50% CGT Discount Reform: Cost Base Indexation + 30% Minimum Tax from 1 July 2027

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

The 50% capital gains tax discount in place since 1999 is ending — and it is now law, not a proposal. The reform announced in Budget 2026 passed Parliament on 25 June 2026 and received royal assent on 26 June 2026 as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49) and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (No. 50). From 1 July 2027, gains on assets held more than 12 months will be taxed under two new rules instead:

1. Cost base indexation — the cost base of the asset is uplifted by CPI inflation over the holding period, so only real (above-inflation) gain is taxed.
2. 30% minimum tax rate on real capital gains — so the effective tax rate on a gain cannot fall below 30%.

The change applies to individuals, partnerships, and trusts holding most asset types (property, shares, units, crypto, etc.) for ≥12 months. Companies are not affected — they already pay 30% on capital gains. Specific carve-outs remain.

Timeline — when each change takes effect

This reform is fundamentally about dates. The same asset attracts very different tax depending on when you bought it and when you sell it. The five-year window from now to 2027 has several breakpoints:

The key practical point: 30 June 2027 is the last day a disposal falls wholly under the legacy rules — but thanks to the Subdiv 112-E deemed sale, missing it does not cost you the discount on gains already accrued. The CGT event date is generally the contract date (trade date for listed assets), not settlement. For most holders the real 1 July 2027 action item is evidence of market value at that date, not a sale.

How time changes your tax bill

The reform is fundamentally a timing tax. Two pieces of timing drive everything:

1. Holding period across 1 July 2027 — the longer you held BEFORE 1 July 2027, the bigger your legacy 50%-discount share. The longer you hold AFTER 1 July 2027, the bigger your reform-portion share.
2. Years past 1 July 2027 at disposal — the more years between 1 July 2027 and your sale, the bigger the CPI indexation uplift, and the smaller the real gain on the reform portion.

These two forces pull in opposite directions on long-held assets crossing the reform line. Here’s the math.

Effect 1 — Holding-period split (assuming a $500,000 nominal gain)

For an asset bought on 1 July 2022 (5 years pre-reform) and sold on a range of dates after 1 July 2027 (shares shown use the time-apportioning election for illustration; the primary split method under the Act is market valuation at 1 July 2027 — see the Bucket B section below):

The longer you delay your sale past 1 July 2027, the bigger the reform-portion of your gain — and the more your tax outcome depends on the new rules rather than the legacy 50% discount.

Effect 2 — CPI indexation grows with reform-period years (assuming 2.5%/yr)

The cost base of the reform-portion is uplifted by CPI from 1 July 2027 to disposal. With 2.5%/yr inflation, the indexation uplift compounds:

For a high-growth asset (e.g. crypto, ASX growth shares — say 10%/yr nominal), the indexation uplift is small relative to nominal growth, so most of the gain remains taxable. For a low-growth asset (regional residential, infrastructure ETFs, bonds — say 3-4%/yr nominal), the indexation uplift can absorb most of the gain, leaving little to tax.

Effect 3 — The asset’s growth rate interacts with both

Three sensitivity scenarios on a $500,000 nominal gain over a 10-year hold straddling 1 July 2027:

The reform shifts tax burden from low-growth-asset holders to high-growth-asset holders. A high-growth asset crossing the reform date pays more tax than under the old rules. A low-growth asset can actually pay less.

Effect 4 — The 30% minimum binds for low-marginal-rate taxpayers

For taxpayers on a marginal rate below 30% (typically retirees on low pension income, or low-income earners), the reform’s 30% minimum ratchets up the effective rate on the reform portion. Effect grows with reform-portion share:

Across all MTRs, the legacy portion is always cheaper than the reform portion. The bigger your reform share, the worse your tax outcome — UNLESS the asset has been so low-growth that indexation shelters most of the reform gain. The interplay is non-trivial, which is why the CGT calculator and scenario compare tools matter more than a back-of-envelope estimate.

Bottom line

• If you’ve held the asset for 10+ years before 1 July 2027 and sell within a few years after, the legacy share dominates — small impact.
• If you held the asset 2-3 years before 1 July 2027 and sell 10 years later, the reform share dominates — large impact on high-growth assets.
• If you buy after 1 July 2027 and hold long enough for indexation to substantially uplift the cost base, the new rules can be kinder than the old 50% discount would have been — especially for slow-growth assets.
• If your marginal rate is below 30%, the 30% minimum can ratchet up your effective rate noticeably.

Effective date and three-bucket transition

The new rules only apply to gains that accrue after 1 July 2027, not to the full capital gain on an asset sold after that date. The legislation structures the transition into three buckets:

The 12-month holding requirement carries over from current rules.

Bucket B: how the split treatment works

The enacted mechanism is the Subdivision 112-E “deemed sale”: every CGT asset you hold at 30 June 2027 is deemed to be disposed of just before 1 July 2027 and immediately reacquired. The pre-1 July 2027 notional gain is calculated under the old law (50% discount preserved) and deferred until you actually sell the asset. Growth after 1 July 2027 is taxed under the new rules. The asset’s value at 1 July 2027 is the boundary between the two regimes.

Two split methods are available under the Act:

• Market valuation at 1 July 2027 — the primary method (use quoted prices for shares, formal appraisal for property, etc.).
• Apportioning method — a Minister-determined formula that estimates the split from the asset’s overall growth over the holding period. This is a taxpayer election (ss 112-155(3)/112-165(3)), not the default.

You make the choice when you lodge your tax return in the year you sell the asset — but the market-valuation route only works if you can evidence the 1 July 2027 value. Practical action for anyone holding assets at 30 June 2027: get and keep evidence of market value at 1 July 2027 — closing prices for listed shares and ETFs, a formal or well-documented appraisal for property. It is far cheaper to secure that evidence now than to reconstruct it at a sale in the 2030s.

Pre-1985 (pre-CGT) assets — major change: the enacted Act brings all CGT assets, including pre-1985 assets held by individuals, trusts and partnerships, into the regime. For the first time since CGT was introduced in 1985, pre-CGT assets become subject to CGT — but only on the post-1 July 2027 gain. The pre-1 July 2027 gain on a pre-1985 asset remains exempt. Practical effect: if you have held land, shares or other appreciating assets continuously since before 20 September 1985, the cost base at 1 July 2027 (set via the same market-valuation or elective apportioning method as Bucket B) becomes the starting point for any future CGT — another reason to get a 1 July 2027 valuation.

Worked examples (from Treasury explainer)

Jane — split-treatment (house held since 2022)

Jane bought an asset for $800,000 on 1 July 2022 and sells it for $1,600,000 on 1 July 2032 (7.2% annual return). She uses ATO tools to determine the asset’s value at 1 July 2027 was $1,131,371.

• Pre-1 July 2027 portion: gross gain $331,371, with 50% discount = $165,685 taxable.
• Post-1 July 2027 portion: gross gain $468,629; after cost base indexation = $319,958 taxable.
• Total taxable gain: $485,643 (vs $400,000 under a flat 50% discount applied to the whole gain).
• At 47% marginal rate: tax = $228,252 (vs $188,000 under the old rules).

Zoe — wholly new rules (shares bought after policy)

Zoe purchases shares on 1 July 2027 for $100 and sells them 5 years later on 1 July 2032 for $125 — a nominal gain of $25 (4.6% per year).

• With 2.5%/year inflation, the indexed cost base becomes $113.
• Taxable gain after indexation: $12 (vs $13 under the old 50% discount).
• Zoe pays slightly less tax under the new rules because inflation eroded most of her nominal gain.

The key insight from Zoe’s case: low-return assets near or below the inflation rate benefit from indexation compared to the old discount.

Discount equivalent — Treasury’s 20-year comparison

If indexation had been in place for the past 20 years, the effective discount equivalent (the amount of nominal gain not taxed) would have averaged 35–60% depending on asset class and holding period:

For asset classes with higher than typical real returns (e.g. fast-growth properties or stocks), the indexation discount is smaller than 50% and investors pay more tax. For asset classes with lower real returns, indexation gives a larger effective discount than 50%.

How rate of return changes the outcome

Treasury’s “Different rates of return” cameo for a $500,000 asset purchased July 2027, held 10 years, owner has $100,000 other income:

• David — 5% return (typical residential real estate): taxable gain $174,405 indexed vs $157,224 discounted. Pays $8,075 more in tax under reforms.
• Ben — 2.5% return (returns equal to inflation): no taxable gain under indexation vs $70,021 under old discount. Pays $24,858 less in tax.
• Kate — 7.5% return (high-growth): taxable gain $390,474 indexed vs $265,258 discounted. Pays $58,851 more in tax.

Rule of thumb: real returns above ~5% per year produce more tax under the new rules; below ~2.5% produces less tax.

The 30% minimum tax

A minimum tax rate of 30% applies to real capital gains accruing from 1 July 2027. The rule only bites when your other taxable income is low enough that your marginal rate on the gain would otherwise be under 30%.

Jack — minimum tax bites

Jack has taxable income of $25,000 in 2029–30 and realises a $10,000 capital gain on an asset bought in 2027–28.

• Tax on the capital gain at his marginal rate (excluding Medicare): $1,400 (14%).
• Since 14% < 30%, Jack pays an additional $1,600 to bring his effective rate up to 30%.

Income support exemptions — now a hard-coded statutory list (s 119-15):

• Recipients of Age Pension, Disability Support Pension, JobSeeker, Carer Payment, Parenting Payment, Youth Allowance, Austudy, Special Benefit, Double Orphan Pension, Family Tax Benefit, the stillborn baby payment, Farm Household Allowance, Parental Leave Pay, ABSTUDY living allowance, and specified DVA/MRCA payments are EXEMPT from the minimum tax in years they realise a capital gain. The Senate replaced the proposed ministerial-instrument power with this fixed list.
• The exemption is from the 30% minimum tax only. Exempt recipients still lose the 50% discount — their post-2027 gains get cost base indexation and are then taxed at their ordinary marginal rate.
• Charity deductions reduce the minimum-tax base: a Senate amendment reduces the base by Division 30 gift/donation deductions and Division 31 conservation covenant deductions.
• Tax offsets may also reduce the minimum tax liability.

New residential property — investor election (CGT)

The enacted Act builds an explicit incentive for new housing supply: investors in new residential dwellings can choose either the 50% CGT discount, or cost base indexation (in which case the gain is also within the 30% minimum tax). This is a per-disposal election — the investor picks whichever produces less tax. Two things worth knowing about the final law: new residential dwellings are the only asset class with this choice (the proposed ministerial power to extend it to other asset classes was removed in the Senate), and qualifying affordable housing keeps its existing up-to-60% discount. The election is paired with (but separate from) the negative gearing carve-out for new builds covered in Negative Gearing Reform Bucket D. The same “new build” eligibility framework applies (off-the-plan apartments, eligible knock-down rebuilds, vacant-land construction).

Practical effect for a new-build investor selling after 1 July 2027: model both treatments, pick the cheaper one. For high-growth properties the 50% discount typically wins; for low-growth, indexation often wins. The 30% minimum tax applies only if the indexation route is chosen and the investor’s other taxable income is low.

What is unchanged

These CGT settings are NOT affected by the reform:

• Main residence exemption — fully retained.
• Small business CGT concessions — all four concessions retained (15-year exemption, 50% active asset reduction, retirement exemption, rollover). One improvement in the final law: the 50% active asset reduction’s turnover threshold rises from $2m to $10m aggregated turnover from FY2027-28; the other three concessions keep the $2m turnover / $6m net asset tests.
• 60% CGT discount on qualifying affordable housing — fully retained.
• Complying super funds — keep the 33 1/3% discount; they are excluded from the new regime.
• Companies — no change; companies don’t get a discount currently and pay 30% on gains anyway.
• CGT 6-year main residence absence rule — unchanged.
• CGT events on death (rollover to beneficiary) — unchanged.

Tech and start-up investments: Government will consult on how the CGT reforms interact with early-stage incentives. Status TBD.

EOFY action items

If you currently own appreciating assets

Calculate what your effective tax rate would be under EACH set of rules at your expected sale date. For most established residential property held more than 5 years, the new rules cost more. For low-return assets (poor-performing shares, slow-growth regional property), the new rules may cost less.

If you are planning to sell within the next 14 months

The 30 June 2027 EOFY is the last full-year window where 50% CGT discount applies to gains accrued through to that date. Consider whether your normal selling timeline can be accelerated, balancing:

• Lock-in of the 50% discount on pre-1 July 2027 portion (always available regardless when you sell)
• Marginal rate in 2026–27 vs 2027–28 (your salary may put you in a different bracket)
• Capital loss carryforwards available
• Transaction costs

Run scenarios in the CGT Calculator and the CGT Scenario Compare.

If you have unrealised capital losses

Capital loss carry-forward becomes more valuable under the new rules, not less. A $50,000 loss carried forward against a future $100,000 gain saves more tax when the discount has been narrowed. The CGT Harvest Calculator ranks loss-harvest candidates.

Sources

• Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49 of 2026) and Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (No. 50 of 2026) — royal assent 26 June 2026 (legislation.gov.au)
• APH bill homepage — Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 — passage history and Senate amendments
• Treasury Budget Paper No. 1, Statement 4: Tax reform for workers, businesses and future generations (12 May 2026) — original announcement
• Treasury fact sheet: Negative Gearing and Capital Gains Tax Reform (12 May 2026)
• Treasury Budget Paper No. 2, Tax Reform — Boosting Home Ownership measure (p21)

Asset-class deep dives

The split-treatment mechanics play out differently for each asset class. Five companion articles walk through worked examples and the asset-specific complications:

• CGT Reform for Property Investors — investment property, main-residence carve-out, new-build discount election, depreciation cost-base interactions.
• CGT Reform for ASX Share Investors — parcel methods, DRP cost-base proliferation, ESS shares, off-market buybacks.
• CGT Reform for ETFs and Managed Funds — AMIT cost-base adjustments, distributed capital gains, foreign-domiciled vs ASX-domiciled ETF treatment.
• CGT Reform for Crypto — Bitcoin/ETH/altcoin parcel matching, hard forks, staking rewards, stablecoin churn.
• Small Business CGT Concessions After 2027 — what’s retained: 15-year exemption, 50% active asset reduction, retirement exemption, rollover relief.

Taxpayer-archetype deep dives

The reform hits different taxpayers in different ways. Five more verticals cover the major archetypes:

• CGT Reform for SMSF and Super Funds — interaction with the 10% effective SMSF CGT rate, pension-phase exemption, Division 296 ($3M+) overlap.
• CGT Reform for Retirees and Age Pensioners — the Age Pension carve-out, 30% minimum tax binding on low-MTR retirees, means-test interaction.
• CGT Reform for Deceased Estates and Heirs — Section 128 rollover preserved, pre-1985 inherited assets, 2-year main-residence window.
• CGT Reform for Expats and Foreign Residents — stacking with the 2012 discount denial, 2019 main-residence denial, 15% FRCGW, treaty positions.
• CGT Reform for ESS, RSUs, Options and ESPPs — taxing-point dates, sale-at-vesting strategy, cross-border ESS, Subdivision 83A interactions.

Decision guide

• Should I Sell Before 30 June 2027? — the five-question framework with worked scenarios showing when acceleration helps and when it costs you more than it saves.

Related reading

• Negative Gearing Reform Budget 2026: What Changed by Purchase Date — paired negative-gearing changes for residential property.
• 50% CGT Discount Under Review: Senate Inquiry Update — pre-Budget context and confirmed outcome.
• Budget 2026 Explained: Winners and Losers — full Budget breakdown.
• How Budget 2026 Changes Your EOFY Plan — combined EOFY 2026 and 2027 implications.