In the Federal Budget on 12 May 2026, the Australian government proposed significant changes to the Capital Gains Tax (CGT) arrangements.
These measures have been passed by parliament and as they are now law, they will take effect from 1 July 2027.
A brief history of Capital Gains Tax
CGT was introduced in 19 September 1985 for assets purchased after this date and initially calculated taxation using the indexation method. That is calculating the capital gains taxation based adjusting for inflation based on the Consumer Price Index (CPI), so that only “real” gains were taxed.
Assets purchased prior to 19 September 1985 are CGT free.
In 1999 indexation was replaced with the 50% discount, whereby 50% of the capital gain was taxable for assets held for more than 12 months.
In both cases the capital gain was taxed at for individuals their marginal tax rate. Hence many people would often undertake asset sales when they may have been at lower taxation rates – for example, retired or contributing into superannuation to offset.
For instance, there are many “retired” people that have a small taxable income and are slowly selling down their share portfolio to keep their income below $18,200, effectively paying no tax.
What has been implemented from the 2026-27 budget?
The changes that have been introduced are:
- replacing the current 50 per cent CGT discount with a discount based on the actual rate of inflation, in effect returning to the way CGT was calculated when it was introduced
- a minimum 30 per cent tax on gains from 1 July 2027, the effective tax on capital gains would not fall below 30%, regardless of an individual’s marginal tax rate
- assets acquired before 20 September 1985 (currently exempt) will become subject to CGT on gains accruing from 1 July 2027.
New residential properties
For qualifying new residential properties (generally those that add to housing supply and meet specific criteria), taxpayers will have the option, on disposal, to choose between:
- applying the existing CGT discount regime (i.e. the 50% discount where eligibility criteria are satisfied); or
- applying the new framework, which includes:
- indexation of the cost base (so that only real, inflation‑adjusted gains are taxed), and
- a minimum 30% tax rate on the resulting capital gain.
Superannuation and self-managed superannuation funds
The taxation of capital gains within the superannuation system remains unchanged, including the continued availability of the concessional one-third CGT discount for assets held by complying superannuation funds for more than 12 months. Accordingly, superannuation will continue to operate under its existing tax framework for long-term capital gains.
Assets bought before 1 July 2027
Assets owned before 1 July 2027 are subject to the following arrangements:
- gains accrued before 1 July 2027 will continue to receive the existing 50 per cent CGT discount,
- while gains accruing after 1 July 2027 will instead be taxed under the new CPI indexation and minimum 30% tax framework.
Taxpayers will need to determine the asset’s value at 1 July 2027, either through a market valuation which must be objective and supportable.
For example:
Shares: the closing share price as at 30 June 2027, this date is readily and historically available on various ASX Reporting.
Property: market valuation. Further details will be shared in a later newsletter as the ATO provides more information.
Example of how this will work
Property purchased 1 January 2010 for $500,000 sold 31 December 2030 for $1,200,000
- Calculation of capital gain 1 Jan 2010-30 June 2027
- Firstly, the asset needs to be valued at 30 June 2027 for the purposes of this example was $1,000,000
- Capital gain is valuation of $1,000,000 less cost $500,000 = $500,000 of as the property was owned for more than 12 months discounted 50%
- Taxable amount = $250,000
- Calculation of capital gain 1 July 2027 to 31 December 2030 (date of sale).
- 30 June 2027 valuation adjusted for inflation to date of sale based on CPI (note the ATO will publish this information)
- If inflation for the 3 years has been 10%, the 30 June 2027 value will be adjusted to $1,100,000 being $1,000,000 + 10% increase
- Capital gain = sales price $1,200,000 – adjusted value $1,100,000 = $100,000 gain
- Total capital gain = $350,000 ($250,000 + $100,000) of which is taxed at marginal taxation rates noting that $100,000 is taxed at a minimum of 30%.
We will continue to share further updates on the Capital Gains Tax changes as information is released.
If you need help navigating this or wish to discuss this further, please contact us.