From 1 July 2027, the 50% CGT discount is replaced with cost base indexation plus a new 30% minimum tax on net capital gains.
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The change applies to all CGT assets, including shares, investment properties, and business assets, held by individuals, trusts, and partnerships. Our guide to the existing CGT discount describes how the current rules work. Indexation was the method used for CGT in Australia from 1985 through to 1999, when the Howard Government replaced it with the 50% discount. In effect, we are returning to the pre-1999 approach with a minimum tax added on top.
The Old Rules vs the New Rules
| Before 1 July 2027 | From 1 July 2027 | |
|---|---|---|
| Discount method | 50% CGT discount for assets held 12 months | Cost base indexed for CPI |
| Reduction on a long-held asset | Effectively 50% of the gain | Only the inflation component |
| Minimum tax | None – taxed at marginal rate | 30% minimum on net capital gains |
| Applies to | Assets sold before 1 July 2027 | Gains arising from 1 July 2027 |
| Income support / Age Pension recipients | 50% discount | Exempt from 30% minimum |
| New residential property investors | 50% discount | Choice of 50% discount or indexation |
Cost base indexation reduces the taxable gain by accounting for inflation only, which is a smaller adjustment than the 50% discount provides in most cases.
The Generous Transitional Rules
The 50% CGT discount continues to apply to all gains arising before 1 July 2027. If you sell an asset before that date, the existing rules apply in full, regardless of when you originally bought it.
For assets held beyond 1 July 2027, the new indexation method applies to gains arising from that date forward. The pre-1 July 2027 portion of the gain still receives the 50% discount. The post-1 July 2027 portion is reduced by indexing the original cost base for CPI movements.
Worked example: Long-held asset sold in 2037
Asset purchased 11 years ago for $500,000. Worth approximately $1,000,000 today. Sold in 2037 for $2,000,000. Total gain across the period is $1,500,000, split between pre and post 1 July 2027 periods. CPI assumed at 3% per annum, 47% combined tax rate.
| Period | Gain portion | Tax treatment | Taxable gain |
|---|---|---|---|
| Pre 1 July 2027 (11 years) | ~$786,000 | 50% discount applies | ~$393,000 |
| Post 1 July 2027 (10 years) | ~$714,000 | Cost base indexed for CPI | ~$476,000 |
| Total | $1,500,000 | Hybrid calculation | ~$869,000 |
Tax payable at 47%: approximately $408,000. Under the current rules, the tax would have been approximately $353,000. Additional CGT cost: ~$56,000 on this single asset.
What If You Sold Before 1 July 2027 Instead
Worked example: Selling on 30 June 2027 then reinvesting
Same asset, sold on 30 June 2027 (the last day the full 50% discount applies). $500,000 gain at that point produces tax of approximately $118,000.
If you then purchased a replacement asset on 1 July 2027 and sold it in 2037 for the same projected price, the replacement falls under the new indexation rules. Total tax across both transactions: approximately $426,000.
Holding the original asset produces a lower total tax outcome in this example, but it also means a large tax bill deferred to the future rather than paid today.
These examples assume CPI of 3% per annum, a 47% combined tax and Medicare Levy rate, and are illustrative only. All figures are subject to final legislation.
The 30% Minimum Tax
The 30% minimum tax on net capital gains is the second part of the package. After cost base indexation has reduced the taxable gain, the tax payable on that net gain cannot be less than 30%.
| Your marginal rate | Effective CGT rate from 1 July 2027 | Effect of 30% minimum |
|---|---|---|
| 0% (no other taxable income) | 30% | Tax raised to the floor |
| 19% (after tax-free threshold) | 30% | Tax raised to the floor |
| 32% (middle income) | 32% on indexed gain | Minimum does not bite |
| 47% (top rate) | 47% on indexed gain | Minimum does not bite |
| Income support / Age Pension | Marginal rate | Exempt from 30% minimum |
The minimum tax narrows the gap between high-bracket and low-bracket investors. Lower-income asset holders are most affected, though income support and Age Pension recipients are exempt.
The Concession for New Residential Property
A specific concession applies to investors in newly built residential property. They can choose between the 50% CGT discount or cost base indexation with the 30% minimum tax, whichever produces the better outcome. This is a deliberate carve-out to support housing supply.
What to Do Now
Whether to hold or sell an existing asset will be a different decision for every client. The right answer depends on your individual tax rate, your specific asset, and how long you plan to hold it. Some clients should be planning sales for the 2026-27 financial year. Others will be better served by holding through the transition. Our tax planning service models the numbers under both the existing and new rules so the right path becomes clearer.
This article is part of our 2026-27 Federal Budget guide. Read the full overview for a summary of every measure announced on Budget night.
