The 2026-27 Federal Budget overhauled Australia’s capital gains tax system. The 50% CGT discount — in place since 1999 — is being replaced with inflation-adjusted cost base indexation and a new 30% minimum tax on capital gains from 1 July 2027.

These are the most significant CGT changes in over 25 years. Whether you hold shares, investment property, a business you plan to sell, or pre-1985 assets you assumed were CGT-free forever, the rules are shifting under you.

Below is what’s changing, who it hits, and what you should be doing about it now.

What’s Changing

The 50% CGT discount is gone for most assets from 1 July 2027. In its place, the government is reforming capital gains tax by bringing back cost base indexation — the same system Australia used between 1985 and 1999. Instead of halving your capital gain, your original purchase price gets adjusted upward for inflation (CPI) before the gain is calculated. You pay tax only on inflation-adjusted, real gains, not inflation.

A 30% minimum tax rate applies to capital gains from 1 July 2027. Even if your marginal tax rate is lower than 30%, your capital gains will be taxed at 30% minimum. This is designed to stop investors deferring asset sales to low-income years (like retirement) to access a lower rate on their gains, which can distort investment decisions by encouraging people to push realised gains into lower-tax years. Income support recipients, including Age Pension holders, are exempt from the minimum rate.

Pre-CGT assets are no longer exempt. Assets acquired before 20 September 1985 have been CGT-free for 40 years. From 1 July 2027, that blanket exemption ends. Gains accrued before that date stay exempt, but any growth after 1 July 2027 falls under the new indexation and minimum tax rules. The cost base for these assets will be reset to their market value at 1 July 2027.

New builds get a choice. If you buy a new residential property from 1 July 2027, you can choose between the old 50% discount method or the new indexation-plus-minimum-tax method — whichever gives you a better result. This carve-out is intended to keep incentives for adding to housing supply. Under the old rules, investors generally paid tax on only half the profit after holding an asset for at least 12 months. The new treatment applies only to gains arising after 1 July 2027, not earlier growth.

The main residence exemption is unchanged. Your family home remains CGT-free.

Super funds are (for now) unaffected. The existing CGT discount for super funds is not expected to change under these measures. SMSF trustees should still watch for further announcements.

When It Starts

The new rules take effect 1 July 2027, subject to legislation passing Parliament and the final rules being settled. The bills (Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026) were introduced to Parliament on 28 May 2026, after the government announced the proposed reforms.

Three scenarios now exist:

Asset bought and sold before 1 July 2027: The current 50% discount applies in full under existing arrangements. Nothing changes.

Asset bought and sold after 1 July 2027: The new indexation method and 30% minimum tax apply. No access to the 50% discount, which also removes incentives to defer asset sales to lower-tax years.

Asset bought before 1 July 2027, sold after 1 July 2027: Transitional rules apply. Only post-1 July 2027 gains are covered by the new method, while earlier gains stay under existing arrangements. The gain is split into a pre-transition portion (which keeps the 50% discount) and a post-transition portion (which uses indexation and the 30% minimum). The split is based on how long you held the asset before and after 1 July 2027. The government has indicated taxpayers may also be able to use a market valuation at 1 July 2027 as an alternative to the time-apportionment method.

Who It Affects

Share and ETF investors. If you hold shares or managed funds outside super and plan to sell after 1 July 2027, your after-tax return will change. For most investors in the middle to higher tax brackets, the 50% capital gains tax discount was more generous than indexation — particularly in low-inflation periods — and at the top marginal rate the effective capital gains tax on shares could fall to about 23.5%. The 30% minimum floor means even lower-income investors can no longer time a sale to a low-income year for a better rate, and for some lower-income investors it can also mean more tax paid than under current rules.

Property investors. Investment property held for the long term is directly affected. The combination of negative gearing changes and negative gearing in Australia restrictions and CGT changes means the after-tax economics of holding residential investment property are shifting. From July 2027, negative gearing will be limited to new builds, while existing arrangements remain unchanged for properties purchased or held before the policy cut-off in May 2026. Investors in new builds can still deduct losses against other income. For older properties, losses that can’t be used immediately may be carried forward to offset future years’ residential property income. New builds are partially shielded by the choice between old and new methods.

Business owners planning to sell. If you’re planning to sell your business or business assets, the timing relative to 1 July 2027 matters. Capital gains tax when selling a business is still subject to the small business CGT concessions (15-year exemption, 50% active asset reduction, retirement exemption, rollover), but the base calculation they apply to is changing. If your business sale straddles the transition date, get advice on the apportionment.

Holders of pre-CGT assets. This is the group that may be caught most off guard. If you’ve held assets since before September 1985 — a family farm, a block of land, shares in a private company — and assumed they would always be CGT-free, that assumption is now wrong for any growth after 1 July 2027. You’ll need a valuation at that date and a clear handle on how to calculate capital gains tax under the new indexation rules.

Startup founders and employees with equity. Employee share schemes and founder equity are affected. Arrangements that previously qualified for the 50% discount on disposal will now fall under the new regime for post-transition gains.

Worked Example

Sarah bought an investment property in July 2022 for $1,000,000. She plans to sell in July 2032 for $1,500,000 — a $500,000 capital gain. Her taxable income puts her in the $135,001–$190,000 bracket.

Under the old rules (50% discount): Taxable gain = $500,000 × 50% = $250,000. Tax is calculated at her marginal rate on $250,000, which then forms part of her net capital gain.

This is one reason long-term capital growth was often more attractive under the former discount system.

Under the new transitional rules: The gain is split by time. She held the property for 5 years before 1 July 2027 and 5 years after, so roughly 50/50.

• Pre-transition portion: $250,000 × 50% discount = $125,000 taxable at marginal rates
• Post-transition portion: $250,000, less CPI indexation on the cost base for that period. Assuming 2.5% annual inflation over 5 years, the inflation adjustment reduces the taxable post-transition gain to approximately $218,000. This portion is taxed at the higher of her marginal rate or 30%.

Her total tax bill will be higher under the new rules than the old ones. The exact difference depends on inflation over the period and her income in the year of sale.

Note: This is a simplified illustration. Your situation will differ based on holding period, inflation, income, capital losses, and whether other concessions apply. Always get specific advice.

What You Should Do

If you were planning to sell an asset in the next 12 months, review the timing. Assets sold before 1 July 2027 still get the full 50% discount. There may be a genuine tax advantage to bringing a sale forward — but only if the commercial decision also makes sense and fits within your broader legal tax minimisation strategies. Don’t let the tax tail wag the dog.

If you hold pre-CGT assets, get a valuation plan in place. You’ll need to establish the market value of these assets as at 1 July 2027. For listed shares that’s straightforward. For unlisted business interests, property, or complex assets, a formal valuation takes time. Start the conversation with your accountant and valuers now, not in June 2027.

If you’re a business owner thinking about succession or sale, model both scenarios. Expanded rollover relief may be available for eligible small businesses transitioning ownership or restructuring after the tax changes, including options like the small business CGT concessions and Small Business Restructure Rollover. The interaction between the new CGT rules and the small business CGT concessions is going to be complex. Get your accountant to model the sale under both pre- and post-transition rules so you can make an informed call on timing.

If you hold investment property, read the changes alongside the negative gearing restrictions. The two changes work together. Existing holdings that are grandfathered stay on their current treatment, while newer purchases need to be assessed under the new tax settings. See our Property Investors & Negative Gearing page for the full picture on how rental property economics are shifting.

If you’re an SMSF trustee, watch this space. The current CGT discount for super funds hasn’t been touched in this budget, but with Division 296 and the broader reform direction, superannuation funds are still being treated differently from other trust structures, so further changes aren’t off the table.

Remember: these are proposed changes, not yet law. The bills have been introduced to Parliament but haven’t passed yet. The final legislation may differ from the budget announcements, so wait for the final rules and legislation before making irreversible decisions — but do start planning.

Not Sure How This Affects You?

Every investor’s situation is different. The interaction between these CGT changes, the negative gearing restrictions, the small business concessions, and your personal tax position makes generic advice dangerous.

Book a free 15-minute consultation and we’ll walk through what the changes mean for your specific situation.

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Frequently Asked Questions

This article is general information only and does not constitute financial, tax, or legal advice. Your circumstances are unique — always consult a qualified tax adviser before making decisions based on proposed legislation.