Capital gains tax (CGT) has just gone through its biggest shake-up in over 25 years. In June 2026, Parliament passed the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026, receiving Royal Assent on 26 June 2026. From 1 July 2027, the familiar 50% CGT discount will be replaced with a system based on cost base indexation and a 30% minimum tax rate.
If you already own shares, an investment property, or units in a managed fund, you’re probably wondering what this means for you. The good news is that the changes aren’t retrospective, but they’re not fully “set and forget” either, especially if you plan to sell an asset after the cut-off date. This guide walks through how CGT used to be calculated, how it will be calculated for assets you already hold, and how the new rules apply going forward, with worked examples throughout.
This article is general information only and doesn’t take into account your personal circumstances. Speak with a registered tax agent or financial adviser before making decisions based on it.
What Is Capital Gains Tax?
CGT isn’t a separate tax: it’s part of Australia’s income tax system. When you sell (or otherwise dispose of) an asset like shares, a rental property, or units in a trust for more than it cost you, that profit is a “capital gain” and gets added to your assessable income for the year, generally taxed alongside your other income.
CGT was introduced in 1985 to stop people converting what would ordinarily be salary or business income into capital gains to reduce their tax bill. A handful of exemptions have always applied, most importantly your main residence.
How CGT Used to Be Calculated (The Pre-Reform Rules)
Until the reform takes effect, and for any gains you’ve already accrued, CGT is calculated the way it always has been. Here’s the process:
1. Work out your capital gain or loss. Subtract your cost base (what you paid for the asset, plus associated buying, holding, and selling costs) from what you sold it for. A positive result is a capital gain; a negative result is a capital loss.
2. Total up multiple assets. If you sold more than one asset in the year, add up the gains and losses across all of them.
3. Apply the 50% CGT discount. If you’re an individual or a trust and held the asset for more than 12 months, you only include half the gain in your taxable income.
4. Offset any capital losses. Losses reduce your gross (pre-50% discount) capital gains in the same year. If losses exceed gains, you carry the excess forward to future years.
5. Add the net capital gain to your income tax return. It’s taxed at your marginal rate, alongside your salary and other income.
Worked example: property (under the old rules). You bought an investment property for $400,000 and later sold it for $600,000. Total buying, improvement, and selling costs came to $50,000, giving a cost base of $450,000. Your capital gain is $150,000. Because you held the property for more than 12 months, the 50% discount applies, so only $75,000 is added to your taxable income.
Worked example: shares (under the old rules). You bought shares for $20,000 and sold them for $30,000, incurring $2,000 in brokerage. Cost base: $22,000. Capital gain: $8,000. After the 50% discount: $4,000 taxable.
The 2026 CGT Reform: What’s Changing and When
From 1 July 2027, four key changes take effect for individuals, trusts, and partnerships:
- The 50% CGT discount is removed for assets held more than 12 months.
- Cost base indexation returns. Instead of a flat 50% discount, your cost base is adjusted upward for inflation (CPI), so tax applies only to the “real” gain: growth above and beyond inflation. This is actually a return to how CGT worked between 1985 and 1999, before the 50% discount was introduced.
- A new 30% minimum tax rate applies to real capital gains. No matter your marginal tax rate, the effective rate on the taxable (indexed) portion of a gain won’t fall below 30%, though there’s an exemption for taxpayers receiving income-support payments (like the Age Pension or JobSeeker) in the year the gain is realised.
- Pre-CGT assets are brought into the system. Assets bought before 20 September 1985 (previously outside CGT entirely) will now be taxed on the growth that accrues from 1 July 2027 onwards. Gains that built up before that date remain exempt.
Some things are staying the same. The main residence exemption is untouched: your home remains CGT-free. Superannuation is unaffected, including the concessional one-third discount that complying super funds already receive. The four small business CGT concessions remain, and the turnover threshold for the 50% active asset reduction is actually rising, from $2 million to $10 million. The 60% discount for qualifying affordable housing investments is retained. And eligible new residential developments get a choice at sale between the old 50% discount and the new indexed/minimum-tax framework, to avoid discouraging new housing supply.
If You Bought Before 1 July 2027: How Your CGT Will Be Calculated
This is the part that matters most if you already hold investments, and it’s the part your existing portfolio isn’t automatically “grandfathered” out of.
Here’s the mechanism: every CGT asset you still hold at 30 June 2027 is treated as if it were sold and immediately reacquired at its market value on that date. No tax is triggered by this “deemed disposal” itself; it simply creates a dividing line for calculating your eventual gain when you actually sell:
- The portion of your gain that accrued up to 30 June 2027 continues to be calculated under the old rules, including the 50% discount, and is taxed at your marginal rate.
- The portion that accrues from 1 July 2027 onward is calculated under the new rules: cost base indexation plus the 30% minimum tax.
Both portions are only actually taxed when you eventually sell the asset; the deemed disposal doesn’t trigger a tax bill in 2027 itself.
To work out the split, you have two options:
- Get a market valuation as at 1 July 2027 (the primary method): for listed shares or ETFs this is usually just the closing price; for property, a formal valuation.
- Elect to use a statutory time-based apportionment formula, which estimates the split based on how long you held the asset before and after 1 July 2027, assuming gains accrued evenly.
If you don’t obtain your own valuation, the ATO will default to the time-apportionment method, which can work against you if most of the asset’s growth happened earlier in your ownership (common for property or long-held shares), since it assumes growth was spread evenly across the whole period.
Worked example: a property straddling the cut-off. Say you bought an investment property in July 2015 for $400,000 (cost base). You get it professionally valued as at 1 July 2027, and it’s worth $700,000. You eventually sell it in 2032 for $900,000.
- Pre-reform portion: $700,000 − $400,000 = $300,000 gain. The 50% discount applies, so $150,000 is added to your assessable income in the year of sale, taxed at your marginal rate.
- Post-reform portion: Your new cost base of $700,000 is indexed for inflation between 1 July 2027 and the 2032 sale date, which lifts it to roughly $750,000. The real gain is $900,000 − $750,000 = $150,000, taxed at a minimum of 30% (so at least $45,000 in tax on this portion, or more if your marginal rate is higher).
The exact indexation and apportionment figures will depend on actual CPI movements and which apportionment method you use, but the shape of the calculation (split the gain at the 1 July 2027 boundary, apply old rules to one side and new rules to the other) will be the same for most assets you already hold.
How CGT Will Be Calculated Under the New Rules (Assets Bought After 1 July 2027)
For anything you buy from 1 July 2027 onward, the new system applies in full, from day one:
- Establish your cost base as usual (purchase price plus buying and holding costs).
- Index the cost base for inflation (CPI) for the period you hold the asset.
- Calculate the real gain: sale price minus the indexed cost base.
- Apply tax at the higher of your marginal rate or the 30% minimum (subject to the income-support exemption noted above).
Worked example: shares bought after the reform. You buy shares in August 2027 for $20,000. You sell them in August 2032 for $32,000. Assume CPI indexation lifts your cost base to roughly $23,000 over that period. Your real (taxable) gain is $9,000, and at minimum you’d pay 30% tax on it (around $2,700), regardless of your marginal rate, unless that rate is higher.
Compare that with what would have happened under the old system: a $12,000 nominal gain, halved by the 50% discount to $6,000 taxable at your marginal rate. Whether the new system leaves you better or worse off depends heavily on inflation over the period and how much of your return was “real” growth versus simply keeping pace with prices: high-inflation, low-growth periods tend to favour indexation, while strong real growth tends to favour the old discount.
Why Record-Keeping Matters More Than Ever
Good record-keeping was always important for CGT: now it’s essential. On top of your usual purchase, sale, and cost-base records, you’ll want to keep:
- A defensible valuation of every asset you hold as at 1 July 2027 (or documentation supporting your choice to use the time-apportionment method instead).
- Records of any CPI indexation applied to your cost base going forward.
- Documentation of pre-CGT asset values, if applicable, since gains on these assets are no longer automatically exempt after 1 July 2027.
Frequently Asked Questions
Is CGT changing in Australia? Yes. Legislation has already passed and received Royal Assent, replacing the 50% CGT discount with cost base indexation and a 30% minimum tax rate from 1 July 2027.
Does this affect my family home? No. The main residence exemption is unchanged.
Do I need to get my investments valued before 1 July 2027? It’s optional but often worthwhile: a market valuation locks in the pre-reform portion of your gain rather than relying on the default time-apportionment formula, which can produce a less favourable result if most of your growth happened early in your ownership.
Will I pay more tax under the new rules? It depends on your circumstances, how long you hold assets, and inflation over that period, but for many investors with strong real (above-inflation) growth, the outcome is likely to be higher tax than under the old 50% discount.
Get Advice Tailored to Your Situation
Every taxpayer’s mix of assets, purchase dates, and long-term plans is different, and the transition rules add a genuine layer of complexity on top of an already technical area of tax law. If you’d like help working out how these changes affect your specific investments, or want a hand deciding whether a 1 July 2027 valuation is worth getting, contact the team at Tax Stuff or speak with Brad on 02 4319 4910.
