From 1 July 2027, the 50% CGT discount is replaced by cost base indexation, and a minimum 30% tax rate applies to gains made by individuals after indexation. Gains that build up before that date keep the current discount. That much has been reported. What has had less attention is how the change reaches assets you already own, and one group of assets in particular.

What is changing?

For most assets, the 50% discount is removed from 1 July 2027. In its place, the cost base is adjusted for inflation using CPI, so tax applies to the real gain rather than the nominal one. A minimum rate of 30% then applies to that gain for individuals, as a top-up where the tax otherwise payable would fall below it.

The intent is a system that taxes real economic gains. The effect is a system with considerably more moving parts.

Assets you already hold

Most assets held by individuals and trusts are treated as sold and immediately bought back just before 1 July 2027, at market value on that date.

Nothing is payable at the time. The gain built up to 30 June 2027 is set aside and taxed later, when you actually sell, and it keeps the 50% discount when it is. The gain from 1 July 2027 onward is taxed under the new indexation rules. So a single asset ends up with two gains calculated two different ways.

This treatment does not apply to companies or superannuation funds. It also does not apply to anyone who has been a foreign or temporary resident at any point while they owned the asset.

Your original acquisition date carries over for the small business CGT concessions and for the twelve month holding test, so the reset does not restart the clock for those purposes.

Pre-CGT assets

If you have held an asset since before 20 September 1985, this is the most significant change in the package.

Pre-CGT status ends on 1 July 2027, for every type of entity. Each pre-CGT asset held on 30 June 2027 is treated as sold and reacquired at market value, and the gain built up over the whole period you have owned it is disregarded. There is no tax bill on 30 June 2027.

From 1 July 2027, ordinary capital gains tax applies to whatever happens after that date, measured against the new cost base. The exemption you have relied on does not carry forward.

For family businesses and farming families, this is worth a conversation well before June 2027.

Do you need a valuation?

Not everyone does, and it is worth knowing which group you are in before you commission one.

A valuation at 30 June 2027 will be needed if you hold a pre-CGT asset, or a pre-CGT interest in a company or trust. In the second case, valuations may be required through the ownership chain.

For many other situations there is no need to rush. And for real property, and other assets without a readily available market value, there is an alternative to a formal valuation. An apportionment method can be used instead, which estimates the 30 June 2027 value by applying a compounding daily growth rate across your whole ownership period.

Apportionment is cheaper and simpler. It does not always produce the better result, particularly where property values have moved unevenly. Where both are available it is worth modelling each before choosing.

Note the date. The valuation point is the end of 30 June 2027, not 1 July.

The 30% minimum, and who it does not apply to

The minimum rate operates as a top-up. It does not change how the gain is calculated, only the tax payable on it, and it applies to individuals.

It does not apply at all in a year where you received certain payments. The list is broader than most people assume, and includes the age pension, family tax benefit, the carer payment, the disability support pension, jobseeker, parenting payment, parental leave pay, the farm household allowance and ABSTUDY living allowance.

Deductible gifts and conservation covenant deductions also reduce the gain before the minimum rate is worked out, which makes the timing of a planned donation worth considering alongside a planned sale.

What keeps the discount

The discount has not gone everywhere.

New residential dwellings keep the 50% discount. Affordable housing keeps up to 60%. Superannuation funds are unaffected and keep their one third discount. Gains that accrued before 1 July 2027 keep the discount, including the deferred gains described above.

For new dwellings and affordable housing there is a choice to make: the discount, or indexation plus the 30% minimum. Which is better depends on your holding period and your marginal rate, and it is an election, so it needs a decision rather than a default.

Capital losses no longer go where you direct them

Gains are now sorted into four categories: deferred non-residential, deferred residential, non-residential and residential. Losses must be applied against them in that order.

In practice, losses have to absorb your deferred gains before they can reach any post-2027 gains. If you have been carrying losses forward and planning to apply them against particular gains, that flexibility has narrowed.

If you hold a negatively geared residential property

Where deductions on a residential property exceed the income it produces, the excess is denied in that year and carried forward as a quarantined amount.

That amount does not disappear. It reduces future residential capital gains, and it does so before the CGT discount and before the small business concessions are applied. The denied expenditure also does not form part of the cost base.

So the negative gearing change is not only an annual deduction question. It follows the property through to the eventual sale.

Planning implications

Timing. Realising a gain before 1 July 2027 accesses the current rules. Whether that is sensible depends on the asset and your position, not on the date alone.

Valuations. Establish whether you need one, and if so, get it dated 30 June 2027.

Structure. Outcomes now vary considerably depending on who holds the asset. The same gain can produce materially different tax in an individual’s name, a trust or a company.

Records. Cost base records matter more than they did, and for longer.

Our perspective

This is one of the most structural investment tax reforms in decades. It moves the system toward taxing real gains rather than nominal ones, which is defensible, and it does so at the cost of a great deal more complexity.

For most investors the work is not urgent, but it is time sensitive. The decisions that matter, on timing, valuations and structure, are better made across the next eighteen months than in the weeks before June 2027.