The 2026-27 Federal Budget abolished the 50% CGT discount and replaced it with two things: cost base indexation tied to CPI, and a 30% minimum tax on capital gains. Both apply to gains that accrue after 1 July 2027, not to gains already built up before that date.
That distinction matters more than most investors realise. And the window to act on it is shorter than it looks.
Updated July 2026: The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 passed both houses of Parliament on 25 June 2026 and received Senate amendments on 18 June 2026. These changes are now law. Investors should seek professional advice before making decisions based on how these rules apply to their specific situation.
What Investors Should Be Doing Before 1 July 2027
Note: These changes were announced in the 2026-27 Federal Budget but are not yet law. They remain subject to parliamentary passage. Investors should seek professional advice before making decisions based on these proposals.
Review Every Asset You Hold With a Capital Gain
Gains built up to 30 June 2027 still attract the 50% discount under the transitional rules. For investors who bought well before 2027 in high-growth markets, it is worth running the numbers on whether selling before 1 July 2027 locks in a better overall tax outcome.
This will not always produce the best result. Timing a sale around a tax date creates its own risks: market conditions, transaction costs, CGT in the year of sale, and the reality of finding the right buyer. But the analysis is worth doing with a qualified tax adviser before the window closes.
Get a Valuation Recorded for 1 July 2027
Even if you are not planning to sell, having a credible valuation of major assets as at 1 July 2027 on record is a practical step. The law now treats all assets held on 30 June 2027 as subject to a deemed sale and reacquisition on 1 July 2027. That deemed cost base becomes the starting point for calculating post-2027 gains. Getting it documented early removes complexity and potential disputes at the time of eventual sale.
For property, a formal valuation report is the safest approach. For listed shares and ETFs, the quoted market price on that date will typically be accepted. Either way, document it now and store it alongside your purchase records.
Do Not Assume Indexation Will Always Be Better
A common assumption is that indexation sounds more precise and therefore more fair, so it must be better. It is not always. Whether it produces a lower taxable gain than the old 50% discount depends entirely on the real return on your specific asset.
For any asset returning significantly more than inflation, the old 50% discount produced a lower taxable gain. The Treasury’s own modelling confirms this for typical residential property returning around 5% per year. High-growth assets in strong markets will face a higher tax bill under indexation than they would have under the old rules.
For New Build Investors, Keep Records to Preserve the Election Right
If you invest in a qualifying new residential build, you retain the right to choose between the 50% discount and indexation when you eventually sell. But making that election correctly requires complete records of your acquisition costs, holding period, and any capital improvements made along the way.
The choice only works in your favour if you have the data to run both calculations at the time of sale.
The Transitional Rules for Assets You Already Own
The Split Calculation at 1 July 2027
If you own an asset before 1 July 2027 and sell it after that date, the gain is not calculated under a single method. It is split at the 1 July 2027 boundary.
- Gains accrued up to 30 June 2027 use the current 50% discount.
- Gains accrued from 1 July 2027 onwards use CPI indexation and the 30% minimum tax.
The official Treasury example illustrates this clearly. Jane buys an asset on 1 July 2022 for $800,000 and sells it on 1 July 2032 for $1,600,000, at a 7.2% annual return. The asset was worth $1,131,371 on 1 July 2027.
Her taxable gain breaks down as follows:
- Pre-2027 gain: $331,371 gross, reduced to $165,685 after the 50% discount.
- Post-2027 gain: $468,629 gross, reduced to $319,958 after CPI indexation.
- Total taxable gain: $485,643, compared to $400,000 under a full 50% discount.
At a 47% tax rate, she pays $228,252 in tax rather than $188,000. That is $40,252 more, driven by the high real return on the post-2027 portion.
How You Determine the 1 July 2027 Value
Under the new law, all assets held on 30 June 2027 are subject to a deemed sale and reacquisition on 1 July 2027. To calculate the pre- and post-2027 gain correctly, you need to establish your asset’s market value on that date. The ATO will provide tools to assist, and taxpayers have two options:
- A formal valuation as at 1 July 2027 (or quoted market prices for listed assets).
- An ATO-approved apportionment formula that estimates the 1 July 2027 value based on growth over the full holding period.
The formal valuation approach gives you more certainty. The ATO formula may be acceptable for assets where a valuation is not cost-effective, but this is still subject to finalised ATO guidance. Get your adviser involved early.
The Pre-CGT Asset Change
This is worth calling out separately because many long-term investors have not registered it. Under the new law, pre-CGT assets, those acquired before 20 September 1985, are no longer fully exempt. The exemption covers gains that accrued up to 1 July 2027, but gains accruing after that date on pre-CGT assets are now subject to indexation and the 30% minimum tax. If you hold a pre-CGT asset with a large unrealised gain, this is an urgent discussion to have with your adviser before 30 June 2027.
How the New CGT Calculation Works
Cost Base Indexation: The Core Mechanic
Instead of halving your capital gain, you adjust your cost base upward using CPI. Inflation is carved out of the taxable gain, and only the real return above inflation is taxed.
Here is the official Treasury example. Zoe buys shares for $100 on 1 July 2027 and sells them on 1 July 2032 for $125. Her nominal return is 4.6% per year. Inflation runs at 2.5% per year over the same period. Her indexed cost base becomes $113, reducing her taxable gain from $25 to $12. Under the old 50% discount, it would have been about $13. In this case, indexation works slightly in her favour.
But this is not always the case.
When Indexation Hurts More Than the Old Discount
The Treasury’s own modelling uses a $500,000 asset purchased in July 2027, held for 10 years, with 2.5% annual inflation and $100,000 in other income:
Annual Return | Taxable Gain Under Indexation | Taxable Gain Under 50% Discount | Extra Tax Paid |
2.5% (matches inflation) | $0 | $70,021 | $24,858 less |
5% (typical residential property) | $174,405 | $157,224 | $8,075 more |
7.5% (strong growth) | $390,474 | $265,258 | $58,851 more |
Investors in high-growth markets planning long holds need to factor this into their projections. The higher your real return, the worse indexation performs relative to the old discount.
The 30% Minimum Tax
The minimum tax sits on top of indexation. It ensures that even if your marginal tax rate in the year of sale is below 30%, you still pay at least 30% on the real capital gain.
From the Treasury factsheet: Jack has $25,000 in taxable income before capital gains in 2029-30 and realises a $10,000 capital gain on an asset purchased in 2027-28. Tax at his marginal rate would be $1,400, an effective rate of 14%. Because that is below 30%, he pays an additional $1,600 to reach the 30% floor.
This specifically targets investors who time asset sales to fall in low-income years. That strategy no longer works on gains from 1 July 2027 onwards.
One exemption applies: individuals receiving means-tested income support payments such as the Age Pension or JobSeeker in the year they realise the gain are exempt from the minimum tax.
New Builds Get a Choice
Investors who buy eligible new residential builds retain the right to choose between the old 50% CGT discount and the new indexation plus minimum tax arrangement when they sell. This carve-out was preserved in the final legislation.
For an investor weighing up an established property purchase versus a new build after Budget night, the CGT treatment at exit is a genuine differentiator.
A new-build investor in a high-growth market expecting returns well above inflation may prefer to elect the 50% discount at sale. A new-build investor with returns closer to inflation may prefer indexation. Having the choice is worth something in an environment where you cannot know today exactly what inflation and returns will do over a 10 to 20 year hold.
What Changed in the Senate Amendments
The Bill was amended in the Senate before passing on 25 June 2026. The key changes that affect investors include:
- Small business CGT concession threshold raised: The turnover threshold for the small business 50% active asset CGT concession was raised from $2 million to $10 million, preserving the concession for a much larger group of small business owners.
- Innovative Business CGT Concession (IBCC): Treasury released a consultation paper on a new discount designed to preserve 50% CGT relief for genuine start-ups. Details are still subject to consultation.
- Discretionary trust minimum tax: The 30% minimum tax on discretionary trusts was separated into a second Bill, expected later in 2026, and commences from 1 July 2028. Rollover relief of three years from 1 July 2027 applies for investors wanting to restructure out of a discretionary trust.
- SMSF limited recourse borrowing arrangements (LRBAs): New residential SMSF loans under an LRBA structure are blocked 45 days after royal assent. Existing facilities and contracts in progress are grandfathered.
- Co-ownership and inheritance: Several issues around jointly owned assets and inheritance transfers were flagged during Senate debate. The Government confirmed these will be addressed in subsequent legislation.
If you operate through a discretionary trust, hold assets in an SMSF, or co-own investment assets with family members, these amendments are worth a direct conversation with your adviser now rather than later.
Actions to Take Now
The reforms are law. The 1 July 2027 commencement date is less than 12 months away. The steps below are not about panicking. They are about making sure you are not making decisions in the dark.
- Get a CGT position mapped for every asset you hold. Know your cost base, your estimated current value, and how the split calculation would work if you sold before or after 1 July 2027. Do this for each asset separately.
- Commission valuations early. The ATO has not yet finalised guidance on acceptable valuation methodologies for the 1 July 2027 cost base reset. Getting in early means more valuer availability and more time to address any disputes about methodology before they become urgent.
- Review your trust structure. Discretionary trusts face a 30% minimum tax from 1 July 2028. The three-year rollover relief window from 1 July 2027 is the restructuring opportunity. That window is finite.
- Do not assume your pre-CGT exemption still applies. If you hold assets acquired before 20 September 1985, the full exemption no longer applies to post-2027 gains. Get advice.
- Talk to a tax adviser, not just an accountant. The seven-step CGT calculation method introduced by the new law, with four categories of gains split across residential and non-residential assets and pre- and post-2027 accruals, is materially more complex than the previous system. General-purpose accounting software and back-of-envelope calculations will not be reliable.
Book a strategy session with Number Solutions to map your CGT position before 30 June 2027.
Frequently Asked Questions
Yes, in two situations. First, gains that accrued on any asset before 1 July 2027 still attract the 50% discount under the transitional rules. Second, investors in qualifying new residential builds retain the option to elect the 50% discount at the time of sale, even on gains accruing after 1 July 2027.
Companies are not affected by the removal of the 50% discount because companies have never been eligible for the CGT discount. The new rules apply to individuals, trusts, and partnerships only.
The ATO has committed to providing tools and guidance, but detailed ATO guidance on acceptable valuation methodologies and apportionment formulas has not yet been finalised as of July 2026. Check the ATO’s CGT reform page for updates and engage your adviser to stay across any changes.
The existing rules apply in full. You pay tax on 50% of the gain (if the asset was held for more than 12 months), at your marginal tax rate, with no minimum tax floor. If you have a large unrealised gain and are considering selling, the timing decision is worth modelling carefully with your adviser.
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