The 2026-27 Federal Budget contained the biggest shake-up of Australian capital gains tax in more than 25 years. From 1 July 2027, the long-standing 50% CGT discount for individuals will be replaced with a new system: an inflation-indexed discount combined with a minimum 30% tax on capital gains. The change touches almost every investor in the country — property landlords, share traders, ETF holders, and crypto investors all at once.
If you sit on capital gains today, this is one of the most important budget changes to understand. Below we break down what's actually changing, how the maths works on a $500,000 gain, and what you can reasonably do (and not do) in the runway between now and the start date.
In short: the headline 50% discount that's been a fixture since 1999 is going away for most assets sold on or after 1 July 2027. The new rules cut what was sometimes a generous tax break in half, while introducing a minimum tax floor to prevent very-low-income retirees from paying close to nothing on million-dollar gains.
What's actually changing
The current system (until 30 June 2027)
Under the current rules — in place since the Howard government's 1999 reforms — an Australian resident individual who holds a CGT asset for at least 12 months pays tax on only 50% of the capital gain. The other 50% is tax-free.
A $200,000 capital gain on an investment property held five years means you add $100,000 to your taxable income. The other $100,000 is wiped from your assessable income entirely.
This discount is the single largest tax expenditure in the Australian system. Treasury estimates it costs the budget roughly $20 billion a year in foregone revenue, with most of the benefit flowing to the top 10% of taxpayers by income.
The new system (from 1 July 2027)
From 1 July 2027, the flat 50% discount is replaced with two protective elements that work together:
The practical effect: investors with long holding periods and modest *real* gains may not be much worse off (because CPI indexing protects them). Investors with short holding periods, large nominal gains, and high marginal rates will pay more.
Side-by-side comparison
| Element | Current (until 30 Jun 2027) | New (from 1 Jul 2027) |
|---|---|---|
| Discount basis | Flat 50% off the gain | CPI-indexed cost base |
| Minimum effective tax rate | None — taxed at marginal rate × 50% of gain | 30% floor on the gain |
| 12-month holding rule | Yes (required for discount) | Yes (required for indexing) |
| Foreign residents | No discount since 8 May 2012 | Same — no discount/indexing |
| Super funds | 33.3% discount | TBC — pending legislation detail |
| New-build investment property | Standard 50% discount | Choice between 50% discount OR new rules |
Worked example: $500,000 capital gain on a property
Let's run the numbers on a realistic scenario. Sarah, a Melbourne-based marketing manager earning $135,000 a year, bought an investment unit in 2017 for $700,000 and sells it in 2028 for $1,200,000 — a $500,000 nominal capital gain over 11 years.
We'll compare the two systems side by side. For simplicity, we ignore selling costs and assume Sarah has no other capital losses.
Under the OLD system (50% discount)
- Nominal gain: $500,000
- 50% CGT discount: −$250,000
- Taxable gain added to income: $250,000
- Sarah's marginal rate on this slice: mostly 37% (income $135k–$190k bracket in FY2027-28), some 45% above $190k
- Approximate tax on the gain: ~$95,000
Under the NEW system (CPI indexing + 30% floor)
- Original cost: $700,000
- CPI indexation over 11 years (assume average 3% p.a.): cost base uplifts to roughly $970,000
- *Real* gain after indexing: $1,200,000 − $970,000 = $230,000
- Sarah's marginal rate on this slice: 37%
- Tax on real gain at marginal rate: ~$85,100
- Effective tax rate on the nominal $500,000 gain: ~17% — but this is below the 30% floor
- 30% minimum tax applies instead: 30% × $500,000 = $150,000
The bottom line
| Outcome | OLD system | NEW system |
|---|---|---|
| Tax owed on $500k gain | ~$95,000 | ~$150,000 |
| After-tax proceeds | ~$405,000 | ~$350,000 |
| Difference | — | ~$55,000 more tax |
The 30% floor kicks in here because indexation alone produced a softer outcome than the discount. In other scenarios — for example, an asset held only 18 months with rapid price growth — indexation provides almost no relief and the new rules can be more punishing than a simple 30% floor would suggest.
The structural shift: under the old rules, your CGT bill depended mostly on your marginal tax rate. Under the new rules, your CGT bill depends mostly on how much of the gain is real vs inflation, plus a hard 30% floor. High-income earners selling shortly after the 12-month mark are the biggest losers. Long-term holders of slow-growth assets may be roughly neutral.
Who's affected
Residential property investors
This is the headline group. Roughly 2.2 million Australians own at least one investment property, and the bulk of their wealth-building case has historically rested on negative gearing during the hold period plus a 50% CGT discount on sale.
The combination of the CGT reform with the parallel negative gearing changes from 1 July 2027 makes property investment less tax-favoured than at any point since 1999. Investors buying established properties after Budget night (12 May 2026) lose both legs of the stool.
Shareholders and ETF holders
The ASX has roughly 10.2 million retail investors holding shares directly or via ETFs. Those who built their portfolios buying-and-holding over 15-20 years will see CPI indexing partially protect them. Active traders rotating positions within a year of acquisition were never eligible for the discount and aren't affected here.
Crypto holders
Australia's ATO treats cryptocurrency as a CGT asset, not a currency. The same 50%-discount-after-12-months rule that applied to BTC, ETH and ASX-listed crypto ETFs is being replaced. Given the volatility of crypto gains and typically shorter holding periods, the 30% minimum tax floor is likely to be the binding constraint for most crypto sellers from FY2027-28 onwards.
Small business and farmers
Small business CGT concessions (15-year exemption, 50% active asset reduction, retirement exemption, rollover) sit in a separate division of the tax law (Div 152) and are not changed by this reform. Family farm transfers and qualifying business sales continue under the existing concessional regime.
Super funds
For APRA-regulated super funds and SMSFs, the current discount is 33.3% (not 50%). Treasury has indicated super fund treatment will be addressed in the legislation but specifics are TBC. Anyone with a heavily concentrated CGT exposure inside super (e.g., a large unrealised gain on a single SMSF property) should monitor the consultation closely.
Existing assets — what about grandfathering?
This is the question every investor is asking and unfortunately the answer is not yet fully confirmed. The Budget announcement says the new rules apply to disposals on or after 1 July 2027. The Treasurer's press materials suggest there will be no grandfathering of the 50% discount — assets bought today are subject to the new rules if sold after the start date.
The single confirmed grandfathering carve-out is for new-build investment properties, where investors can choose between the 50% discount and the new CPI-plus-30% arrangement. This mirrors the negative-gearing carve-out for new builds and is designed to keep residential construction supply incentives in place.
Until draft legislation lands (Treasury consultation runs through 2026), the conservative interpretation is: the new rules apply to all disposals on or after 1 July 2027 regardless of when the asset was acquired, with the new-build CGT election the only carve-out.
Should you sell before 1 July 2027 to lock in the old discount?
This is the trickiest question. The short version: do not let tax tail wag the investment dog.
There are scenarios where bringing forward a sale makes sense:
- You were already planning to sell within the next 18-24 months for non-tax reasons (downsizing, portfolio rebalancing, retirement timing)
- You have a large embedded gain on a high-growth asset where the difference between old and new is material (the worked example above shows a ~$55,000 swing on a $500k gain — that's real money)
- You're already in a high-marginal-rate year and CGT under the old rules is genuinely tolerable
There are equally clear scenarios where forcing a sale before 30 June 2027 is a bad idea:
- The asset is fundamentally good and you'd just rebuy something similar (you'd pay CGT, lose to brokerage/stamp duty, and reset the clock)
- You don't have other income to absorb the gain in a low-MTR year
- The transaction costs of selling and re-entering exceed the tax differential
- You'd be forced to sell into a depressed market
Important caveat: tax law can and does change. The reform itself could be amended during legislative passage, grandfathering could be added, the start date could be deferred, or a future government could repeal it. Crystallising a gain today to dodge a tax regime that may look different by 2027 is a real risk.
Use our tax refund calculator to model what bringing a gain into your current financial year would do to your overall tax position. And if the gain is material (over ~$100k), this is exactly the kind of decision worth paying a registered tax agent for.
What to do between now and 1 July 2027
Without suggesting any specific action, here's the checklist of housekeeping that pays off regardless of how the rules land:
How this fits with the rest of the budget
The CGT reform doesn't sit in isolation. It's bundled with the federal budget 2026 personal tax changes, the negative gearing changes, Stage 4 income tax cuts, and a 30% minimum tax on discretionary trust distributions from 2028. Together these are the biggest realignment of the individual tax base in a generation.
For most ordinary workers — PAYG employees with a home, some super, and modest investments — the Stage 4 cuts and the $1,000 instant deduction more than offset any CGT impact, because they don't have large unrealised gains. For asset-rich households, particularly property investors who've held since the 2010s, the CGT and negative gearing changes are the dominant factor.
Frequently asked questions
See the FAQ section below for the most common scenarios investors are asking about.
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*Disclaimer: This is general information only and does not constitute personal tax advice. Consult a registered tax agent for advice tailored to your specific situation. Always verify against the latest ATO guidelines at ato.gov.au.*
*This is general information only — not legal or financial advice. For your specific situation, consult a registered tax agent.*