Major Capital Gains Tax (CGT) Changes – What You Need to Know

Written By Michaela Rowlands

The Federal Government has announced major changes to how capital gains tax (CGT) will be calculated in Australia from 1 July 2027. While the removal of the 50% CGT discount had been widely anticipated, several additional measures may significantly affect long‑term investment, property and retirement planning.

Key CGT Changes from 1 July 2027

1. The 50% CGT Discount Will Be Replaced

For assets held longer than 12 months, the current 50% CGT discount will be replaced with inflation‑adjusted cost base indexation.

Instead of halving a capital gain, the cost base of the asset will be increased for inflation over the holding period so that only real gains are taxed.

Important clarifications:

  • The CGT discount has only ever applied to individuals, trusts and partnerships

  • Companies have never been eligible for the CGT discount, and this does not change

2. Minimum Tax Rate of 30% on Capital Gains

A minimum tax rate of 30% will apply to realised capital gains from 1 July 2027, after indexation has been applied.

This applies to all CGT assets (including shares), not only properties.

We understand this is a minimum tax rate on the net profit after inflation. This may not result in an effective tax rate of at least 30%, in fact once inflation has been taken into account, the Government considers the effective tax rate on the nominal gain to be in the range of 13% - 30%.

3. Pre‑1985 Assets Will Enter the CGT System

Assets acquired before 20 September 1985 will no longer be fully exempt from CGT for disposals occurring from 1 July 2027.

  • Gains accrued up to 30 June 2027 remain CGT‑free

  • Gains accrued from 1 July 2027 onward will be subject to CGT

This change may affect long‑held family investment properties, business assets and other legacy investments previously considered outside the CGT system.

The asset’s value at 1 July 2027 will be determined when it is sold, either by obtaining a valuation (including quoted market prices where available) or by using an ATO‑provided apportionment formula that estimates the value based on the asset’s growth over its holding period.

Special Rule for New Residential Property Investments

To maintain incentives for housing construction, new residential properties will be treated differently.

If you invest in a qualifying new build, you will be able to choose between:

  • Applying the 50% CGT discount, or

  • Using cost base indexation, subject to the 30% minimum tax

For these purposes, a “new residential property” means housing that genuinely adds to overall supply, such as homes built on vacant land or developments where an existing property is demolished and replaced with a greater number of dwellings; simple knock‑down rebuilds or substantial renovations that do not increase the number of homes will not qualify.

Impact

The changes are prospective, not retrospective.

  • Gains accrued up to 30 June 2027 will continue to be taxed under the existing CGT discount rules

  • Gains accrued from 1 July 2027 onward will be taxed under the new indexation model, subject to the minimum tax rate of 30%.


Example: Michael sells his property two years after the new rules commence for $560,000. He continues to receive the 50% CGT discount on the gain accrued up to 1 July 2027, using ATO tools to determine the property’s value at that date as $500,000. The gain accrued after 1 July 2027 is then adjusted for two years of inflation at 2.5%, resulting in a taxable capital gain of $34,688 for that period. This is slightly higher than the $30,000 taxable gain that would have applied under the 50% discount. Assuming a 47% tax rate, the tax payable on the post‑1 July 2027 gain is $16,303 (compared to $14,100 under the discount). Importantly, no CGT is payable until the property is sold.


Implications for Superannuation Funds

The Budget Papers do not yet contain enough detail to draw firm conclusions for superannuation. Currently however…

  • Complying super funds receive a two‑thirds CGT discount

  • This results in an effective CGT rate of 10% on assets held longer than 12 months

How the new indexation and minimum tax rules will apply to Self‑managed super funds (SMSFs) will depend on the final legislation and will be clarified at a later date.

What Hasn’t Changed

  • Assets bought and sold before 1 July 2027 continue to receive the full CGT discount (where eligible)

  • Pre‑1985 assets disposed of before 1 July 2027 remain fully exempt.

  • The main residence exemption continues to apply so that CGT is not payable on your home

  • The Government has indicated there will be no changes to the Small Business CGT Concessions.

What You Should Be Thinking About Now

Although these changes are still some time away, early planning will be important. You may wish to consider:

  • Reviewing long‑held and pre‑1985 assets

  • Reassessing the timing of planned asset disposals

  • Reviewing property investment strategies, particularly new builds

  • Modelling CGT outcomes under the indexation and minimum tax framework

  • Considering impacts on retirement, succession and estate planning

As your trusted advisors, we will work with you to optimise your position.

Contact Us

This information is general in nature and based on Budget announcements and factsheets. Final outcomes will depend on legislation yet to be passed.

Michaela Rowlands
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