What’s Changing
- From 1 July 2027, the long-standing 50% Capital Gains Tax (CGT) discount is being replaced by a cost-base indexation method coupled with a minimum 30% tax rate on real gains. (pm.gov.au)
- New builds will largely be exempted, offering taxpayers a choice between the old 50% discount (for new builds) or the new indexation/minimum-rate method. Existing properties “grandfathered” under old rules as of Budget night (12 May 2026). (pm.gov.au)
What This Means in Practice
- If you hold an investment property or asset acquired before 1 July 2027, only the portion of the gain accruing after that date will be taxed under new rules. Gains accrued before retain the old discount. (taxathand.com)
- New build assets allow you to choose to use the old CGT discount if construction commenced after Budget announcement. This gives a window for developers or future owners to time acquisitions. (community.ato.gov.au)
Strategic Tax Planning Tips
- Review your asset portfolio: Identify which assets are new builds, which were held prior to 12 May 2026, and which gain accrual might be substantial after 1 July 2027. Plan sales accordingly.
- Consider timing: If planning to sell, wait until closer to or after 1 July 2027 only if the gains largely accrued before that date to benefit from the discount.
- Track cost base indexation carefully: the base cost as at 1 July 2027 becomes critical. Keep records of acquisitions, improvements and valuation benchmarks.
- New build vs existing property investment shift: investing in new builds may retain old benefits; this could push preference toward townhouses, apartments built after Budget date—but always examine supply, resale prospects and location.
Examples
- Case A: Sarah bought shares in listed company in 2018. She realizes a capital gain of $50,000 in 2028. Portion accrued before 1 July 2027 taxed with 50% discount; portion after taxed on new rules—minimum 30% rate unless tax computed via rate schedule method.
- Case B: Tom invests in a new build apartment after 12 May 2026. He sells it in 2028. He can elect to use the 50% discount (older rule) for the entire gain or choose the new rule. Decision: compare after-tax proceeds, cash flow, possible sale price and costs.
Actionable Steps
- Inventory all CGT assets, purchase/acquisition dates, whether new builds.
- Estimate gains if sold in coming years—split accrual pre- and post-1 July 2027.
- Consult with a tax adviser to compute Net Present Value (NPV) of sale under both old and new regimes.
- For new builds, get legal confirmation of status and construction dates.
- Update financial models and wealth planning strategies to reflect higher effective tax on capital gains.
Bottom line: if you hold assets likely to generate large gains post-1 July 2027—especially non-new builds—you’ll want to plan sales and purchases to maximise the remaining window of the 50% CGT discount or shift strategy toward qualifying new build investments.