1. Recent Changes to Capital Gains Tax (CGT)
Australia’s 2026-27 Federal Budget introduced sweeping CGT reforms, which aren’t yet law but will start from 1 July 2027. Key changes include:
- A minimum tax rate of 30% on “real capital gains” accruing from 1 July 2027. Assets held prior to that date are taxed under current rules for gains made before that date, and under the new rules for gains accrued afterward. (community.ato.gov.au)
- The familiar 50% CGT discount will still apply, but only to the portion of the gain accrued up to 30 June 2027. Accrued gains after that date use a fixed real capital gain framework plus minimum tax. (community.ato.gov.au)
- Negative gearing rules are being reformed — only “eligible new builds” (including some knock-down rebuilds or substantial renovations that increase supply) will qualify. Existing properties or substantial renovations that do not increase housing supply will be excluded under the proposed rules. (community.ato.gov.au)
2. Real vs Nominal Gains: How Cost Bases Change
- For assets held before 1 July 2027, their value at that date becomes the new cost base for future gains. Only gains accruing afterwards get the new treatment. (community.ato.gov.au)
- Indexation (to adjust for inflation) will be used to calculate gains in the new system, reducing taxable real gain. For example, if you bought a property for $500,000 and its market value on 1 July 2027 is $700,000, gains are measured from $700,000 forward. Gains before that date are taxed under current rules. (community.ato.gov.au)
3. Impacts on Investors & Examples
| Scenario | Outcome Under Old Rules | New Rules After 1 July 2027 |
|---|---|---|
| You bought house in 2016, sell in 2028 | 50% discount on full gain | Discount only on portion up to 1 July 2027; remaining gain taxed with 30% minimum rate and real gain basis |
| You do extensive renovations that increase housing supply | Negative gearing works | Only qualifies if 'eligible new build'; requires supply-increase condition |
Example: You bought a property in 2016 for $500,000. On 1 July 2027 it’s worth $700,000. You sell in July 2029 for $800,000. Under the new rules, gains on the first $200,000 (up to 2027) are taxed under the existing discount regime. The $100,000 gain after 2027 is scaled under the new real gain + 30% minimum tax rules. Negative gearing deductions post-2027 will depend on eligibility of the build.
4. What Should You Do Now?
- Check your assets: List those you own now that may generate capital gains after 1 July 2027.
- Consider timing: If you're planning to sell a large asset, it may be beneficial to realise gains before 1 July 2027 under existing rules.
- Evaluate new property projects: If building, renovating or replacing property, ensure it qualifies as an “eligible new build” under upcoming rules if you want negative gearing benefits.
- Stay updated: These reforms must become law, which involves drafting legislation and ATO guidance. Watch for exposures and draft rulings.
5. Actionable Insights & Planning Strategies
- Pre-July 2027, consult your accountant to possibly pre-sell or restructure property holdings to capitalize on the CGT discount.
- For property investors: model cash flows under both regimes to see effect of minimum tax rate and whether new build classification applies.
- If multiple properties, weigh gains across them — selling high gain assets before 1 July 2027 might reduce locked-in liabilities.
- Keep thorough records of valuations, improvements, and costs as at 1 July 2027 — basis points for all future CGT calculations.
These reforms mark a major shift for investors and homeowners. Early planning can reduce unexpected tax burdens and help you align your strategy with upcoming rules.