The CGT Discount Is Being Replaced from 1 July 2027 — Here’s What It Actually Costs You

Important: the CGT reform discussed in this article was announced in the 2026-27 Federal Budget. It is proposed, not yet legislated. Detail will evolve as draft legislation is released and we will update this article accordingly.

For 25 years, the 50% CGT discount has been one of the cleanest tax rules in the Australian system: hold an asset for more than 12 months, halve the gain, pay tax on the rest. That rule ends from 1 July 2027 and is replaced by an indexation framework with a 30% minimum tax floor.

The headline is dramatic. The arithmetic, for most long-term investors, is not — and for a small group, the new system is actually better. This guide from Trinity Accounting Practice walks through how the new rules work, where they genuinely cost money, where they do not, and the planning window between now and 1 July 2027.

How the new framework works

From 1 July 2027, three things happen at once for individuals, trusts and partnerships:

• The 50% CGT discount on assets held more than 12 months is removed.
• The cost base of a CGT asset is indexed by CPI between acquisition and disposal — so only the real gain (above inflation) is taxed.
• A 30% minimum effective tax rate applies to that real gain.

Capital losses continue to offset capital gains under the existing carry-forward rules. Companies are not affected — they were never entitled to the 50% discount in the first place.

Three things to understand about the mechanics:

• Indexation taxes only the real gain. If inflation runs at 3% a year and your asset grows at 5% a year, you are taxed on the 2% real growth, not the 5% nominal. The headline rate is higher, but the base is smaller.
• The 30% minimum stops the old “time the sale to a low-income year” strategy. Investors who used to plan disposals to retirement years, sabbaticals, or business-loss years to drop their marginal rate now face a floor.
• Pre-2027 growth is preserved. Assets owned before 1 July 2027 keep the 50% discount on the portion of growth that occurred before that date. Only growth from 1 July 2027 onwards falls under the new rules.

The transitional rule that matters most

For any asset acquired before 1 July 2027 and sold after that date, the gain is conceptually split in two:

• Pre-2027 growth — the increase in value from acquisition to 30 June 2027 — keeps access to the existing 50% discount at disposal.
• Post-2027 growth — the increase in value from 1 July 2027 to the disposal date — is taxed under the new indexation framework, with the 30% minimum.

The dividing line is the market value at 1 July 2027. That value is determined either by formal valuation or by the ATO’s apportionment formula. For material assets — investment properties, business premises, long-held shareholdings, business goodwill — a defensible market valuation as at 1 July 2027 will lock in the pre-2027 growth and protect it. We expect the run-up to mid-2027 to be busy with valuation work for exactly this reason.

Where the change genuinely costs money

Four investor profiles bear real cost under the new rules:

1. High-growth, long-hold assets

Where an asset grows faster than CPI by a meaningful margin — say, 5–7% above inflation — the new framework taxes a larger share of the real gain than the old 50% discount did. Treasury’s own modelling on a $500,000 property held 10 years with a 7.2% nominal growth rate shows about a $40,000 increase in total tax compared to the old settings. That is real money. The profile to watch: well-located metropolitan property, blue-chip equity portfolios, and high-performing private business interests.

2. Investors who time disposals to low-income years

The 30% minimum floor eliminates the planning strategy of pushing a sale into a retirement year, a sabbatical, a loss year, or a year of unusually low income. Under the old rules, an investor on a low marginal rate in the year of sale could drop their effective CGT rate well below 30%. Under the new rules they cannot.

3. Pre-CGT asset holders

Assets acquired before 20 September 1985 have until now been entirely outside the CGT system. From 1 July 2027 their pre-1985 growth is preserved tax-free, but post-2027 growth is brought into the system using market value at 1 July 2027 as the new cost base. This is the most consequential single change for legacy family business premises, long-held farm land, and intergenerational landholdings.

4. Trust-held appreciated assets

Discretionary trusts are doubly affected — by the CGT reform from 2027 and by the 30% minimum on trust distributions from 2028. Where an asset is sitting in a discretionary trust with substantial unrealised gain, the question of whether to restructure during the 2027–2030 rollover window becomes one of the central planning decisions of this Budget. That is a separate conversation we cover in our 2026-27 Budget guide.

Where the change costs less than the headlines suggest

Three profiles where the impact is muted — and one where the new system is arguably better:

1. Long-hold property at average growth rates

For residential property growing at the long-run average — around 5% a year nominal, of which roughly 2.5–3% is inflation — the indexation system protects most of the inflation component. Treasury modelling on a $519,000 property bought after Budget night and held 10 years showed a lifetime tax difference of around $186 versus the old settings. Almost nothing, in real terms, for a typical Sydney residential investor.

2. Investors who never sell

The 50% CGT discount benefits investors who realise a gain. Many of our long-term property clients do not sell — they refinance, draw equity, and use it to fund the next purchase. A discount on a gain that is never realised has no value, under any system. For that investor, the CGT reform is academic.

3. Low-growth or stagnant assets

For an asset that grows at or near the inflation rate, the indexation system can actually produce a lower tax outcome than the 50% discount did. The real gain is near zero; the tax on it is near zero. Under the 50% discount, the same investor would have paid tax on half the nominal gain — a larger base.

4. New residential builds and SMSFs

New residential builds purchased as investments retain the choice between the 50% discount and the new indexation framework at sale. SMSFs are unaffected by the reform — they continue under the existing super-fund concessional regime.

The valuation question — start thinking about it now

If you own a material long-term asset and you are likely to sell it more than a few years after 1 July 2027, a defensible market valuation as at 1 July 2027 is worth the money. A formal valuation:

• Locks in the cost base for the post-2027 portion of growth
• Preserves the pre-2027 portion at a specific reference point
• Reduces the risk of an ATO dispute on disposal five or ten years out
• Supports the restructure decision if you are weighing the 2027–2030 trust rollover window

Trinity is already coordinating valuation work for clients with significant long-held assets — particularly commercial premises, multi-property residential portfolios, business goodwill, and pre-1985 holdings. The capacity of qualified valuers is limited and we expect a queue closer to mid-2027. Earlier is better.

A Trinity insight from 22 years in practice

Of all the questions we have been asked since Budget night, the most common is “should I sell before 1 July 2027 to lock in the discount?” For most clients, the answer is no. Selling a sound long-term asset to avoid a future tax change rarely produces the result the seller imagined — once you account for selling costs, the missed growth between now and the time you would otherwise have sold, and the practical reality that the next investment has its own tax position. We have seen this play out before, in 1999, 2017 and 2019. The clients who did best were the ones who treated the reform as a structural-review prompt, not a sell signal.

What this means for you

• If you hold long-term residential property at average growth: the lifetime tax difference is likely small. Plan, do not panic.
• If you hold high-growth assets: a sale-before-vs-sale-after model is worth running. The numbers can go either way depending on holding period, expected growth and personal income.
• If you hold pre-1985 assets: book a structural review now. The 1 July 2027 valuation is critical for these.
• If you used to time disposals to low-income years: the 30% minimum changes the strategy. Build the new floor into your modelling.
• If you have appreciated assets in a discretionary trust: the CGT reform and the 30% trust minimum interact directly. The 2027–2030 rollover window is the planning point.
• If you own commercial premises: the reform applies to commercial property too. Negative gearing is preserved, but the exit calculation changes.

How Trinity can help

Trinity Accounting Practice has worked through every major CGT change of the past two decades — the small business CGT tightening in 2017, the Division 7A reforms in 2019, the residential withholding rules, and many others. We model both sets of rules for your specific asset, coordinate the valuation work, and bring it together with the trust-structure and Division 296 super conversations where relevant. For clients with multiple long-held assets, this Budget is the trigger for a single, joined-up review.

Book a CGT planning review with the Trinity team →

General advice only. This article contains general information current as at May 2026 and does not constitute tax, financial or legal advice. The measures discussed are based on announcements made in the 2026-27 Federal Budget and may change as draft legislation is introduced and finalised. It does not take into account your personal circumstances, objectives or needs. Before acting on any information in this article, you should consider its appropriateness to your situation and seek professional advice from Trinity Accounting Practice or another qualified adviser. Liability limited by a scheme approved under Professional Standards Legislation.