On 12 May 2026, Federal Treasurer Jim Chalmers announced sweeping changes to the Australian tax landscape. We provided a summary of those announcements in an article published immediately after the budget. However, we will now also publish separate articles for the each of the changes to keep you updated on the status of each.
Capital Gains Tax Changes from 1 July 2027
The 2026-27 Federal Budget announced some of the most significant changes to Australia Capital Gains Tax (CGT) system in decades.
These changes have now been legislated.
The Treasury Laws Amendment (Tax Reform No.1) Act 2026 received Royal Assent on 26 June 2026, with the key CGT reforms taking effect from 1 July 2027.
The changes will affect individuals, trusts and partnerships holding assets such as investment properties, shares, business interests and other CGT assets.
The 50% CGT discount is being replaced
Under the current rules, individuals and trusts can generally reduce a capital gain by 50% where a CGT asset has been held for at least 12 months.
For CGT events occurring on or after 1 July 2027, this general 50% CGT discount will be removed and replaced with a system of cost base indexation.
Rather than simply reducing the taxable capital gain by 50%, the cost base of an asset will be adjusted for inflation. CGT will then broadly be calculated as the increase in the value of the asset above inflation.
For example, if an investment was acquired for $500,000 and its indexed cost base at the time of sale is $600,000, a sale for $800,000 will result in an indexed gain of $200,000.
This is fundamentally different from the existing CGT discount system and could produce significantly different tax outcomes depending on how much an asset increases in value and the rate of inflation during the ownership period.
Indexation will generally be available to Australian resident individuals and trusts where the relevant eligibility requirements are met.
Assets already owned at 30 June 2027
Importantly, the new rules do not simply apply the indexation system to an asset’s original purchase price.
Transitional provisions apply to assets held at 30 June 2027.
Broadly, for assets held at 30 June 2027, you can apply the capital gains tax discount up to 30 June 2027 and then indexation after that date. The calculation will be based on the market value of the asset as at 1 July 2027. As such, valuations as at 1 July 2027 will become important for many taxpayers.
The transitional provisions are continuing to be developed by Treasury.
For taxpayers with property portfolios, shares in private companies or business interests, it will be important to identify assets that may require valuation as at 1 July 2027.
It is important to note that the valuation needs to be as at 1 July 2027 – not before. While you can obtain a retrospective valuation, you cannot get a prospective valuation. It may be straightforward to obtain a property valuation retrospectively (even several years after 1 July 2027). However, it may be more difficult to obtain a retrospective business valuation as records and comparative are harder to come by as more time passes.
A new 30% minimum tax on capital gains
Another significant change is the introduction of a 30% minimum tax on capital gains made by Australian resident individuals from 1 July 2027.
This is particularly significant for taxpayers who may previously have planned to realise a large capital gain in a year in which they had little other taxable income – for example, after retirement.
Under the new system, having a low marginal rate will not mean that the capital gain is taxed at that lower rate.
Certain taxpayers receiving specified income-support payments are excluded from the minimum tax.
Pre-CGT assets will no longer remain permanently exempt
Assets acquired before 20 September 1985 have historically been referred to as “pre-CGT assets” and have generally remained outside the CGT system.
That treatment will end from 1 July 2027.
Capital growth accruing before 1 July 2027 will continue to be tax-free, but growth arising after that date can become subject to CGT.
This will be particularly relevant for long-standing family businesses, farms, commercial properties and shares in private companies that have been held since before the introduction of CGT.
Again, establishing appropriate values around 30 June 2027 may become extremely important.
Special treatment for new residential property
The Government has retained more favourable CGT treatment for certain new residential dwellings. Eligible investors may be able to choose between the existing 50% CGT discount or cost base indexation. This means that the removal of the 50% discount does not necessarily apply to every residential property acquired or sold after 1 July 2027.
Small business CGT concessions remain
The existing small business CGT concessions have been broadly retained.
These include the:
- 15 Year Exemption
- 50% active asset reduction
- Retirement exemption; and
- Small business rollover.
There has also been an important expansion to the 50% active asset reduction.
From the 2027-28 income year, the aggregated turnover threshold relevant to accessing this particular concession increases from $2 million to $10 million.
This could increase the number of business owners able to access the 50% active asset reduction when selling active business assets.
Importantly, the increased $10 million threshold applies specifically to the 50% active asset reduction. It does not increase the existing turnover threshold for all the other small business CGT concessions.
What should taxpayers be doing now?
The new rules do not commence until 1 July 2027, so there is time to prepare.
However, for taxpayers holding significant assets, the period between now and 30 June 2027 should be used to review existing structures and investments.
In particular, consideration should be given to:
- assets currently eligible for the 50% CGT discount;
- investment and commercial properties;
- shares and units in private companies and trusts;
- pre-CGT assets acquired before 20 September 1985;
- businesses that may be sold or transferred in coming years;
- succession planning arrangements;
- existing capital losses; and
- the availability of the CGT small business concessions.
The changes do not necessarily mean that assets should be sold before 1 July 2027. The appropriate outcome will depend heavily on the individual asset, its cost base, current market value, expected future growth and the taxpayer’s circumstances.
However, the tax consequences of selling an asset before and after 1 July 2027 may now be very different.
Planning before 30 June 2027 will be important
These reforms represent a major change to the way Australian individuals and trusts are taxed on investment and business assets.
Although the new rules commence from 1 July 2027, the decisions and valuations made before that date could affect tax outcomes for many years afterwards.
Over the coming months, we will be reviewing the potential impact of the new CGT rules for affected clients, particularly those with substantial investment assets, business interests and long-held or pre-CGT assets.
If you are considering selling, restructuring or transferring a significant asset or business over the next few years, we recommend obtaining advice well before 30 June 2027 rather than waiting until a transaction is underway.
If you would like to discuss the tax implications of the budget proposals, please call us on (07) 56656469.
DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.
Jeanette has over 20 years experience as an accountant in public practice. She is a Chartered Accountant, registered tax agent and accredited SMSF Association advisor. When she is not helping business owners grow their empires, you will likely find her out running on the trails or at the gym. Book in to see Jeanette today.
