Important Update: What the Historic Capital Gains Tax (CGT) Changes Mean for You

The federal government has officially passed the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026. Receiving Royal Assent on 26 June 2026, these changes represent the biggest shake-up to Australia’s wealth taxation system in over 25 years.

While the headline changes do not start until 1 July 2027, key cut-offs are already active. Below is a simple, highly scannable breakdown of what is changing, what is safe, and how it impacts your portfolio.

1.     The Big Shift: Out with the 50% Discount, In with Indexation

• The Old Way: If you held an asset (like shares or property) for more than 12 months, you only paid tax on half the profit.

• The New Way: From 1 July 2027, the blanket 50% CGT discount is abolished for individuals and trusts. Instead, the tax system returns to CPI Indexation.

• The Upside: You will only be taxed on your real profit, adjusting your original purchase price for inflation so you don't pay tax on the broader economy's price rises.

Scenario: The Old 50% Discount vs. New CPI Indexation

Let’s look at an example using a long-term investment to see how the numbers stack up.

The Setup:

• Original Purchase Price: $200,000

• Sale Price (Years Later): $400,000

• Total Inflation (CPI) during ownership: 40%

Here is how your taxable capital gain is calculated under both systems:

Tax Metric	Old System (50% Discount)	New System (CPI Indexation)
Original Cost Base	$200,000	$200,000
Inflation Adjustment	$0 (No inflation protection)	+$80,000 (40% of purchase price)
Adjusted Cost Base	$200,000	$280,000
On-Paper Profit	$200,000	$200,000
Taxable Capital Gain	$100,000 (Flat 50% reduction)	$120,000 ($400k sale minus $280k indexed base)

2. The New 30% Tax Floor

• Flat Minimum Rate: Starting 1 July 2027, a minimum 30% effective tax rate will apply to all net capital gains.

• The Impact: Even if your personal income tax bracket is normally lower than 30%, capital gains will be subject to this flat baseline.

3. The End of "Pre-1985" Exemptions

• Blanket Protection Removed: Assets bought before 20 September 1985 used to be completely exempt from CGT forever. This 40-year-old exemption is ending.

• How It Works: These legacy assets will be treated as if they were sold and re-bought at fair market value on 1 July 2027. You won't pay tax on past growth, but any capital gains made after this date will face the new tax rules.

4. Changes to Property & Negative Gearing

• Established Housing Restricted: For established properties bought after 7:30 pm AEST on 12 May 2026 (Budget Night), net rental losses can no longer be used to offset your wage income.

• Quarantined Losses: These losses are now locked away. You can only use them to offset future rental income from that property or to reduce your ultimate CGT bill when you sell it.

5. What is NOT Changing?

1. Your Family Home: The Main Residence Exemption remains completely intact. You still pay 0% CGT on your primary home.

2. New Residential Builds: If you invest in new builds or affordable housing, you can still choose between the traditional 50% discount or the new indexation method, and standard negative gearing remains fully available.

3. Your Superannuation: CGT structures inside Self-Managed Super Funds (SMSFs) and large APRA funds are entirely exempt from these reforms.

4. Small Business Concessions: Active asset concessions for small businesses remain unchanged.

6. Key Dates to Watch

• 1 July 2027: Universal transition to CPI indexation, the 30% minimum CGT floor, and resetting values for pre-1985 assets.

• 1 July 2028: A separate 30% minimum tax on discretionary trust distributions begins, aimed at curbing income-splitting.

7. Next Steps for Your Portfolio

These new laws apply differently depending on how your assets are held, please reach out to your advisor to discuss your portfolio.