In short
From 1 July 2027, the flat 50% CGT discount for individuals, trusts and partnerships is replaced by CPI cost-base indexation plus a 30% minimum tax rate on real capital gains. The 12-month holding rule, main residence exemption, and super-fund treatment are unchanged. Assets owned before 1 July 2027 get split treatment: 50% discount on the pre-2027 gain, indexation + 30% minimum on the post-2027 gain. Investors who buy a qualifying new build can elect either system at sale.
What's Changing on 1 July 2027
The 2026-27 Federal Budget reforms how capital gains tax is calculated for individuals, trusts and partnerships. The flat 50% CGT discount — in place since 1999 — is replaced by two mechanisms working together: CPI cost-base indexation (so only the real, above-inflation gain is taxable) and a 30% minimum tax rateon real gains (so very low marginal rates can't be used to pay almost no tax on a large gain).
Two practical things stay the same: the 12-month holding rule still gates access to the concession, and the main residence exemption still removes the family home from CGT. Super funds (including SMSFs) and companies are unaffected.
The reform applies only to gains accruing after 1 July 2027. For an asset you owned before that date and sell after, the gain is split: the pre-2027 portion keeps the 50% discount, and the post-2027 portion uses indexation plus the 30% minimum tax. No tax is paid until the asset is sold.
The Three Pillars
1. CPI cost-base indexation
Your cost base grows with CPI over the holding period. Only the gain above inflation is taxable. Applies to assets held at least 12 months — the holding rule is unchanged. The ATO will publish tools to support the calculation.
2. 30% minimum tax on real gains
If the marginal rate on the indexed gain would otherwise be below 30%, a top-up brings the effective rate up to 30%. Doesn't affect anyone already taxed at 30% or more. Waived for people receiving means-tested support (Age Pension, JobSeeker) in the realisation year.
3. New-build election
Investors who buy a qualifying new residential build can elect either the old 50% discount or the new indexation + 30% minimum tax — whichever produces a better outcome. Subsequent buyers of the same dwelling lose the election.
Cost-Base Indexation (CPI)
Indexation grows your cost base by the Consumer Price Index over the years you hold the asset. The taxable capital gain is the sale proceeds minus the indexed cost base — so only the real (above-inflation) portion of the gain is taxed.
Australia used CPI indexation for CGT between 1985 and 1999, before the 50% discount replaced it. The 2027 reform reintroduces the same mechanism. The 12-month holding rule still applies — assets sold within 12 months get neither indexation nor the 30% minimum tax floor: the entire nominal gain is taxed at marginal rates.
Worked example — Zoe's shares (Treasury cameo)
Zoe buys shares for $100 on 1 July 2027 and sells them on 1 July 2032 for $125 — a nominal gain of $25 over five years (a 4.6% annual return).
Inflation runs at 2.5% per year, so the indexed cost base is $113. Zoe's taxable capital gain is $12 ($125 − $113). Under the current 50% discount, her taxable gain would have been ~$13. The new rules leave her slightly better off.
Source: Treasury cameo, Budget 2026-27 factsheet.
The 30% Minimum Tax
Once your real capital gain is calculated using indexation, the tax on that gain is at least 30%. If your normal marginal rate on the gain would have been lower (for example, because you have low income that year), a top-up brings the effective rate up to 30%. Taxpayers already on a 30%+ marginal rate are unaffected.
Means-tested-support exemption. Taxpayers receiving any means-tested income support payment — the Age Pension, JobSeeker, and similar — in the financial year they realise the gain are exempt from the 30% minimum. The intent is to avoid penalising retirees and lower-income recipients realising a gain in a year their main income is a support payment.
Worked example — Jack's top-up (Treasury cameo)
Jack has taxable income of $25,000 in 2029-30 (before the gain) and realises a $10,000capital gain on an asset he bought in 2027-28. He doesn't receive an income support payment, so the minimum tax applies.
Ordinary tax on the gain comes to $1,400 — a 14% effective rate (excluding Medicare levy). Because that's below 30%, Jack pays an additional $1,600 top-up to bring his rate on the gain up to 30%.
Source: Treasury cameo, Budget 2026-27 factsheet.
The New-Build Election
Investors who buy a qualifying new residential build can choose, when they sell, between (a) the old 50% CGT discount or (b) the new indexation + 30% minimum tax — whichever produces the lower tax.
A property qualifies as a new build if it:
- is constructed on previously vacant land, or
- replaces an existing dwelling via knock-down rebuild with a greater number of dwellings (a duplex replacing a single house qualifies; a single house replacing an older single house does not), and
- has not been occupied for more than 12 months before its first sale.
Subsequent purchasers lose the election
The election attaches to the firstinvestor purchaser only. If you buy a property second-hand — even one that was originally a new build — you don't get the choice. Treasury frames this as similar to how new-build stamp duty concessions already operate in some states.
New-build investors also retain access to negative gearing. The negative-gearing changes announced alongside the CGT reform are out of scope for this guide.
Transitional Rules
Assets you owned before 1 July 2027 get a split treatment when sold after that date:
- The gain that accrued between purchase and 1 July 2027 keeps the 50% discount, using the asset's deemed value at 1 July 2027 as the endpoint.
- The gain that accrued from 1 July 2027 to sale uses indexation + the 30% minimum tax, using the same deemed value as the new starting cost base.
- The 1 July 2027 value can be set by either a market valuation (quoted prices for shares; professional valuation for property) or the ATO's apportionment formula based on the asset's overall growth rate.
Pre-1985 assets retain their existing CGT exemption for gains accrued before 1 July 2027; gains accruing after that date are taxed under the new rules.
Worked example — Jane's split-treatment asset (Treasury cameo)
Jane buys an asset on 1 July 2022 for $800,000 and sells it on 1 July 2032 for $1,600,000 — a 7.2% annual return. Using ATO tools, the deemed 1 July 2027 value is $1,131,371.
- Pre-2027 portion: gross gain $331,371; with 50% discount → taxable $165,685.
- Post-2027 portion: gain $468,629 less cost-base indexation → taxable $319,958.
- Total taxable capital gain: $485,643.
At a 47% marginal rate, Jane's CGT on the gain is $228,252 — compared with $188,000 under a uniform 50% discount across the full holding period.
Source: Treasury cameo, Budget 2026-27 factsheet.
What's Not Changing
Main residence exemption
Your family home stays exempt from CGT under the same rules as today, including the 6-year absence rule.
Four small business CGT concessions
The 15-year exemption, 50% active asset reduction, retirement exemption and rollover relief are unchanged.
60% affordable housing discount
The existing 60% CGT discount on qualifying affordable housing is fully retained to preserve incentives in that segment.
Super funds (including SMSFs)
Super funds keep their existing CGT treatment: 15% on accumulation-phase gains with a one-third discount on long-term gains (effective 10%), and 0% in pension phase.
Companies
Companies never had access to the 50% discount, so the reform doesn't change anything for company-held assets.
The 12-month holding rule
Indexation only applies to assets held at least 12 months — the same threshold that today gates the 50% discount.
What Investors Can Do Now
The reform takes effect in 14 months and only applies to gains accruing after that date. There's no automatic incentive to crystallise pre-2027 gains — the transitional rules already preserve the 50% discount on that portion. But it's worth understanding where the new rules tilt the maths.
Long-term share investors
Indexation is most generous when real returns are moderate. If your shares grow at roughly the long-run market real rate, indexation often produces a similar or smaller taxable gain than today's 50% discount.
Existing residential property investors
Gains to 1 July 2027 keep the 50% discount via the deemed-value step. The post-2027 portion will use indexation + the 30% minimum tax. Negative-gearing rules are also changing — see the separate negative-gearing reform announcement.
Prospective property investors
A qualifying new build keeps the election between the old discount and the new rules. An established property after the announcement does not — so the entry point matters more than it did under previous rules.
SMSF members
Nothing changes inside super. SMSF capital gains keep their existing treatment regardless of when the underlying asset was acquired or sold.
Near-retirees on means-tested support
If you receive the Age Pension or JobSeeker in the realisation year, the 30% minimum tax is waived — your gain is taxed at your actual marginal rate after indexation.
Anyone with low real returns
If your asset's nominal growth is at or below inflation, indexation can leave you with no taxable gain at all — a more favourable outcome than the 50% discount, which would still tax half the nominal gain.
This guide is not financial advice. For material decisions, consult a registered tax adviser.
Sources
Worked examples (Zoe, Jack, Jane) are reproduced from Treasury's cameos in the factsheet above.
Frequently Asked Questions
Is the 50% CGT discount being scrapped?
Yes, for individuals, trusts and partnerships — but not until 1 July 2027, and not retrospectively. The flat 50% discount is replaced by CPI cost-base indexation plus a 30% minimum tax rate on real gains. Super funds (including SMSFs) and companies aren't affected. Existing assets get transitional treatment for the gain accrued before 1 July 2027.
When does the new CGT discount start?
1 July 2027. From that date, capital gains accruing on assets held by individuals, trusts and partnerships are taxed under the new system. For CGT events before 1 July 2027 (the CGT event date is usually the contract date, not settlement), today's rules still apply — including the 50% discount when the asset has been held for more than 12 months.
Does indexation always reduce tax compared with the 50% discount?
No. Indexation taxes only the real (above-inflation) gain — so when your real return is low, indexation can produce a smaller taxable gain than the 50% discount. When your real return is high, the 50% discount can be more generous. Treasury's modelling over the past 20 years shows effective discounts of 35-60% on indexed gains for typical assets held five or ten years.
What if my real return is below CPI?
If your asset's nominal growth is lower than inflation over the holding period, indexation lifts the cost base above the sale price and there is no taxable capital gain. Under the current 50% discount, you would still have a taxable gain. As an illustration: an asset growing at 2.5% per year matched by 2.5% inflation produces no real gain and no CGT under the new rules — the Treasury factsheet uses this scenario.
How is my asset's value at 1 July 2027 determined?
Two options. (1) Get a market valuation — for listed shares this means using the quoted price on the day; for property this typically means a professional valuation. (2) Use the ATO's apportionment formula, which estimates the 1 July 2027 value based on the asset's growth rate over the full holding period. The ATO has indicated it will publish tools to help taxpayers calculate this.
Does the reform affect my SMSF?
No. The reform applies to individuals, trusts and partnerships. Superannuation funds — including SMSFs — keep their existing CGT treatment: 15% on gains in accumulation phase with a one-third discount for assets held over 12 months (an effective 10% rate), and 0% in pension phase.
Is the main residence exemption changing?
No. The factsheet is explicit that the main residence exemption is preserved. The four small business CGT concessions and the existing 60% CGT discount on qualifying affordable housing are also unchanged.
When does the reform take effect, and what about disposals before then?
The reform applies to capital gains accruing from 1 July 2027 onwards. CGT events before that date (usually the contract date, not settlement) use today's rules, including the 50% discount on assets held more than 12 months. For an asset owned before 1 July 2027 and sold after, the gain is split: the pre-2027 portion uses the 50% discount, and the post-2027 portion uses indexation plus the 30% minimum tax — there is no tax until the asset is actually sold.
