Australia’s Capital Gains Tax (CGT) rules are changing significantly from 1 July 2027.

The existing 50% CGT discount will generally be replaced by cost base indexation, together with a minimum 30% tax rate applying to certain capital gains made by individuals.

Importantly, the changes are prospective. Gains that have accrued before 1 July 2027 are generally protected under the existing rules, even where the asset is sold later.

However, people who already own investments, businesses or other appreciating assets should understand how their existing gains will be treated and whether any planning is appropriate before the new rules commence.

What is changing?

Under the current rules, individuals and trusts can generally reduce a capital gain by 50% where an eligible asset has been held for at least 12 months.

From 1 July 2027, that discount will generally no longer apply to new gains. Instead, the cost base of an eligible asset will be adjusted for inflation using CPI, so tax is more closely applied to the real increase in value of the asset.

For individuals, the new rules also introduce a minimum 30% tax rate on certain capital gains. Broadly, this operates as a top-up where the tax otherwise payable on the relevant gain is less than 30%.

There are exceptions and special rules, so the actual outcome will depend on the asset, ownership structure and taxpayer’s circumstances.

What happens to assets you already own?

For eligible assets held across 1 July 2027, the gain is broadly separated into:

• the gain accrued up to 30 June 2027, which retains access to the existing CGT treatment; and
• the gain accrued from 1 July 2027 onwards, which is subject to the new rules.

The transitional rules can effectively treat an asset as being sold and reacquired around 1 July 2027 for CGT calculation purposes. No actual sale occurs and CGT does not become payable at that time.

Instead, the pre-1 July 2027 gain is deferred until the asset is eventually sold or another relevant CGT event occurs.

This means there may effectively be two CGT calculations when an existing asset is eventually sold – one under the old rules and another under the new rules.

What about pre-CGT assets?

The changes are particularly important for assets acquired before 20 September 1985.

The value built up in a pre-CGT asset before 1 July 2027 remains protected. However, future growth in its value from 1 July 2027 can become subject to CGT.

This may be relevant for families who have held property, businesses, farms, shares or other assets for many years.

If you hold a significant pre-CGT asset, it is worth reviewing the position before 1 July 2027, including any future valuation or record-keeping requirements.

Will you need get a valuation at 30 June 2027?

Not necessarily.

For listed assets you don’t need to do anything because the 30 June 2027 values will always be available.

However, for unlisted assets – particularly business interests whether owned as a sole trader, partner, or has a holder of shares in a companies or trusts it will be critical to organise a valuation as at 30 June 2027 or at least collect some contemporaneous information to enable a 30 June 2027 valuation to be completed accurately later.

For properties, there is enough information in existence for valuers to be able to prepare a ‘back-dated’ valuation to 30 June 2027 so you don’t have to organise a valuation until you are ready to sell.  There is also an alternative formula method allowed that can provide a deemed valuation as at 30 June 2027 so you don’t have to incur the cost of a formal valuation if you don’t want to.

Before arranging a valuation, we recommend checking with us to determine whether one is actually required.

How does the 30% minimum tax work?

The new rules do not mean that every capital gain will automatically be taxed at 30%.

For affected individuals, they broadly ensure that the tax payable on the relevant capital gain is at least 30%. There are exceptions, including for some individuals receiving government income support payments, as well as specific adjustments for certain deductions.

The final tax outcome will therefore still depend on the taxpayer’s broader circumstances.

Does the 50% CGT discount disappear completely?

No.

The existing discount continues to apply in a number of situations, including:

• gains accrued before 1 July 2027;
• eligible new residential dwellings;
• eligible affordable housing; and
• existing CGT discount arrangements for superannuation funds.

For some eligible residential investments, there may also be a choice between retaining the CGT discount and using the new indexation rules.

What happens to capital losses?

The legislation also changes how some capital losses are applied.

Different categories of capital gains may need to be dealt with in a prescribed order, affecting how current and carried-forward capital losses interact with gains arising before and after 1 July 2027.

Taxpayers with significant carried-forward capital losses should therefore review their position before the new rules commence.

What about negatively geared residential property?

The CGT reforms also interact with the Government’s separate changes to negative gearing.

From 1 July 2027, deductions relating to certain residential property investments may be quarantined rather than immediately deducted against salary, business or other income. Quarantined amounts may instead be available against future residential property income or capital gains.

We discuss these changes separately in our Negative Gearing Changes – A New Landscape for Property Investors Insight.

What should you be thinking about before 1 July 2027?

There is no need to restructure investments or sell assets simply because the CGT rules are changing.

However, some areas are worth reviewing:

• Timing – if you are already considering selling a significant asset, compare the tax outcome before and after 1 July 2027.
• Pre-CGT assets – identify assets acquired before 20 September 1985 and consider the future CGT implications.
• Valuations and records – determine what information may be needed to establish pre and post-1 July 2027 gains.
• Ownership structures – outcomes can differ for assets held personally, through trusts, companies or superannuation funds.
• Capital losses – consider how the new ordering rules may affect carried-forward losses.
• Estate and succession planning – review long-held family assets and business interests as part of broader succession planning.

Plan – don’t panic

These are significant changes, but they do not mean everyone should rush to sell assets before 1 July 2027.

For many people, the important step is to understand which assets are affected, what records or valuations may be required, and whether the new rules change an existing investment, business succession or estate planning strategy.

At DFK Everalls, we can help you model the tax outcomes under the existing and new CGT rules and consider them alongside your broader investment, business and family wealth plans.

If you hold substantial investments, a business, pre-CGT assets or assets that have been in the family for many years, talk to us well before 1 July 2027 so we can help you plan with clarity and confidence.

This article provides general information only and does not constitute tax, financial or legal advice. The core CGT reforms have been legislated, although further legislation and administrative guidance dealing with aspects of their operation is continuing to be developed.