What’s Changing?
- The 50% CGT discount for individuals, trusts and partnerships is being replaced by a system of cost-base indexation so that tax applies only on gains above inflation from assets held over 12 months. (treasury.gov.au)
- A 30% minimum tax rate will apply to these “real capital gains” post-1 July 2027, to prevent gains being strategised into low marginal tax years. (pwc.com.au)
- Assets held before 1 July 2027 will be grandfathered: gains up to that date taxed under old rules, gains after under the new scheme. (bdo.com.au)
Who Is Affected Most?
- Individuals with low to moderate income who currently pay lower marginal rates but realize large gains. The minimum tax will hit those with marginal rates below 30% for the relevant gain periods. (pwc.com.au)
- Investors holding assets with long unrealized gains, especially properties or shares bought before inflation soared. Pre-CGT assets (pre-1985) will also come under tax on gains made after 1 July 2027. (pwc.com.au)
- Owners of residential property and trusts — notably discretionary trusts — will also see changes in negative gearing and trust taxation from mid-2027 and 2028. (treasury.gov.au)
Strategic Planning Tips Before 1 July 2027
1. Review your holdings and record-keeping
- Obtain valuations as at 30 June 2027 for assets you hold now — these will form your cost base under new rules. ATO offers methods including ATO-approved valuation or an apportionment formula. (austax.tools)
- Gather purchase records, cost base details, improvement costs, holding costs — good documentation could make a big difference. Pre-1985 assets especially challenging if paperwork is scarce. (bdo.com.au)
2. Consider timing of disposals
- Realize gains before 1 July 2027 to lock in current 50% discount where possible. Depending on your tax bracket and asset growth, this could be materially favourable.
- For assets you plan to hold on long-term, balancing timing with holding costs, return expectations and inflation forecasts will help estimate real gains beyond the indexation.
3. Evaluate structure and trust implications
- Entities like discretionary trusts are facing minimum taxation (30%) from 1 July 2028, except for certain exceptions. Consider if restructuring (e.g. company or fixed trust) might reduce exposure. (treasury.gov.au)
- For residential property investors, negative gearing deductions will be restricted to new builds after budget date and ring-fenced to income from residential property. Existing property investments remain grandfathered. (treasury.gov.au)
Example: How It Could Play Out
Jane bought a rental property in 2015 for $500,000. By 30 June 2027, it’s valued at $750,000, and she sells it in 2029 for $1,000,000.
- Under the old system, she’d calculate the full $500,000 gain at sale and apply 50% discount — taxable gain $250,000.
- Under the new system: assess $250,000 gain accrued pre-1 July 2027 (using 30 June valuation) taxed under old 50% discount, and only gains after that date taxed on real gains with cost base indexation and subject to minimum 30% tax if marginal rate lower.
Action Checklist Before Mid-2027
- Get valuations by 30 June 2027 for your key assets.
- Assess your marginal tax rate projections for future years; if expecting low income years, consider realizing gains earlier.
- Consult your superannuation/trust/legal advisor about entity restructuring if trusts are part of your plan.
- Keep tracking draft legislation and bill passage — many reform measures are proposed but require royal assent and implementation details.
These CGT reforms are likely to reshape investment behaviour in Australia. Getting a detailed, proactive strategy in place now could significantly reduce your tax burden and preserve more of your gains under the new rules.