Budget night on 12 May 2026 announced the biggest structural change to capital gains tax since the 50% discount was introduced in 1999. From 1 July 2027 the 50% discount is replaced with an inflation-based discount, a minimum 30% tax rate applies to gains, and assets held since before 20 September 1985 stop being fully CGT-exempt. There is a transitional period — gains accrued before1 July 2027 still get the 50% discount; only gains arising after that date go into the new system. This post is the practitioner's walk-through of what changes, who it hits, and the planning window between now and 1 July 2027.
What changes from 1 July 2027
The 50% CGT discount goes
Individuals, trusts and partnerships currently apply a flat 50% discount to capital gains on assets held more than 12 months. That ends on 1 July 2027 (Treasury, Budget 2026-27 tax reform page). It is replaced with an indexation-based discount — only the real capital gain, after stripping out inflation, is taxed. In plain language the government is restoring the original 1985 CGT design (which was indexation-based until the Costello reforms of 1999) and pulling back from the flat 50% discount.
A minimum 30% tax on gains
Even after the inflation discount, gains attract a minimum effective tax rate of 30% (Treasury fact sheet, Negative Gearing and Capital Gains Tax Reform). For a top-bracket individual this lifts the floor below the marginal rate; for low-bracket taxpayers it means a gain that would have been taxed at their actual marginal rate may now attract more. Trusts that distribute to low-rate beneficiaries lose some of the historical advantage.
Super CGT discount untouched
The one-third CGT discount inside complying superannuation funds is not changed. SMSFs and APRA-regulated funds continue to apply the 10% effective rate on long-held gains. The reforms target assets held by individuals, trusts and partnerships outside super.
Who is affected
Anyone who holds CGT assets in their own name, a discretionary trust, a fixed trust, a unit trust or a partnership. That includes the obvious — rental property investors, share portfolio holders, business owners selling their company — and the less obvious: holders of crypto, art, collectibles, employee share scheme interests outside super.
Companies are not affected. Companies never had access to the 50% discount; their gains are taxed at the corporate rate regardless.
Transitional rules — the 1 July 2027 cut
For assets held on 30 June 2027, the gain is notionally split at that date:
- Gains accrued up to 1 July 2027 — the existing 50% discount continues to apply on disposal, regardless of when the disposal happens.
- Gains accrued from 1 July 2027 onwards — the new inflation-discount + 30% minimum rules apply.
In practice this means a market valuation as at 30 June 2027 will become an essential record for any asset held on that date. The valuation establishes the pre-reform cost base for the new system — gain above that is the post-reform component. Property investors and share holders should plan to obtain or document the value at 30 June 2027 (broker statements, real-estate appraisals, valuation reports) so the apportionment is defensible if challenged.
Pre-1985 assets stop being fully exempt
Assets acquired on or before 19 September 1985 have been completely exempt from CGT since the regime began. From 1 July 2027 that exemption is partial: gains accrued before1 July 2027 remain exempt, but any gain after that date becomes taxable (Treasury fact sheet). The same 30 June 2027 valuation logic applies — the pre-1 July 2027 value establishes the baseline.
This is a meaningful change for families holding farmland, original homesteads, or businesses operating out of long-held real estate. The asset itself is not "pulled into" CGT for past gains; only post-1 July 2027 movement is captured.
New-build carve-out
Investors who buy new residential builds get a choice (Treasury): either the existing 50% discount or the new inflation-based system. The carve-out runs alongside the negative-gearing reform announced the same night — the government is steering investor capital toward new supply. We have written a separate post on the negative gearing changes which interact closely with this carve-out.
What to do before 1 July 2027
If you intend to sell anyway
Talk to your tax agent. A disposal contract signed before 1 July 2027 keeps the entire gain inside the 50% discount system — even if settlement falls after. CGT event timing is the contract date, not settlement. For investments where you were already planning to exit in 2026 or 2027, accelerating the contract by a few months could materially change the tax position.
If you intend to hold
Get a market valuation documented at or close to 30 June 2027. For property, that means a written real-estate appraisal or formal valuation. For shares, a broker statement printed on or after 30 June 2027 with the closing market price. For private business interests — the kind held in family trusts — engaging a specialist valuer is the only defensible record. The cost of a valuation now is small relative to the tax cost of a contested cost base later.
If you hold pre-1985 assets
Document the asset, its acquisition history, and obtain a valuation at 30 June 2027. The 1 July 2027 cut means any future gain becomes taxable; the exemption on pre-1 July 2027 gain only survives if you can substantiate it.
If you hold inside a discretionary trust
Combine the CGT review with the separate 30% minimum trust tax announced the same night. The CGT reform is from 1 July 2027; the trust 30% minimum is from 1 July 2028. Discretionary trusts holding investment assets face both shifts; entity-structure reviews should look at the combined picture, not each in isolation.
Sources
- Budget 2026-27 tax reform page (budget.gov.au/content/04-tax-reform.htm)
- Treasury fact sheet — Negative Gearing and Capital Gains Tax Reform (budget.gov.au)
- Treasurer's Budget speech, 12 May 2026 (ministers.treasury.gov.au)
