Capital Gains Tax Changes Australia 2027: Discount Replaced by Indexation
Australia’s current CGT discount
Under existing rules, if you hold an asset (investment property, shares, cryptocurrency, etc.) for 12 months or more before selling, only 50% of your capital gain is included in your taxable income. The other 50% is effectively exempt. This 50% CGT discount has been a cornerstone of Australia’s investment tax settings since 1999.
For superannuation funds, the applicable discount is 10% (unchanged by this policy).
What changes from 1 July 2027?
The 12 May 2026 Federal Budget announced that from 1 July 2027, the 50% CGT discount will be replaced with:
-
Indexation of the cost base — the original purchase price is adjusted for inflation (using the Consumer Price Index) before calculating the gain. Only the portion of the gain above inflation is subject to tax.
-
A minimum effective tax rate of 30% on the real (inflation-adjusted) gain for assets held 12+ months.
Exception: new residential builds are excluded from the CGT changes — the existing 50% discount continues for new builds. This aligns with the negative gearing changes to encourage new construction.
Superannuation funds: the 10% CGT discount for super funds is not affected.
Is this retrospective?
No — the changes are not retrospective. This is critical:
Gains accrued before 1 July 2027 on assets you currently hold will still benefit from the 50% discount when you sell — even if you sell after 1 July 2027.
In practice, gains will be apportioned between the pre-1/7/2027 period (old 50% discount applies) and the post-1/7/2027 period (new indexation rules apply). The ATO will provide guidance on the exact apportionment methodology.
Who is most affected?
| Investor type | Impact |
|---|---|
| Long-term property investors with pre-2026 holdings | Gains accrued to date are protected; future accruals from 2027 face new rules |
| Investors who buy existing properties after 12/5/2026 | Gains from 1/7/2027 onward lose the 50% discount |
| Investors in new builds (any timing) | No change — 50% discount retained |
| Superannuation funds | No change — 10% discount retained |
| Owner-occupiers (main residence) | No change — main residence exemption is unaffected |
Indexation vs 50% discount — which is better?
The answer depends on inflation and your holding period:
- In a low-inflation environment, the 50% discount typically produced a lower tax liability than indexation. The new rules will mean more tax for most investors in this scenario.
- In a high-inflation environment over many years, indexation can erode the taxable gain significantly — in some cases producing a result comparable to the old 50% discount.
For most practical scenarios over a typical holding period (5–15 years with moderate inflation), the shift from the 50% discount to indexation + minimum 30% tax is expected to increase the CGT liability on exit.
Interaction with negative gearing changes
The CGT changes are announced alongside negative gearing changes that limit negative gearing on existing properties purchased after 12 May 2026 (see the negative gearing article in this section). Together, these two changes mean:
- Lower tax deduction benefit while holding (no negative gearing on salary).
- Higher CGT on exit.
Investors considering existing property purchases after 12 May 2026 need to model both effects carefully with a qualified tax accountant.
What should I do now?
- If you’re holding existing investments: no immediate action — your accrued gains to date are protected under the old rules.
- Considering selling before 1 July 2027? Run the numbers with your accountant. In some cases, selling before the changeover date and crystallising the full 50% discount may be advantageous — but this depends on your tax situation, marginal rate, and the specific asset.
- Buying new investment assets? Consider new builds where the 50% discount remains intact.
- Watch for ATO guidance on how gains will be apportioned for assets held across the transition date — the legislation will contain the definitive methodology.
Reflects Budget announcement of May 2026. Legislation may modify the details. Not personal tax advice.