The 2026–27 Federal Budget introduces a major redesign of the Capital Gains Tax (CGT) system, changing how investment gains are taxed in Australia. From 1 July 2027, the current 50% CGT discount will be replaced with cost base indexation, alongside a minimum 30% tax on realised gains.

In short: from 1 July 2027, the 50% CGT discount is replaced by cost base indexation and a minimum 30% tax applies to realised gains after indexation. Gains that accrue before that date keep the current discount.

What is changing?

Under the new framework:

• The 50% discount is removed for most assets.
• Gains are instead adjusted for inflation using CPI (indexation).
• A minimum tax rate of 30% applies to gains after indexation.

This shifts the system toward taxing real economic gains rather than nominal gains.

Transitional rules: what happens to existing assets?

The Government has introduced detailed transitional arrangements:

• Gains accrued before 1 July 2027 remain eligible for the 50% discount.
• Gains after 1 July 2027 use the new indexation method.
• Investors will need to determine the market value of assets as at 1 July 2027.

This effectively splits each asset’s gain into two tax treatments.

What does indexation mean in practice?

Instead of applying a flat discount, indexation will:

• Adjust the asset’s cost base for inflation.
• Tax the inflation-adjusted gain only.
• Potentially reduce taxable gains in high inflation environments.

However, the 30% minimum tax rate means outcomes may vary significantly between taxpayers.

Planning implications

This reform creates a number of important considerations.

1. Timing of asset disposals

Investors may consider whether to realise gains before 1 July 2027 to access the current discount rules.

2. Valuation requirements

Accurate asset valuations at 1 July 2027 will become critical for future tax calculations.

3. Portfolio strategy

Different asset classes, such as shares versus property, may be affected differently depending on growth patterns and inflation.

4. Record keeping

Maintaining detailed cost base records will be more important than ever.

Special considerations

• Pre-CGT assets remain exempt for gains accrued before 1 July 2027.
• ATO tools and guidance are expected to support calculations.
• Some taxpayers, such as income support recipients, may be exempt from the minimum tax in certain cases.

Our perspective

This is one of the most structural investment tax reforms in decades. It reduces reliance on broad discounts and introduces a more economically aligned system, but with added complexity.

For investors, the key opportunity lies in:

• Reviewing portfolios early.
• Considering timing strategies.
• Preparing for valuation and compliance changes.

With the right planning, investors can manage the transition well while keeping tax outcomes under control.