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Frequently asked questions
When does the 50% CGT discount end in Australia?
The 50% capital gains tax discount is abolished from 1 July 2027 for most asset classes under the proposed Treasury Laws Amendment (Tax Reform No. 1) Bill 2026. CGT events happening on or after that date no longer attract the discount, except for new residential dwellings (s 115-102) and affordable housing (s 115-125), which retain a 50% discount.
What replaces the 50% CGT discount from 1 July 2027?
Indexation of the cost base under new section 110-36(1A) of the Income Tax Assessment Act 1997, combined with a 30% minimum tax on capital gains for individuals under new Division 119. Indexation reduces the taxable gain by inflation; the minimum tax sets a floor of 30% on what remains. Only individuals and trusts can apply indexation. Companies cannot.
How is capital gains tax calculated in Australia after 1 July 2027?
For individuals: take the sale proceeds, deduct the indexed cost base (cost base multiplied by CPI growth from acquisition to disposal), apply the taxpayer's marginal rate to the resulting indexed gain, then top up the tax to 30% if the marginal rate produces a lower effective rate. For trusts: the trust applies indexation, streams the indexed gain to beneficiaries, and each beneficiary applies their own marginal rate plus the minimum tax floor.
What is the 30% minimum tax on capital gains?
New Division 119 sets a 30% floor on the effective rate of tax applied to an individual's indexed capital gain. If a taxpayer's marginal rate on the indexed gain would produce an effective rate below 30%, top-up tax under section 119-10 brings it to 30%. The floor binds for retirees, low-income spouses, and trust beneficiaries on low marginal rates. It does not bind for taxpayers already on rates above 30%.
Does the 50% CGT discount still apply to property bought before 1 July 2027?
Yes, on growth to 30 June 2027. New section 112-155 (for individuals) and section 112-165 (for trusts) deem a sale and reacquisition of the asset at market value on 30 June 2027. The deemed gain on growth up to that date crystallises with the 50% discount applied, and is deferred until actual disposal. Indexation runs from 1 July 2027 onwards on the reset cost base. You get both regimes across the life of the asset.
Will indexation produce a lower tax bill than the old 50% CGT discount?
For top marginal rate taxpayers, often yes. Indexation reduces the gain by inflation then applies the full marginal rate (47% inclusive of Medicare) to what remains. The old discount halved the gain then applied 47%, producing an effective 23.5% on the unindexed gain. For long holds at typical Australian inflation rates, indexation captures enough of the gain to produce an effective rate below 23.5%. For low-MTR taxpayers, the old discount was often better because indexation now triggers the 30% minimum tax floor.
Can a company use indexation on capital gains from 1 July 2027?
No. New section 110-36(1A) limits indexation to individuals and trusts only. Companies pay tax at 25% or 30% on the full unindexed gain. The drafting also prevents indexation from flowing through to a corporate beneficiary of a trust: under section 115-225(5), if the beneficiary could not have applied indexation directly, the cost base is adjusted to remove the effect of indexation when calculating the beneficiary's attributed gain.
How does the 2027 CGT change affect investment property in Australia?
Three changes apply to investment property from 1 July 2027. The 50% discount is abolished for established residential property. Indexation applies to the cost base for individuals and trusts. Negative gearing losses on residential property acquired after 7.30pm on 12 May 2026 are quarantined under new section 26-155: rental losses can no longer offset other income but instead carry forward to reduce future rental income or the eventual capital gain. New residential dwellings and affordable housing keep the 50% discount and are exempt from the negative gearing quarantine.
What is the best structure to hold investment property under the new CGT rules?
Personal ownership or trust ownership preserves access to indexation. Corporate ownership does not. For capital growth assets, holding through a trust streaming to individual beneficiaries is the most tax-effective structure under the new regime, because it preserves indexation and allows the trustee to direct gains to lower-MTR beneficiaries where commercially appropriate. Corporate structures remain useful for income-producing investments where franking matters, but they have lost ground for pure capital appreciation. Land tax, stamp duty, and the negative gearing quarantine also need to be modelled for any specific structure.
What is the deemed disposal on 30 June 2027?
A mandatory CGT event triggered by new section 112-155 (individuals) or section 112-165 (trusts). On 30 June 2027, taxpayers are treated as having sold each eligible CGT asset at its market value and reacquired it the next day at the same value. Any gain on growth up to that date is calculated under the old 50% discount rules and deferred until the actual disposal of the asset. From 1 July 2027, indexation runs on the reset cost base. The deemed disposal applies automatically. Taxpayers do not need to opt in or take any action; the cost base reset and pre-2027 discount happen by operation of law.
How does indexation work for capital gains tax?
Indexation multiplies each element of the cost base by the ratio of the CPI index number for the quarter of disposal to the CPI index number for the quarter the expenditure was incurred, under new subsection 960-275(1B). The indexed cost base is then subtracted from the sale proceeds to produce the indexed gain. Indexation only applies to expenditure incurred on or after 1 July 2027 (or from the deemed reacquisition date for pre-existing assets). The third element of the cost base, ownership costs, cannot be indexed.
Is the 2027 CGT change law yet?
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 is currently a bill before Parliament. It has not yet received Royal Assent. The commencement provisions specify 1 July 2027 for most CGT changes, contingent on enactment. Investors and advisers should monitor the bill's passage and any amendments through the parliamentary process before committing to structural changes in reliance on its terms.
How long do I need to hold an asset for indexation to apply?
At least 12 months under new section 114-10. The 12-month rule operates the same way as it did under the original indexation regime and the current 50% discount: the asset must be acquired at least 12 months before the CGT event. The deemed disposal on 30 June 2027 does not reset the 12-month clock for the purpose of indexation; the original acquisition date applies.
Who pays the 30% minimum tax on capital gains?
Individuals who are Australian residents at any time during the income year and who have a minimum tax gap under section 119-10. The minimum tax does not apply to companies, foreign residents, or recipients of certain social security and means-tested payments determined by the Minister under section 119-15. Where a trust streams a capital gain to an individual beneficiary, the beneficiary applies the minimum tax test to their share of the gain, not the trust.
Should I sell my investment property before 1 July 2027?
Not for tax reasons alone. The deemed disposal under section 112-155 or 112-165 already locks in the pre-2027 discount on growth to 30 June 2027 regardless of when the asset is ultimately sold. Selling early sacrifices indexation on future growth and may trigger transaction costs unnecessarily. The right decision depends on the investor's personal circumstances, the asset's growth profile relative to inflation, and whether other planning steps (such as restructuring through a trust before 1 July 2027) are commercially appropriate. Tax-driven sales should be tested against the modelled outcome under the new regime, not assumed.
