What the CGT Changes 2027 Australia,
Who It Affects, and What to Do
Before 1 July 2027
The May 2026 Budget announced the most significant CGT overhaul since 1999. The 50% discount is being replaced. A 30% minimum tax is being introduced. Pre-CGT assets are being brought into the net. Here’s what it actually means.
Johan Petrovic
Property Investment Adviser · QPIA · 17 years in practice
Specialist in tax strategy for residential investors · Melbourne, VIC
CGT changes 2027 Australia at a Glance
50% CGT Discount → Cost-Base Indexation
From 1 July 2027, the flat 50% discount is replaced by adjusting your purchase price for inflation (CPI). Only the “real” gain above inflation is taxed. Applies to individuals, trusts and partnerships.
New 30% Minimum Tax on Capital Gains
Regardless of your marginal rate, a 30% minimum tax applies on real capital gains from 1 July 2027. Designed to stop high-income earners deferring gains to low-income years. Pensioners and income support recipients are exempt. Calculated Real Time CGT.
Pre-CGT Assets Brought Into the Net
Assets acquired before 20 September 1985 (pre-CGT) are deemed sold and reacquired at market value on 1 July 2027. Gains accruing after that date become taxable. A 42-year exemption ends.
New Builds Get a Choice
Investors in new residential properties can choose between the 50% discount OR the new indexation + minimum tax regime. This carve-out is designed to keep construction incentives intact.
Superannuation Is NOT Affected
SMSFs and industry super funds retain their existing CGT settings. Accumulation phase keeps the 1/3 discount (10% effective rate). Pension phase remains fully CGT exempt. Super is untouched.
Not Yet Law — But Bills Are Before Parliament
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 was introduced 28 May 2026. Referred to Senate Economics. Current 2025–26 rules apply to all transactions until legislation passes.
CGT Changes 2027 The Full Picture
For 25 years, the 50% CGT discount was the cornerstone of Australian investment tax planning. Buy an asset, hold it for 12 months, sell it and only half your capital gain is taxable. It was simple, it was generous, and almost every financial plan for the past quarter century had it baked in. The 2026 Budget changes all of that.
On 12 May 2026, Treasurer Jim Chalmers announced what he called “the most important and ambitious Budget in decades.” The centrepiece on the investment side was a fundamental restructure of Australia’s CGT system. The 50% discount is being replaced by cost-base indexation, a 30% minimum tax is being introduced, and pre-CGT assets which have been exempt from CGT for 42 years are being brought partially into the net.
The Bills were introduced to Parliament on 28 May 2026. They are before the Senate Economics Committee as of June 2026. This is not yet law, but the legislative process has formally begun.
⚠️ Critical: The legislation needs to pass both houses of Parliament before it takes effect. Cross-bench and Opposition negotiations are ongoing. Some aspects may change before passage. Do not make major financial decisions based solely on announced policy. Get professional advice on your specific situation.
The Three Things Being Replaced or Added
1. The 50% CGT discount is being replaced by indexation. Instead of halving your capital gain, your original purchase price will be adjusted upward for inflation using CPI. You’ll only pay tax on the “real” gain the growth above inflation. If you paid $500,000 for a property in 2020 and inflation since then was 15%, your indexed cost base becomes $575,000. Only gains above that are taxed.
2. A 30% minimum tax is being introduced. Even if indexation leaves you with a small real gain, and even if your marginal rate would normally produce a tax rate lower than 30%, a 30% floor applies. This specifically targets the strategy of deliberately deferring asset sales to years of low income (e.g., after retirement) to get gains taxed at 0% or 19%.
3. Pre-CGT assets are being partially brought in. Assets bought before 20 September 1985 have been fully exempt from CGT for their entire ownership. From 1 July 2027, gains accruing on these assets after that date will be taxable. The pre-2027 gains remain exempt. This affects a small but significant group of long-term property and share holders.
The Three Regimes Old, New and Transitional
The most important thing to understand about this reform is that it creates three distinct tax regimes running simultaneously, depending on when you acquired your asset and when you sell it. Getting this wrong is expensive. Here they are:
Sold Before 1 July 2027
All eligible assets no changes. The 50% CGT discount applies in full. Current 2025–26 rules. No minimum 30% tax.
Acquired Before 1 July 2027, Sold After
Gain is split. Pre-July 2027 portion → 50% discount. Post-July 2027 portion → indexation + 30% minimum tax. Two methods to split the gain.
Acquired From 1 July 2027
Full new regime applies. Cost-base indexation only. 30% minimum tax on real gains. No 50% discount (except new residential builds).
📌 What “Transitional” Means for Most People: If you already own property, shares, ETFs or crypto purchased before 1 July 2027, you’re in the transitional camp. Your total gain when you eventually sell will be split based on how long you held the asset before and after 1 July 2027. The pre-2027 portion uses the old 50% discount. The post-2027 portion uses the new indexation + 30% minimum. Two methods are available to perform this split the time-apportionment method and the market valuation method (which requires getting the asset valued at 1 July 2027).
How the Split Works in Practice
The time-apportionment method allocates the gain proportionally based on time. If you held a property for 10 years before 1 July 2027 and sell 5 years later, two-thirds of the total gain is attributed to the pre-2027 period (50% discount applies) and one-third to the post-2027 period (indexation + 30% minimum). Simple in concept, but the actual mechanics depend on the final legislation.
The market valuation method uses the asset’s value on 1 July 2027 as the dividing line. Your pre-2027 gain is the growth from purchase price to market value at 1 July 2027. Your post-2027 gain is growth from that market value to your eventual sale price. This method is more accurate but requires a formal valuation at 1 July 2027 — which most investors haven’t done and may not think to do until it’s too late.
💡 Action Point Now: If you have significant unrealised gains and plan to hold long-term, getting a formal market valuation of your key assets on or around 1 July 2027 could be extremely valuable. It establishes the dividing line cleanly, potentially giving you a higher post-2027 cost base. A property valuation today might cost $500–$1,500. On a large gain, locking in the right split could save many times that amount.
The Numbers: Old System vs New System
The most important question for most investors is simple: will I pay more or less tax? The answer depends heavily on your income, your inflation rate, your holding period, and whether you’re in the transitional or full new regime. Let’s run the numbers on a typical scenario.
📊 Worked Example — Investment Property Purchased 2020, Sold 2031
Under Old System (if sold before 1 July 2027)
Capital gain | $400,000 |
50% CGT discount | −$200,000 |
Taxable gain | $200,000 |
Tax at 32.5% | $65,000 |
Medicare levy 2% | $4,000 |
Total CGT payable | $69,000 |
Under New System (sold 2031, transitional rules)
Pre-2027 gain (50% disc) | ~$140,000 |
After 50% disc | $70,000 |
Post-2027 real gain | ~$100,000 |
Indexed cost base reduces by CPI | −~$40,000 |
30% min tax applies | → 30% |
Indicative total CGT | ~$85,000+ |
💡 Key takeaway from this example: For a typical investor in the 32.5% bracket holding a long-term property, the new system is likely to produce a higher tax bill than the current system because the 30% minimum tax bites harder than the benefit of indexation. The degree of difference depends on actual inflation rates between now and sale. Investors in the 19% or 0% brackets are most affected for them, the 30% minimum tax is a dramatic increase regardless of indexation.
Who Benefits From Indexation vs Who Loses
Whether the new system is better or worse for you depends on the relationship between your marginal tax rate, the inflation rate, and how long you hold the asset after 2027.
Under New System (sold 2031, transitional rules)
Scenario | Old System (50% disc) | New System (indexation + 30% min) | Better Under |
|---|---|---|---|
High income (45%) + low inflation + short hold | ~22.5% effective | 30% minimum | Old system |
Mid income (32.5%) + 2.5% inflation + 10yr hold | ~16.25% effective | ~30% on real gain | Old system |
Low income (19%) + any inflation | ~9.5% effective | 30% minimum applies | Old system clearly |
Retired (0%) + any inflation | 0% or near 0% | 30% minimum applies | Old system clearly |
High income (45%) + high inflation + very long hold | ~22.5% effective | 30% on much smaller gain | Depends on inflation |
New build property — any scenario | Choice available | Can choose 50% disc | Depends on inflation |
🚨 The Retirement Tax Trap: The 30% minimum tax specifically targets investors who defer gains to low-income retirement years. Under the current system, selling a $500,000 gain in a year where you earn $20,000 from other sources might produce an effective CGT rate of 9–12%. Under the new system, the minimum is 30% regardless of your other income. This is the single biggest change in practical terms for investors planning a tax-efficient retirement exit. The planning strategy of “retire, then sell assets at low marginal rates” is being eliminated. You can check official ATO resource.
Pre-CGT Assets A 42-Year Exemption Is Ending
This is the part of the reform that affects the fewest people but has the most dramatic impact on those it touches. Assets acquired before 20 September 1985 have been fully exempt from CGT for their entire existence. A family property purchased in 1975 for $80,000 and now worth $3 million could be sold completely CGT-free. That is changing.
From 1 July 2027, all pre-CGT assets are deemed to be sold and reacquired at their market value on that date. The pre-2027 gain everything from original purchase to 1 July 2027 remains exempt. But gains accruing after 1 July 2027 are fully subject to the new regime: indexation on the 1 July 2027 market value as cost base, and the 30% minimum tax on real gains.
⚠️ Urgent Action Required (If You Hold Pre-CGT Assets): If you or a family member holds assets acquired before 20 September 1985 whether property, shares, a family farm or a business the time to model your options is now, not in 2027. Once the legislation passes, the window to sell under the old full-exemption rules closes on 30 June 2027. A valuation of those assets needs to be done properly. Given the typical size of pre-CGT gains, this is a situation where professional advice is not optional.
The Government’s rationale is straightforward: a 42-year unconditional exemption was never intended to be permanent, and some of Australia’s largest concentrated wealth holdings are in pre-CGT assets that have never paid any tax. The reform attempts to capture only future gains not the historical ones — which is why the deemed sale and reacquisition mechanism is used rather than taxing the full gain on eventual sale.
Who It Affects — and By How Much
Established Property Investors
Investors with significant unrealised gains in established residential or commercial property face the most complex transitional decisions. Properties purchased before 12 May 2026 are grandfathered for pre-2027 gains but face the new regime on post-2027 growth. Those planning to hold for decades need to model their expected tax position carefully.
Share & ETF Investors
Investors in ASX shares, ETFs and managed funds face the same transitional rules as property investors. For AMIT-adjusted ETFs, the interaction with the indexation rules is still being worked through by the ATO. Employee share scheme holders face particular complexity gains accruing post the ESS deferred taxing point and held beyond 1 July 2027 lose the discount.
Retirees Planning to Sell
The 30% minimum tax specifically closes the strategy of deferring capital gains to low-income retirement years. Retirees who planned to sell assets after retirement at 0% or 19% tax rates now face a minimum 30% rate on post-2027 real gains. This is likely the single most impactful change for this group. Pensioners and income support recipients are specifically exempt.
Pre-CGT Asset Holders
Individuals or families holding assets acquired before 20 September 1985 particularly long-held family properties, farms, or business assets — face the end of full CGT exemption for gains after 1 July 2027. A 42-year unconditional exemption is ending. The window to sell under the old full-exemption rules closes on 30 June 2027.
New Residential Build Investors
Investors in new residential properties can choose between the 50% CGT discount or the new indexation + minimum tax regime, even for purchases after 1 July 2027. This carve-out was included to maintain construction incentives. Affordable housing investors get an even better deal: up to 60% discount as the alternative. A genuine policy benefit for this group.
Superannuation Fund Members
Superannuation funds including SMSFs are explicitly excluded from the CGT reform. Accumulation phase retains the 1/3 discount and 15% fund tax rate (effective 10% on long-term gains). Pension phase remains fully CGT exempt. This makes superannuation even more attractive as an investment vehicle post-2027 compared to personally held assets.
What to Do Before 1 July 2027
There are real decisions to make here but they need to be made carefully and with professional input, not reactively. Here’s the practical action framework for different types of investors:
Model Your Specific Position Before Doing Anything
Before making any decision about selling, holding, or restructuring, model your actual tax position under both regimes. This requires knowing: your cost base, estimated sale value, expected holding period, and projected income in the year of sale. A tax accountant with investment experience can produce this comparison in one meeting. The outcome will differ significantly by individual — there’s no universal “sell before 2027” or “hold” answer.
Consider Selling Before 1 July 2027 If the Numbers Work
If you have large unrealised gains and were planning to sell anyway in the next 3–5 years, running the numbers on selling before 1 July 2027 under the old rules is worth doing. For assets with large gains particularly those where you’d be in a low income year in retirement — the difference between 0–16% and 30% can be enormous. But selling means realising the gain now, paying tax now, and reinvesting. That reinvestment decision needs to be part of the analysis, not ignored.
Get Pre-CGT Assets Valued If You Hold Any
If you hold assets acquired before 20 September 1985, the window for full CGT exemption closes on 30 June 2027. Before that date: get a formal independent valuation of those assets. Understand your total gain if you sell before vs after. Consider whether selling before 1 July 2027 capturing the full exemption — makes more sense than continuing to hold and facing CGT on all future gains. This is a decision with potentially very large dollar consequences. Professional advice here is non-optional.
Get Assets Valued at or Around 1 July 2027
Even if you plan to hold assets long-term, getting a formal independent valuation around 1 July 2027 could be very valuable. This establishes your asset’s value at the regime transition which becomes the effective cost base for the post-2027 portion of your gain. A higher valuation means a higher post-2027 cost base, which means a smaller taxable gain under the new regime when you eventually sell. Property valuations cost $500–$2,000. For a large asset, the tax saving from locking in the right base can be orders of magnitude greater.
Consider Whether Super Structures Make More Sense Post-2027
Superannuation is now even more attractive as an investment vehicle compared to personally held assets. Accumulation phase: 10% effective rate on long-term gains. Pension phase: 0%. Personally held: minimum 30% on real gains. For investors building wealth for retirement, maximising super contributions and considering SMSF structures for investment assets deserves fresh analysis in light of the reform. The relative advantage of super vs personal investing has widened significantly.
Review Trust Structures Especially Discretionary Trusts
Discretionary trusts face an additional change: a 30% minimum tax on trust distributions from 1 July 2028. The Government is offering three-year rollover relief from 1 July 2027 to assist restructuring away from discretionary trusts (into companies or fixed trusts). If you hold investment assets through a discretionary trust, a review of that structure is urgent. Companies and SMSFs are not affected by the CGT discount changes. Fixed trusts retain access to the new indexation regime.
✅ The Most Important Thing to Understand
The 2026 Budget CGT reform is significant — but it is not a reason to make panicked financial decisions. The transitional rules protect existing investors from losing their pre-2027 discount entitlements. For most people holding long-term assets acquired before 12 May 2026, the impact is on future gains only, and those gains haven’t been earned yet. Make decisions based on your numbers, your timeline, and your personal situation — not on headlines.
What’s NOT Changing The Exemptions That Remain
Amid all the change, it’s important to be clear about what the reform does not touch:
- Main Residence Exemption: Your family home remains fully CGT-exempt. The reform does not affect the principal place of residence exemption at all. Selling your home is still tax-free under the same conditions as today.
- Superannuation Funds: Completely excluded — both the CGT discount changes and the minimum tax. SMSF accumulation phase keeps the 1/3 discount. Pension phase stays at 0%. This was explicitly confirmed in the Budget papers.
- Small Business CGT Concessions: The four small business concessions (15-year exemption, 50% active asset reduction, retirement exemption, small business rollover) are being reviewed separately and are not abolished by this reform. Three-year rollover relief is available for restructuring.
- Companies: Companies have never had access to the 50% CGT discount, and the new minimum tax and indexation regime only applies to individuals, trusts and partnerships. Company CGT settings are unchanged.
- New Residential Builds: Investors in new builds can choose the 50% discount or the new regime — the most generous treatment available under the proposed rules.
- Pensioners and Income Support Recipients: Specifically exempt from the 30% minimum tax. Their gains continue to be taxed at their marginal rate — which could be 0% or very low. This carve-out protects low-income and low-wealth retirees.
- Pre-2027 Gains on Existing Assets: For anyone who already owns an asset purchased before 1 July 2027, the portion of gain accrued before that date retains the 50% discount. Only future gains are subject to the new regime.