What’s Changing
Australia is replacing the 50% CGT discount for individuals, trusts, and partnerships with two key mechanisms from 1 July 2027: cost base indexation (i.e. adjusting the purchase price for inflation) and a minimum tax rate of 30% on realised capital gains. (treasury.gov.au) Additionally, negative gearing for residential properties will be limited to new builds only, applying for properties acquired after 7:30pm AEST on 12 May 2026. Existing investments are grandfathered. (treasury.gov.au)
Why It Matters
- For long-term investments, the removal of the fixed 50% discount means investors will increasingly focus on holding periods, inflation impacts, and tax costs.
- Property investors can only claim negative gearing deductions for new builds after the transition point, so opportunities in existing properties may diminish.
- Minimum tax rate ensures a floor, limiting how much tax avoidance is possible—even for trusts.
Practical Steps You Can Take Now
- Review your portfolio: Identify assets likely to realize significant gains post-July 2027. If you’ve acquired property or shares before 12 May 2026 or earlier, the old rules may still apply after the change.
- Time disposals wisely: If holding non-new builds or trust interests, consider whether it makes sense to realize gains under the current regime before the new one begins.
- Structure ownership: Entities like discretionary trusts may face a minimum 30% rate too. Look into rollover relief availability (which will be available for a limited time after 1 July 2027) for timely restructuring. (treasury.gov.au)
- Cost base record keeping: Maintain detailed records of acquisition cost, dates, and any improvements so that cost base indexation is easier when it's applied.
- Consult with a tax advisor: Especially for complex holdings or foreign residency issues, since there will be amendments to foreign resident CGT regimes and stronger penalties for tax adviser misconduct. (ministers.treasury.gov.au)
Example Scenario
- Sarah, an individual, bought shares in June 2020. She plans to sell in August 2027: Without CGT reforms, she would get a 50% discount on any gain. Under new rules, she will only get indexation (which typically reduces gains compared to nominal price increases) and may owe at least 30% tax on the real gain.
- Oliver, who invested in an established residential property (not a new build) in April 2026, will not be able to negative gear after 1 July 2027. But because his investment is pre-announcement (pre 12 May 2026), special grandfathering rules allow some deductions for now.
Key Takeaways
- The transition date of 1 July 2027 is fixed for most CGT and negative gearing changes.
- Early action can yield tax savings—but requires clear records and sometimes structural changes.
- Costs and returns may shift, so recalibrate investment strategies now to avoid unpleasant surprises later.
Being prepared is advantage: start planning now to align holdings, timing, and structures so you're best positioned under the new law.