Changes to Capital Gains Tax

Following the 2026 Federal Budget, the Government's overhaul of Australia's capital gains tax (CGT) rules has now passed Parliament and received Royal Assent. This is no longer a proposal — it is confirmed law, and it represents the most significant change to CGT since the 50% discount was introduced in 1999. Below is a plain-English summary of what's changed, what it means for you, and what to consider before 1 July 2027.


What has changed

• The flat 50% CGT discount for individuals, trusts and partnerships is abolished for gains accruing from 1 July 2027. In its place, a cost base indexation regime applies — your asset's cost base is adjusted for inflation before calculating the gain — combined with a minimum tax rate of 30% on the post-reform (real) portion of the gain.
• Existing gains are protected. Under a deemed-sale/grandfathering mechanism, any gain that has accrued up to 30 June 2027 retains the current 50% discount, and tax on that portion is deferred until you actually sell. Only growth accruing from 1 July 2027 onward is taxed under the new rules.
• New residential dwellings and affordable housing retain access to the existing 50% discount, and the four small business CGT concessions are preserved in full — with the turnover threshold for the small business 50% active asset reduction increased from $2 million to $10 million as part of amendments made during passage.
• Negative gearing has been restricted: residential dwellings acquired after 7:30pm (AEST) on 12 May 2026 will no longer qualify for negative gearing treatment from 1 July 2027, though existing arrangements are grandfathered.
• Recipients of certain means-tested payments (Age Pension, JobSeeker, DSP and others) are exempt from the 30% minimum tax in years they receive a qualifying payment.
• A new Innovative Business CGT Concession (IBCC) is being developed to preserve concessional treatment for genuine start-up founders, employee share scheme participants and early-stage investors — details are still subject to consultation.
• Separately, foreign residents face an expanded definition of "real property" for CGT purposes, with some elements proposed to apply retrospectively from 2006 — this remains a distinct measure worth discussing if it affects you.

What this means for you

• If you hold investment property, shares, or trust units: the gain you've accrued to date keeps the 50% discount and isn't taxed until you sell — you don't need to rush a sale before 30 June 2027 purely because of this reform. However, it's worth reviewing your position with us, since a formal valuation as at 30 June 2027 may be needed to establish the baseline for what's taxed under the new rules.
• If you're planning a new investment, particularly residential property, the changed negative gearing rules and the future CGT treatment should factor into your decision now, not later.
• If you run a small business, the increased $10 million turnover threshold for the active asset reduction may open up concessions that weren't previously available to you.
• If you're a start-up founder, early investor, or hold equity through an employee share scheme, keep an eye out for further detail on the IBCC as it's developed.
• If you're a foreign resident with Australian property-related interests, the broadened "real property" definition warrants a closer look at your specific circumstances given its retrospective elements.

What we recommendBecause the law is now settled, this is a good time — not a rushed one — to review your position properly. We suggest getting in touch if any of the following apply to you:

• you hold investment property, shares or trust units with significant unrealised gains,
• you're planning to buy or sell an investment asset in the next 12–18 months,
• you run a small business and want to understand the revised concessions,
• you're a foreign resident with Australian property interests, or
• you're a start-up founder or early-stage investor wanting to understand the IBCC.

We'll help you work out whether a pre-30 June 2027 valuation, a change in timing, or other planning makes sense for your circumstances.
What happens nextWe're continuing to monitor guidance from the ATO and Treasury as the detail is worked through — including the IBCC consultation — and will keep you updated as it becomes available. In the meantime, please reach out if you'd like to discuss how these changes affect you personally or your business.

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