inflation into real return assessments—not just chasing price appreciation.