2027 CGT Changes: The End of the 50% Discount Explained

From 1 July 2027, Australia's capital gains tax system undergoes its biggest overhaul since the 50% discount was introduced in 1999. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 — announced in the 2026–27 Federal Budget and passed by Parliament on 25 June 2026 — replaces the flat 50% CGT discount with inflation indexation of the cost base, and introduces a 30% minimum tax on capital gains accruing after the start date.

Here's the whole reform in one table:

The stated policy goal is that investors should only pay tax on their real capital gain — the growth above inflation — rather than receiving an arbitrary 50% reduction that over-rewards short holding periods and under-rewards very long ones.

Everything in this guide reflects the final legislation as passed, including the 33 Senate amendments that changed several details from the original Budget announcement.

The reform package has five different start dates depending on the measure. Missing the distinction between them is the most common error in coverage of these changes.

Two points people consistently get wrong:

The reform is prospective. Gains that accrued before 1 July 2027 keep the old treatment — including the 50% discount — even if you sell years later. Only growth after 1 July 2027 falls under indexation and the minimum tax. The mechanics are covered in the transition rules section.

Nothing happens to your 2025–26 or 2026–27 tax returns. If you sell any asset before 1 July 2027, the current rules apply in full: 50% discount, no minimum tax, pre-CGT assets fully exempt.

Australia has been here before. The 2027 reform is less a brand-new idea than a return to the original design of capital gains tax.

1985–1999: the original indexation era

When CGT was introduced on 20 September 1985, there was no discount. Instead, your cost base was indexed for inflation using the Consumer Price Index — you only paid tax on your real gain. This is exactly the mechanism returning in 2027.

1999–2027: the 50% discount era

In September 1999, the Howard government froze indexation and replaced it with the 50% discount. The pitch was simplicity: halve the gain, skip the CPI tables. But the discount created two well-documented distortions:

• It over-rewards short holds. An investor who holds an asset for 12 months and one day gets the same 50% reduction as one who holds for 30 years — even though inflation has eroded far more of the long-term holder's gain.
• It taxes nominal gains that aren't real. In high-inflation years, investors paid tax on "gains" that were entirely inflation. Conversely, in low-inflation periods the 50% discount was far more generous than actual inflation justified.

2027 onward: indexation returns, with a floor

The new system restores inflation indexation — but adds something the pre-1999 system never had: a 30% minimum tax rate on real gains. This closes the long-standing strategy of deferring asset sales into low-income years (retirement, career breaks, income-splitting arrangements) to realise gains at low marginal rates.

The combined effect: whether the new system costs you more than the old one depends on your asset's growth rate relative to inflation. Fast-growing assets (high real returns) did better under the flat 50% discount. Slow-growing assets can actually do better under indexation — the property worked example below shows a real case where the new rules produce less tax.

From 1 July 2027, if you hold a CGT asset for at least 12 months, your cost base is uplifted by CPI inflation between acquisition and disposal:

Indexed cost base = cost base × (CPI at disposal ÷ CPI at acquisition)

Your capital gain is then simply capital proceeds minus indexed cost base, added to your assessable income in full — no discount step.

The key mechanical rules

• 12-month holding period still applies. Assets held less than 12 months get no indexation — the full nominal gain is taxable, exactly like the old rules denied the discount for short holds.
• Ownership costs are not indexed. All cost base elements are indexed except the third element (costs of ownership — interest, rates, land tax, insurance and maintenance for post-August 1991 assets). This mirrors the pre-1999 indexation rules.
• Indexation cannot create or increase a capital loss. If your proceeds fall between your nominal cost base and your indexed cost base, the result is no gain and no loss — not a loss. This is the same "frozen zone" rule that applied before 1999.
• Capital losses are never indexed. Losses are calculated on nominal (reduced) cost bases, and nominal losses continue to offset indexed gains.

A simple example

You buy an ETF parcel for $50,000 in August 2027 and sell it for $70,000 in August 2031. Over those four years, CPI rises 10.4% (about 2.5% a year).

At a 37% marginal rate, the new rules cost $1,776 more tax on this disposal — before considering the 30% minimum, which doesn't bite at this income level.

What about the CPI figures?

Indexation uses the ATO-published CPI index numbers (All Groups, weighted average of eight capital cities) — the same series used for pre-1999 indexation, un-frozen from its September 1999 value of 68.7. The ATO will publish quarterly factors, and our CGT calculator will apply them automatically once the 2027–28 factors are released.

The second pillar of the reform is a minimum 30% tax rate on capital gains accruing after 1 July 2027 — new Division 119 of the tax law. This is the piece most coverage explains badly, so here is exactly how it works.

How it's calculated

1. Work out your real (indexed) capital gain under the new rules
2. Work out the income tax payable on that gain at your ordinary marginal rates — the gain is treated as the top slice of your income
3. If that tax works out to less than 30% of the gain, a top-up tax applies to bring the total to exactly 30%
4. If your marginal rate already produces 30% or more, nothing changes — the minimum tax adds nothing

The minimum is a floor, not a flat rate. High-income earners still pay at 37% or 45% on their gains. The floor only affects taxpayers whose marginal rate on the gain would otherwise be below 30% — broadly, those with taxable income in the 0%, 14% or low-30% bracket range.

Who the floor actually hits

The design target is the classic deferral strategy: realising large gains in years of deliberately low income — after retirement, during a career break, or through income splitting. From 2027–28, a $200,000 real gain realised by someone with no other income pays at least $60,000 in tax, where under the old rules it could have attracted as little as ~$30,000 after the discount and low brackets.

Who is exempt

The final legislation hard-codes an exemption list (section 119-15) for recipients of means-tested income support, including:

• Age Pension, Disability Support Pension, Carer Payment
• JobSeeker, Parenting Payment, Youth Allowance, Austudy, ABSTUDY living allowance
• Family Tax Benefit, Parental Leave Pay, Farm Household Allowance, Special Benefit
• Specified DVA and MRCA veterans' payments

Exempt recipients still lose the 50% discount and move to indexation — but their real gains are taxed at ordinary marginal rates with no floor. A self-funded retiree and an Age Pensioner selling the same shares can face very different tax bills.

The charity carve-out

A Senate amendment allows deductible gifts and donations (Division 30) and conservation covenant deductions (Division 31) to reduce the minimum-tax base. If you make substantial deductible donations in the year you realise a gain, your effective rate on the gain can legitimately fall below 30%.

Worked example: the floor in action

Margaret is a self-funded retiree (not on the Age Pension) with $15,000 of interest income. She buys shares for $40,000 in September 2027 and sells them for $62,000 in November 2029, when CPI has risen 5.06% since purchase.

Under the old rules, Margaret's discounted gain of $11,000 would have attracted just $1,248 of tax. The new floor nearly quintuples her bill. If she had been receiving the Age Pension, the floor wouldn't apply and she'd pay $2,684.

This is the section that matters for almost everyone reading before 1 July 2027. The reform is prospective — but the way the law achieves that is precise, and it creates a real to-do item.

The deemed disposal and reacquisition

Every CGT asset you hold at the end of 30 June 2027 is deemed to be disposed of just before 1 July 2027 and immediately reacquired at market value. No tax is payable at that moment — the deemed disposal exists purely to draw a line between the old and new regimes.

When you eventually sell, your gain is split in two:

How the split is measured

The default method is market valuation at 1 July 2027:

• Listed shares, ETFs and managed funds — the closing price / published unit price on 30 June 2027 does the job. Brokers and registries will have this data forever; low stress.
• Property, crypto and unlisted assets — you need evidence of market value at the transition date. For property, a contemporaneous valuation or even a written agent appraisal obtained around July 2027 is dramatically cheaper and more defensible than reconstructing a 2027 value during an ATO review in 2035.

The Act also provides an alternative: a taxpayer can elect a Minister-determined apportionment method (broadly, splitting the gain by time held before and after 1 July 2027) instead of using market valuation. The determination hadn't been published as at July 2026 — but the election means taxpayers who never obtained a valuation won't be stranded, and those who did can choose whichever method produces the better outcome.

What this means in practice

Because you can pick the better of two methods, the transition creates a genuine — and entirely legitimate — planning asymmetry:

• If your asset's value peaks around mid-2027, a market valuation locks the maximum possible gain into the discounted pre-2027 bucket
• If your asset was temporarily depressed in mid-2027, time apportionment may allocate more gain to the discounted bucket

You can only exploit that choice if you have a 1 July 2027 valuation on file. That's the single most valuable thing any investor can do before the start date.

Buried in the reform is a change that has received far less attention than the discount removal, but is arguably more historic: assets acquired before 20 September 1985 — exempt from CGT for over 40 years — become taxable on their post-2027 growth.

How it works

Pre-CGT assets get the same deemed reacquisition as everything else: their market value at 1 July 2027 becomes their deemed cost base. From that date:

• All growth up to 1 July 2027 — often four decades of appreciation — remains permanently exempt
• Growth after 1 July 2027 is taxed under the new rules: indexation from the deemed cost base, plus the 30% minimum

Example: the family beach house

A holiday house (never a main residence) bought in February 1984 for $95,000 is worth $1,400,000 on 1 July 2027. It sells in July 2032 for $1,620,000, with CPI up 12% over those five years.

Under the pre-reform law, the entire $525,000 nominal gain since 1984 would have been completely tax-free. Under the new law, the owner pays tax on $52,000 — at least $15,600.

The planning question

Owners of significantly appreciated pre-CGT assets face a genuine decision: dispose before 1 July 2027 and keep the full exemption, or hold and accept tax on future real growth only. The right answer depends on expected growth, holding costs, family plans and non-tax factors — but for the first time since 1985, "it's pre-CGT, there's nothing to think about" is no longer true.

Valuation evidence matters even more here: for pre-CGT assets, the 1 July 2027 market value isn't just splitting a gain between two concessions — it's the line between tax-free and taxable.

The final law preserves exactly one asset class where the 50% CGT discount survives: new residential dwellings. This is deliberate housing policy — the same carve-out logic that exempts new builds from the negative gearing quarantine.

How the election works

An investor who buys a qualifying new residential dwelling can choose, when they eventually sell, between:

1. The old treatment — 50% CGT discount, no indexation, ordinary marginal rates (no 30% floor), or
2. The new treatment — inflation-indexed cost base plus the 30% minimum tax

You don't have to decide at purchase — the election is made on disposal, with full hindsight about which method produces less tax. Broadly, fast capital growth favours the discount; slow growth in a low-income year favours indexation only if the 30% floor doesn't erase the benefit.

What counts as a "new residential dwelling"?

This is the reform's biggest remaining open question. The Act leaves the definition to a legislative instrument that hadn't been released as at July 2026. The explanatory materials point to:

• Dwellings that genuinely add to housing supply
• Newly built properties purchased from a builder/developer, not previously occupied (or occupied under 12 months)
• Off-the-plan purchases are expected to qualify

Two traps flagged in the explanatory materials:

• The status doesn't travel. A dwelling is "new" for its first investor purchaser only — when they sell, the next buyer holds an established dwelling under the ordinary new rules.
• Owner-occupied homes don't need it. The main residence exemption is untouched, so the election only matters for investment purchases.

Why it matters for property investors

From 1 July 2027, the choice between a new build and an established investment property carries a permanent tax wedge:

Model both sides with our CGT calculator and check the main residence interaction with the MRE calculator.

Priya earns a salary of $110,000. She buys shares for $100,000 in August 2027 and sells them in August 2030 for $160,000. CPI rises 2.5% a year over her three-year holding period. (All figures exclude Medicare levy and offsets.)

New rules (what actually applies)

Old rules (for comparison)

The verdict

Priya's shares grew at roughly 17% a year — far above inflation — so indexation stripped out much less of her gain than the flat 50% discount used to. This is the typical outcome for strong share portfolios, crypto and start-up equity: the faster the real growth, the bigger the increase versus the old rules.

Notice the 30% minimum was irrelevant here — at a $110,000 salary, Priya's marginal rates already exceed the floor. For middle and high earners, the reform's cost comes from losing the discount, not from the minimum tax.

Now the transition rules in action — including a result that surprises most people: the new system can produce less tax than the old one.

Tom (top marginal rate, 45%) bought an investment property in March 2020 with a total cost base of $640,000. Its market value on 1 July 2027 (he kept an agent appraisal) is $900,000. He sells in March 2031 for $1,050,000. CPI rises 9.5% between July 2027 and March 2031. (Figures exclude Medicare levy.)

Step 1 — split the gain at 1 July 2027

Step 2 — tax each portion under its own rules

Step 3 — compare with the old rules

Had the reform never happened: nominal gain $410,000, 50% discount → $205,000 assessable → tax $92,250.

Tom pays $4,725 less under the new system.

Why the new rules won here

Tom's property grew about 4% a year after 2027 while inflation ran at 2.5% — so inflation made up ~57% of his post-2027 gain, and indexation removed more of it than the 50% discount would have. Combined with the discount being fully preserved on his larger pre-2027 gain, the transition treated him well.

Flip the numbers — a property doubling between 2027 and 2031 — and the old rules would have won comfortably. The lesson: you cannot eyeball which regime costs more. It depends on growth rate vs inflation, the pre/post-2027 split, and your income in the year of sale. Our CGT calculator will model both regimes side by side once the 2027 engine update ships.

The reform targets the entities that currently receive the 50% discount. Everyone else's treatment is deliberately untouched.

Trusts: more reporting, same flow-through logic

Trustees must now track and report gains to beneficiaries across four categories (pre/post-2027 × discountable/indexed), replacing today's two. The familiar gross-up mechanics from our CGT discount guide carry over in modified form. Note this is separate from the 30% minimum tax on discretionary trust distributions, which starts later (1 July 2028) under a different measure.

Super becomes relatively more attractive

An SMSF keeps its 33.33% discount and 15% rate — an effective 10% on discounted gains, or 0% in pension phase. With individuals moving to indexation plus a 30% floor, the gap between holding growth assets inside vs outside super widens substantially from 2027–28. (Note the new LRBA restriction if your SMSF strategy involved borrowing to buy residential property.)

Companies barely notice

Companies never had the discount, and they don't get indexation either. For fast-growing assets, the individual-vs-company gap narrows: an individual on the top rate now pays up to 45% on most of a real gain, while a company pays a flat 25–30% on the nominal gain (with franking on distribution). Expect structuring conversations that were settled a decade ago to reopen.

The Bill passed on 25 June 2026 only after 33 amendments negotiated primarily between the Government and the Greens. Five materially change how the reform works compared with the Budget-night announcement — if you read analysis published in May 2026, these are the deltas:

1. New builds are the only surviving discount class

The original bill included a ministerial power to designate additional asset classes eligible for the 50% discount by regulation. Removed. New residential dwellings are now the sole hard-coded exception.

2. The welfare exemption is codified

The exemption from the 30% minimum tax was originally left to a ministerial instrument. The final Act hard-codes the list of qualifying income-support payments in section 119-15 — see the minimum tax section for the full list.

3. Charitable giving can reduce tax below the floor

Deductible gifts (Division 30) and conservation covenant deductions (Division 31) now reduce the minimum-tax base. Large donors can legitimately pay less than 30% on real gains in the year of the gift.

4. Small business active-asset reduction expanded

The turnover threshold for the 50% active asset reduction rises from $2 million to $10 million aggregated turnover from 2027–28 — partial compensation to small business owners for losing the general discount. The other three Division 152 concessions keep their existing $2 million / $6 million net asset tests. Model the concession stack with our small business CGT calculator.

5. New SMSF borrowing restriction (from 10 August 2026)

Entirely new measure: from 10 August 2026, new SMSF limited recourse borrowing arrangements (LRBAs) over real property are restricted to business real property only — no new geared residential property inside SMSFs. Existing arrangements and their refinancings are grandfathered.

What didn't pass

• The Greens' "one dwelling only" cap on negative gearing grandfathering — grandfathering for pre-Budget-night dwellings remains unlimited
• All of Senator Pocock's amendment sheets

The same Act quarantines negative gearing for established residential property — and the two measures are designed to push in the same direction. Property investors need to read them together.

The negative gearing rules in brief

From 2027–28, net rental losses on residential dwellings acquired after 7:30pm AEST on 12 May 2026 (contract date) can no longer offset salary or other income. Quarantined losses can only be applied against other residential property income, or carried forward against future property income and property capital gains.

Exempt from the quarantine: dwellings bought before Budget night (fully grandfathered, no cap), new residential dwellings, widely held trusts, complying super funds, and build-to-rent.

The combined picture for a property investor

The carried-forward quarantined losses aren't wasted — they offset the capital gain when you eventually sell. But a dollar of loss offsetting an indexed gain years later is worth less than a dollar deducted against salary today.

A dedicated negative gearing guide and calculator are on our roadmap; in the meantime, the investment property CGT guide covers the current rules for property disposals.

With about a year of runway, here's the sensible preparation checklist — none of which requires predicting the future:

1. Get 1 July 2027 valuations for everything significant. The transition rules let you choose the better of market valuation or time apportionment — but only if valuation evidence exists. Property appraisals, crypto price exports, unlisted business valuations. This is the highest-value, lowest-cost action on this list.

2. Audit your pre-CGT assets. Anything acquired before 20 September 1985 loses its blanket exemption for post-2027 growth. Owners of heavily appreciated pre-1985 assets have a once-only window to weigh disposal under the full exemption against holding on.

3. Review planned disposals against the boundary. A sale you were going to make in late 2027 anyway may be worth contracting before 30 June 2027 (full old rules) — or after, if your asset's growth profile favours indexation (see Tom's example). Timing decisions should be modelled, not guessed.

4. Revisit structures. The individual/trust discount is going; super keeps its concessions; companies are unchanged; trusts face new reporting plus a separate 30% minimum from 2028. Structures chosen a decade ago under different assumptions deserve a fresh look — with professional advice.

5. Don't panic-sell. The reform taxes only real, post-2027 gains. Pre-2027 growth keeps the 50% discount forever, and slow-growing assets can genuinely come out ahead. Selling good assets purely to "beat the deadline" crystallises tax today to avoid a smaller tax tomorrow — the arithmetic often doesn't work. Run the numbers first.

6. Keep records like never before. The new system needs your acquisition-date CPI figures, 1 July 2027 valuations, and per-element cost base records (ownership costs are excluded from indexation). Cost base documentation just became permanently more valuable — see our cost base guide.

This guide is general information, not advice. For decisions involving significant assets — especially pre-CGT holdings and structural changes — get advice from a registered tax agent who can model your specific position.

Misinformation about this reform is everywhere. The most common myths, corrected:

• "CGT is going up 30%." No. The 30% figure is a minimum tax rate — a floor that only affects gains that would otherwise be taxed below 30%. Most middle and high earners never encounter it.

• "I'll be taxed on gains I've already made." No. Growth before 1 July 2027 keeps the 50% discount permanently via the transition rules. Only future growth falls under the new system.

• "The deemed disposal on 30 June 2027 triggers a tax bill." No. The deemed disposal and reacquisition is a paper exercise — no tax is payable until you actually sell.

• "My home is affected." No. The main residence exemption is completely untouched. If part of your home has been income-producing, the existing partial exemption rules apply — check with the MRE calculator.

• "Super funds lose the discount too." No. Complying super funds keep the 33.33% discount. The reform applies to individuals, trusts and partnerships only.

• "The new rules are always worse." No. When inflation makes up more than half your nominal gain — common for slow-growing assets — indexation beats the 50% discount. It cuts both ways.

• "Pensioners pay the 30% minimum tax." No. Recipients of the Age Pension and other listed income-support payments are expressly exempt from the floor (they do move to indexation like everyone else).

• "It's just a proposal — it'll never pass." It passed. Both houses, 25 June 2026, royal assent 26 June 2026. The start date is written into law.

• "Pre-CGT assets stay exempt forever." The biggest sleeper change: post-2027 growth on pre-1985 assets becomes taxable for the first time in four decades.