CGT Changes from 1 July 2027: How the New Rules Affect Property and ETF Investors

The 50% capital gains tax discount has existed since 1999. From 1 July 2027, it's gone — replaced by a cost base indexation system and a 30% minimum tax floor. This is the biggest structural change to Australian CGT in a generation, and if you own an investment property, ETFs, or any other asset you plan to sell in the next few years, the numbers work differently from here.

This guide explains the new rules in plain English, with worked dollar examples, and what to consider before July 2027.

Important: As at June 2026, the legislation has been introduced to Parliament but has not yet passed. These changes were announced in the May 2026 Budget with a 1 July 2027 start date. This article reflects the announced policy — check the ATO's new legislation page or speak with a tax adviser for the current status.

Old rules vs new rules: what's actually changing

	Current rules (until 30 June 2027)	New rules (from 1 July 2027)
Long-term discount	50% discount if held 12+ months	Eliminated
Calculation method	Half of the nominal gain is taxable	Gain reduced by CPI indexation; 100% of the real gain is taxable
Minimum tax rate	None — your marginal rate applies	30% floor even if your marginal rate is lower
New residential properties	50% discount applies	Choose 50% discount OR new indexation — whichever gives a better result
Main residence	Fully CGT exempt	Still fully exempt — no change
Superannuation funds	33.3% discount	Unchanged — still 33.3% discount
Companies	No discount	Unchanged
Trusts	50% discount passes to beneficiaries	New rules apply at the beneficiary level

How the new CGT system works

CPI indexation replaces the 50% discount

Instead of halving your gain, the government is reinstating cost base indexation — the system Australia used from 1985 to 1999. Your original purchase price (cost base) is adjusted upward by the Consumer Price Index (CPI) before the gain is calculated. You pay tax only on the real, inflation-adjusted gain, not the full nominal gain.

Example: You bought an investment property in 2021 for $700,000. By the time you sell in 2028, CPI has risen 20% since purchase. Your indexed cost base becomes $700,000 × 1.20 = $840,000. If you sell for $1,000,000, your taxable gain is $160,000 — not the nominal $300,000.

The 30% minimum tax floor

Under the new rules, a 30% minimum effective tax rate applies to capital gains. Even if your marginal rate on the gain would be lower (say 15%), you pay at least 30%.

This mostly affects lower-income earners who have large investment gains in a year their ordinary income is modest — for example, a retiree drawing down from investments. For investors with income above $45,000, the 30% bracket (or higher) already applies to their marginal rate, so the floor is irrelevant.

The 30% minimum does NOT apply to:

Recipients of means-tested income support (Age Pension, Disability Support Pension, Carer Payment, JobSeeker — to be confirmed in final legislation)
New residential dwellings where you elect the 50% discount instead of indexation
Pre-existing gains taxed under the transitional rules with the old 50% discount

Who the changes do NOT affect

Your main residence is completely unaffected. The main residence CGT exemption is unchanged. If you live in a property and it qualifies for the full exemption, these reforms are irrelevant to you.

Superannuation funds keep their 33.3% discount on assets held 12+ months. If your super fund sells shares or property, the fund-level tax treatment is unchanged. (Note: Division 296 tax is a separate change that affects individuals with super balances over $3 million — that's a different measure.)

Companies don't receive a CGT discount under the current or new rules. They pay the corporate tax rate on 100% of gains as before — no change.

Small business CGT concessions — including the 15-year exemption, retirement exemption, and active asset rollover — are unaffected by this reform.

Assets sold before 1 July 2027 still get the full 50% discount, regardless of when you bought them.

Worked example 1: investment property

Sarah bought a Melbourne investment property in January 2019 for $650,000. She's weighing up whether to sell before or after 1 July 2027. Her income puts her in the 47% marginal tax bracket.

Scenario A — Sell in May 2027 (under current rules)

	Amount
Sale price	$1,000,000
Cost base	$650,000
Capital gain	$350,000
50% discount	−$175,000
Taxable gain	$175,000
Tax at 47%	$82,250

Scenario B — Sell in September 2028 (under new rules)

Sarah obtains a formal market valuation as at 1 July 2027 — the property is independently valued at $980,000.

Pre-July 2027 portion (taxed under old rules):

	Amount
Value at 1 July 2027	$980,000
Original cost	$650,000
Gain	$330,000
50% discount	−$165,000
Taxable gain	$165,000
Tax at 47%	$77,550

Post-July 2027 portion (taxed under new rules):

	Amount
Sale price	$1,000,000
Indexed cost (3% CPI for FY2028)	$980,000 × 1.03 = $1,009,400
Real gain	−$9,400 (no gain — CPI exceeded price growth)
Tax	$0

Total tax in Scenario B: $77,550 — less than Scenario A because the post-July 2027 portion produced no real gain after CPI adjustment.

The lesson: the outcome depends heavily on how much the asset grows after July 2027 relative to CPI. If the property had risen a further $100,000 after July 2027 rather than only $20,000, the new-rules portion would attract more tax. The maths is asset-specific.

Model both scenarios side by side: Use our CGT Comparison Calculator to compare your after-tax return under the current 50% discount vs the proposed indexation rules with your own numbers — shares, ETFs, or property.

Worked example 2: ETF investor

James has been invested in a broad ASX ETF since 2015. His position in June 2026:

Original cost: $30,000
Current value: $120,000
Unrealised gain: $90,000
Marginal tax rate: 37%

Scenario A — Sell before 1 July 2027

	Amount
Capital gain	$90,000
50% discount	−$45,000
Taxable gain	$45,000
Tax at 37%	$16,650

Scenario B — Hold and sell in 2030

Value on 1 July 2027 (market valuation): $140,000. He sells in 2030 for $180,000.

Pre-July 2027 portion:

	Amount
Gain to 1 July 2027	$140,000 − $30,000 = $110,000
50% discount	−$55,000
Taxable gain	$55,000
Tax at 37%	$20,350

Post-July 2027 portion:

	Amount
Sale price	$180,000
CPI-indexed cost (3% pa for 3 years)	$140,000 × 1.093 = $153,020
Real gain	$180,000 − $153,020 = $26,980
Tax at 37%	$9,983
Check 30% minimum	$26,980 × 30% = $8,094 → 37% applies

Total tax in Scenario B: $30,333 — roughly double what he'd pay selling before July 2027.

The trade-off: selling now means paying $16,650 in tax today, losing 3 more years of compounding on that portfolio value. Holding longer means a higher eventual tax bill but continued investment growth. Whether that growth exceeds the tax cost depends on the return and the length of holding.

The transitional rules: assets you already own

For assets held before 1 July 2027 and sold after 1 July 2027, your gain must be split into two portions:

Pre-July 2027 gain — taxed under the old 50% discount rules (if held >12 months)
Post-July 2027 gain — taxed under the new indexation rules

There are two ATO-sanctioned methods to split the gain:

Method 1 — Market valuation: Get a formal independent valuation of your asset as at 1 July 2027. The gain from your original cost base to that valuation is your pre-July 2027 portion. The gain from the valuation to your eventual sale price is the post-July 2027 portion.

Method 2 — ATO apportionment formula: The government will prescribe a formula via legislative instrument to estimate the split without a formal valuation. The details aren't yet released as at June 2026. Some advisers suggest this formula may be less generous than a market valuation for assets that grew strongly in earlier years.

Practical implication: If you own significant investment assets — especially property — it may be worth arranging a formal valuation as close to 1 July 2027 as practical. This locks in the maximum pre-July 2027 portion, taxable under the more generous old rules.

Should you sell before 1 July 2027?

There's no universal answer, but here are the key factors:

Arguments for selling before July 2027:

You lock in the 50% discount on all gains accrued to date with no transitional complexity
Works best if you were going to sell anyway in the next 1–3 years
Particularly strong case if the asset has very long holding period (large nominal gain) and your marginal rate is high

Arguments for holding:

You pay CGT now instead of later — you lose compounding on that tax money for years
You may be selling at the wrong point in the market cycle
If the asset doesn't grow much after July 2027, the new-rules portion may be manageable
Transaction costs (agent fees, conveyancing for property) reduce net proceeds significantly
If the legislation doesn't pass, selling was unnecessary

One group that should probably not rush to sell: Age Pension recipients and others on income support. They're exempt from the 30% minimum tax, meaning their gains on the new system are taxed at their often-zero or very low marginal rate. The old 50% discount may not actually be more generous for them.

A common misreading: Some investors think they must sell everything before July 2027 to avoid the new rules entirely. That's not right — the transitional rules preserve the 50% discount on all gains up to 1 July 2027, even if you sell years later. You're not forced to sell; you're simply choosing between crystallising now or splitting the gain later.

Run the numbers yourself: Our CGT Comparison Calculator lets you model both scenarios side by side with your own investment amount, marginal rate, and holding period — including the transition split.

Frequently asked questions

What is replacing the 50% CGT discount in Australia?

The 50% discount is being replaced with cost base indexation — your purchase price is adjusted upward by the Consumer Price Index (CPI) before calculating your gain, so only the real, inflation-adjusted gain is taxable. A 30% minimum tax floor also applies, meaning even if your marginal rate on the gain is below 30%, you pay at least 30%. The changes take effect from 1 July 2027.

Does the CGT change affect my family home?

No. The main residence exemption is completely unchanged. If your home qualifies for the full CGT exemption, these reforms don't affect you. The partial exemption (for periods the home was rented out) also continues under its existing rules.

Does the CGT change affect ETFs and shares, or just property?

The change applies to all CGT assets held by Australian resident individuals — investment property, ASX shares, ETFs, managed funds, cryptocurrency, foreign shares, and other growth assets. Superannuation funds are not directly affected; they retain their 33.3% discount.

Should I sell my investment property before July 2027?

It depends entirely on your situation. Selling before July 2027 locks in the 50% discount on all gains to date but means paying CGT now and losing compounding. The transitional rules preserve the old 50% discount on pre-July 2027 gains even if you hold longer — so you're not forced to sell. Get advice from a registered tax agent or financial adviser before deciding.

Will I pay more or less CGT under the new indexation method?

For most long-term investors on high marginal rates, the new system is more expensive. Australia's nominal asset prices — especially property — tend to rise faster than CPI, so the 50% discount has historically been more generous than stripping out inflation only. The 30% minimum tax adds an extra burden for lower-income investors.

Do superannuation funds pay the new CGT?

No. Complying superannuation funds retain their 33.3% CGT discount on assets held over 12 months, unchanged. The new rules apply to individual taxpayers, not to funds. (Division 296 is a separate measure affecting individuals with super balances above $3 million.)

What if the legislation doesn't pass before July 2027?

If the legislation fails or is delayed, the current 50% discount rules continue. As at June 2026 the Government has a Senate majority and has signalled this is a firm policy — but there is always a degree of legislative uncertainty. Monitor the ATO website for updates.

This article is for general information only and does not constitute financial, tax or legal advice. Individual circumstances vary. Consult a registered tax agent or licensed financial adviser before making decisions based on this information.