What is the 50% CGT discount — and why is it changing?
Since 21 September 1999, if you held an asset for more than 12 months before selling, you only paid tax on half of your capital gain. The other half was completely tax-free. This applied to shares, investment properties, ETFs, managed funds — almost any personally held asset.
For a high-income earner on the top marginal rate of 45%, the effective CGT rate was 22.5% (plus Medicare Levy). For a middle-income earner on 32.5%, it dropped to 16.25%. This made long-term investing extraordinarily tax-efficient in Australia.
The Albanese Government's view: the discount has contributed to rising asset prices — particularly property — and disproportionately benefits high-income investors. The 2026–27 Budget replaces it with a system designed to tax only real gains above inflation.
What replaces it — the two new mechanisms
From 1 July 2027, two things apply together:
1. CPI indexation of your cost base
Instead of halving your gain, you index your cost base by the Consumer Price Index (CPI) from the purchase date to the sale date. This means if your asset grew in line with inflation, you pay no tax. You only pay tax on the gain above inflation — the real gain.
This is a return to how CGT worked from 1985 to 1999, but with one key difference: the old system froze the CPI at September 1999. The new system will use live, ongoing CPI — so your cost base keeps growing with inflation indefinitely.
2. A 30% minimum tax on real gains
After indexation, any remaining real gain is subject to a minimum 30% tax rate. This means even if your marginal tax rate is lower (say, 16%), you'll still pay at least 30% on the real capital gain.
Exception: if you receive means-tested government payments such as the Age Pension or JobSeeker in the year of sale, the 30% minimum is waived — you pay at your actual marginal rate.
The transitional rules — the most important part for existing investors
If you already own assets, the transition works like this:
- Assets sold before 1 July 2027: Nothing changes. Current rules apply — 50% discount as usual.
- Assets purchased on or after 1 July 2027: Fully subject to the new rules from day one.
- Assets you already hold and sell after 1 July 2027: The gain is split at 1 July 2027.
How the split works
For assets you already own, the gain is divided into two portions at 1 July 2027:
- Pre-2027 gain (from your purchase price to the asset's value at 1 July 2027) → 50% CGT discount applies → taxed at your marginal rate
- Post-2027 gain (from the asset's value at 1 July 2027 to your sale price) → CPI indexed from 1 July 2027 + 30% minimum tax
To determine the split, you can either get a formal market valuation of your asset at 1 July 2027, or use an ATO-approved apportionment formula that estimates the value based on the asset's growth over the holding period.
Real examples — shares
Example 1: Selling shares in 2029 — held since 2018
Real examples — investment property
Example 2: Investment property purchased 2015, sold 2030
Note that in this property example, the new rules actually produce a slightly lower tax bill — because the post-2027 portion benefits from CPI indexation, which is significant over three years of higher inflation. The outcome varies depending on inflation, holding period, and your income.
New builds — a special carve-out
New residential builds are excluded from the new CGT framework. Investors who purchase a newly constructed property can choose to apply either the old rules (50% discount) or the new rules (CPI indexation + 30% minimum), whichever produces a better outcome.
This is designed to incentivise construction of new housing and maintain attractiveness of new build investment.
What about negative gearing?
The Budget also proposes changes to negative gearing from 1 July 2027. For established properties purchased after 12 May 2026, net rental losses can only be offset against rental income — not against wages or other income. Excess losses carry forward to future years.
Properties purchased before 12 May 2026, and all new builds, are unaffected.
Key dates to remember
| Date | What happens |
|---|---|
| 12 May 2026 | Budget announced. Negative gearing cut-off for established properties purchased after this date. |
| Before 1 Jul 2027 | Current rules apply. Consider whether to sell before new rules commence. |
| 1 July 2027 | New CGT rules start (subject to Parliament). 50% discount replaced for most assets. |
| 30 June 2028 tax return | First year some investors will need to report split-treatment gains. |
What should you do now?
This is not a call to panic-sell. But it is worth reviewing your portfolio with a few questions in mind:
- Do you have assets with large unrealised gains that you were planning to sell in the next few years anyway? Selling before 1 July 2027 locks in the 50% discount on the entire gain.
- Do you own new builds? You'll retain the ability to choose the most favourable method.
- Are you planning to buy investment property after 12 May 2026? The negative gearing restriction applies from that date.
- What is your asset's likely value at 1 July 2027? Getting a valuation locked in around that date (for listed securities, quoted prices are acceptable) will give you a precise transitional split.
Calculate your exact CGT position
Enter your asset details and instantly compare what you'd pay under current rules versus the proposed 2027 changes — including the pre/post 2027 transitional split.
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