Why the change?

In short: tax the real profit, not the inflation. The 50% discount was a 1999 shortcut for stripping inflation out of capital gains. However, in low-inflation years, it hands investors a far bigger break than inflation justifies, so a dollar earned on assets is often taxed at half the rate of a dollar earned at work. The new rules aim to fix that: only real gains are taxed; investment profits are taxed more like wages, and the revenue funds tax cuts for workers, including the $250 tax offset and $1,000 standard deduction in the same Bill.

What is changing

The 2026-27 Federal Budget delivered the most significant capital gains tax reform in Australia since 1999. From 1 July 2027, the longstanding 50% CGT discount will be abolished. In its place, the Government is introducing CPI-based cost base indexation, meaning only the real, inflation-adjusted gain will be taxed. In addition, there will be a new 30% minimum tax on capital gains accruing from 1 July 2027, applying to resident individuals, with an exemption for recipients of means-tested income support payments such as the Age Pension. The changes apply broadly across CGT assets: shares, ETFs, managed funds, and investment properties. Companies generally retain their existing treatment, having never benefited from the discount, and superannuation funds retain their one-third CGT concession. One important exception: gains accruing from 1 July 2027 on pre-1985 (pre-CGT) assets will become taxable for all taxpayers, including companies. The main residence exemption and the small business CGT concessions are unchanged.

How the transition works

In simple terms, every gain on an asset you already hold will be split into two parts:

• Growth accrued before 1 July 2027 stays under the current rules, so the 50% CGT discount generally still applies to this part
• Growth accrued from 1 July 2027 falls under the new rules: CPI indexation of the cost base, plus a 30% minimum tax on the real (inflation-adjusted) capital gain

The new regime applies only to gains arising on or after 1 July 2027. For assets already held at that date, the gain will be split: the 50% discount is preserved for growth accrued up to 1 July 2027, while growth after that date is taxed under indexation and the minimum tax when the asset is eventually sold. This requires the asset’s value at 1 July 2027 to be established, either by valuation or under an ATO apportionment method yet to be released. Owners of unlisted or hard-to-value assets should consider obtaining contemporaneous valuations at that time. Investors in new residential builds may elect between the old and new regimes. A Bill implementing these measures was introduced into the House of Representatives on 28 May 2026 and has been referred to the Senate Economics Legislation Committee; several key details will follow in separate legislative instruments and may change.

What you should do now

For investors with long-held assets carrying significant embedded gains, the timing of any future disposal warrants careful consideration. Depending on an asset’s acquisition date, holding period, and the investor’s marginal tax rate, outcomes under the two regimes can differ materially. Portfolio reviews and modelling of CGT positions ahead of the 30 June 2027 transition are advisable. We recommend speaking with your adviser to understand how these changes interact with your specific investment structure.