Is the 50% CGT discount being abolished in Australia?

Yes — from 1 July 2027, the 50% CGT discount is abolished for individuals, trusts and partnerships. It is replaced with cost-base indexation (only real, inflation-adjusted gains are taxable) plus a 30% minimum tax on those real gains. Gains that accrued before 1 July 2027 on existing assets retain the 50% discount via grandfathering.

What is cost-base indexation and how does it work?

Cost-base indexation means your original purchase price is adjusted upward by the consumer price index (CPI) over your holding period, so that only the 'real' gain above inflation is taxed. If your property rose 4% in a year when inflation was 2.5%, only the 1.5% real gain is taxable — not the full 4% nominal gain.

Are existing investment properties affected by the CGT changes?

Partially. For properties purchased before 7:30pm AEST on 12 May 2026, the gain is split at 1 July 2027: the portion that accrued before that date keeps the 50% discount; the portion that accrues after falls under the new indexation + 30% minimum tax regime. For established properties bought after Budget night, all gains fall under the new regime.

Do new residential builds get different treatment?

Yes. Investors in new residential builds can elect at the time of sale which CGT regime applies — the existing 50% discount or the new inflation-indexed regime with the 30% floor. This gives new build investors the ability to choose whichever produces the better outcome based on their actual holding period and inflation over that period.

What is the 30% minimum tax on capital gains?

From 1 July 2027, even if your marginal income tax rate is below 30%, you cannot pay less than 30% tax on the real (inflation-indexed) portion of a capital gain. There are limited exemptions for income-support recipients. This floor primarily affects investors on lower marginal rates whose effective CGT rate under the current 50% discount was below 30%.

Evidence-backed. Sourced from the 2026–27 Federal Budget, ATO CGT guidance, KPMG, ABC News, The Guardian, SBS News, William Buck and the Tax Institute. General information only — not financial or tax advice. CGT outcomes depend on your individual assets, holding periods and marginal tax rate. Consult a registered tax agent or financial adviser before making any investment decision. Last updated: June 2026.

⚡ Key Takeaways

The 2026–27 Budget announced the biggest CGT shake-up since 1999. From 1 July 2027, the 50% CGT discount is abolished for individuals, trusts and partnerships. It is replaced with cost-base indexation — only inflation-adjusted real gains are taxable — plus a 30% minimum tax on those real gains, even for taxpayers on lower marginal rates. ^[1][2][3]
Grandfathering applies to existing gains. For assets already held, the gain is split at 1 July 2027: everything that accrued before that date keeps the 50% discount; everything that accrues after falls under the new indexation + 30% floor regime. For properties purchased before 7:30pm AEST on 12 May 2026 (Budget night), this partial grandfathering applies. For established properties bought after Budget night, all future gains fall under the new regime. ^[1][4][6]
New residential builds get a choice. Investors in new residential builds can elect either the existing 50% discount or the new inflation-indexed regime — whichever produces the better outcome at sale time. ^[5][1][2]
At the same time, negative gearing on established properties is restricted from 1 July 2027. Losses on established residential properties bought after 7:30pm 12 May 2026 can no longer offset wage income — only other rental income or future property gains. Properties bought before Budget night are grandfathered under current negative gearing rules. ^[7][8][2]
Small business CGT concessions are not changing under this package. The reforms are prospective — there is no retrospective tax on gains that have already accrued. The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 is the legislative vehicle. ^[5][1]

The 2026 Capital Gains Tax Changes Every Property Investor Needs to Know About Now

By The Fine Print editorial team | Last updated: June 2026 | 14 min read | ⚠️ Not financial advice

The 50% CGT discount has been the cornerstone of Australian property investment strategy since John Howard introduced it in 1999. Hold an asset for more than 12 months, sell it, and only half the gain is taxable. That rule has been in place for a quarter of a century — and from 1 July 2027, it ends. The 2026–27 Budget confirmed the replacement: cost-base indexation (so only the “real” inflation-adjusted gain is taxable) plus a 30% minimum tax floor that applies even if your marginal rate is lower. For investors with existing properties, the change is partially grandfathered. For new purchases of established properties after Budget night, the old rules don’t apply at all. This guide explains exactly what changed, how to calculate the impact on your specific situation, and what to do before the cut-off dates.

📋 What’s in This Guide

The current rules — how the 50% discount works until 30 June 2027
What replaces it — indexation and the 30% minimum tax
Who is grandfathered and who isn’t
How the maths changes — better, worse, or it depends
The negative gearing change and its interaction with CGT
Three actions to take now
Frequently asked questions

The Current Rules — How the 50% Discount Works Until 30 June 2027

Under the rules that apply until 30 June 2027, individuals, trusts and partnerships that hold an asset for more than 12 months can reduce their capital gain by 50% before adding it to their assessable income. The remaining 50% is taxed at their marginal rate. Your main residence remains fully exempt from CGT (subject to the standard 6-year absence rule for periods of non-occupancy). ^[3][4]

💡 Example under current rules: You sell an investment property with a $300,000 capital gain after holding it for five years. The 50% discount reduces the taxable gain to $150,000. If your marginal rate is 34.5% (including Medicare), you pay $51,750 in tax — an effective rate of about 17.25% on the full $300,000 nominal gain. ^[3][6]

What Replaces It — Indexation and the 30% Minimum Tax

From 1 July 2027, for gains that accrue on and after that date, the 50% discount is replaced by two new mechanisms working together: ^[1][2][5]

⚠️ The new CGT system from 1 July 2027:

Cost-base indexation: Your cost base (what you paid) is adjusted upward by inflation (CPI) over the holding period. Only the “real” gain above inflation is subject to tax. If your property rose 4% in a year when inflation was 2.5%, your real gain is only 1.5% — that 1.5% is what gets taxed, not the full 4% nominal gain.
30% minimum tax: Even if your marginal tax rate is below 30%, you cannot pay less than 30% tax on the real (inflation-indexed) capital gain. There are narrow exemptions for certain income-support recipients, but for most working Australians, 30% is the floor.
Taxed at marginal rate if higher than 30%: If your marginal rate is above 30%, the real gain is added to your income and taxed at your marginal rate in the normal way — the 30% floor only protects the lower end.

Who Is Grandfathered and Who Isn’t

The grandfathering structure is the most important detail for existing investors. The Budget’s key cut-off dates produce three distinct situations: ^[1][4][2]

Category 1: Properties bought before 7:30pm AEST, 12 May 2026 (Budget night)

These properties get a split-gain treatment when sold after 1 July 2027. The portion of the gain that built up before 1 July 2027 retains the 50% discount. The portion that accrues from 1 July 2027 onwards is taxed under the new indexation + 30% floor regime. You’re partially protected on what you’ve already earned, but future growth faces the new rules. ^[1][4][6]

⚠️ Category 2: Established properties bought after 7:30pm AEST, 12 May 2026

No grandfathering. All gains on these properties — from purchase to eventual sale — fall under the new inflation-indexed regime with the 30% minimum tax. You have no access to the 50% discount at any point. ^[2][7][4]

✅ Category 3: New residential builds (any purchase date)

Investors in new residential builds get the best treatment: you can elect at sale time which regime applies — the existing 50% discount or the new inflation-indexed regime with the 30% floor. You pick whichever produces the lower tax bill based on your actual holding period, the inflation rate over that period, and your marginal rate at the time of sale. ^[5][8][1]

How the Maths Changes — Better, Worse, or It Depends

Whether the new regime is better or worse than the current 50% discount depends on two key variables: the inflation rate over your holding period and your marginal tax rate at sale. ^[4][6]

When the new rules could be more generous

In a high-inflation, modest-growth environment, indexation can produce a smaller taxable gain than the current 50% discount. The Guardian’s analysis gives a clear example: if a property rises 4% in a year when inflation is 2.5%, the real gain is only 1.5%. Taxing that 1.5% at 30% is equivalent to a 62.5% effective discount on the nominal gain — more generous than the flat 50% discount would have been. In prolonged periods of high CPI and subdued real asset price growth, the new regime can be less painful. ^[6]

When the new rules will be more expensive

The 30% minimum tax floor is the key constraint. For an investor on a marginal rate of 34.5% (the $120,001–$180,000 bracket in 2025–26, including Medicare), the current effective rate on a nominal capital gain via the 50% discount is approximately 17.25%. Under the new regime, even with indexation reducing the nominal gain, the 30% minimum applies to whatever real gain remains. In the typical Australian scenario — property values rising well above CPI over long holding periods — the new rules will result in a higher effective tax rate for most investors at most marginal rates. ^[1][5][6]

The Negative Gearing Change and Its Interaction with CGT

The CGT reform doesn’t operate in isolation. The Budget simultaneously restricts negative gearing from 1 July 2027 for established properties bought after 7:30pm on 12 May 2026. Under the new rule, losses from those properties can no longer offset salary and wage income — they can only offset other residential rental property income or future capital gains on the same property. ^[7][8][2]The combined effect on post-Budget established property purchases is a double impact: less tax benefit on the way in (rental losses can’t offset salary) and more tax on the way out (CGT under the new indexed + 30% floor regime). William Buck describes this as making “highly geared, low-yield established investment properties far less attractive.” Properties that are positively geared and/or qualify as new builds have a materially different risk-return profile under the new rules. ^[8][2][7]

✅ Three Actions to Take Now

Action 1: Map every investment property against the key dates and categories

For every investment property you own, record four pieces of information: the purchase or contract date (before or after 7:30pm AEST 12 May 2026); whether it is an established property or a new residential build; your current estimated unrealised gain; and your intended holding period (are you likely to sell before or after 1 July 2027?). This mapping tells you immediately which category each property falls into and therefore what your CGT treatment will look like. A property bought in 2020 and sold before 1 July 2027 retains the full 50% discount on the whole gain — a meaningfully different position from the same property sold in 2030 under split-gain treatment. Understanding where you stand is the prerequisite to making any informed decision. ^[8][2][3]

Action 2: Stress-test your portfolio under the new tax settings

For each property, model a realistic future sale price — based on current value plus a conservative annual growth assumption over your intended holding period — and calculate the estimated CGT under both the current rules and the new indexation + 30% floor rules. Use an assumed CPI rate (Treasury’s current projections are around 2.5–3%) to estimate what the indexed cost base would be. Compare the after-tax proceeds under each scenario. Then layer in the loss of negative gearing on post-Budget purchases: if the rental yield means you’re carrying a loss each year that previously offset your salary, factor in that those losses are now quarantined going forward. If the combined impact makes a property marginal, consider whether selling before 1 July 2027 (to lock in the full 50% discount on the entire gain), de-leveraging, or shifting investment focus toward new builds makes more financial sense. These are complex calculations — the point of this exercise is to make sure the decision is driven by numbers, not assumptions based on the pre-2027 rules. ^[6][1][8]

Action 3: Get advice before making big moves around 30 June 2027

If you are already considering selling an investment property and your asset has substantial unrealised gains, 30 June 2027 is a hard cut-off. Gains crystallised on or before that date — by way of a completed sale — lock in the 50% discount on the full gain for existing holdings. Depending on the size of the gain and your marginal tax rate, selling before 1 July 2027 rather than after could mean a materially lower tax bill. However, the calculation isn’t always in favour of selling early: if your asset has only modest unrealised gains and inflation is high, holding into the new indexation regime might actually reduce your real taxable gain. There is also CGT event timing to consider — settlement date, not contract date, determines the income year in which CGT is assessed. This is a decision where getting the numbers from a registered tax agent or accountant before acting is worth the advisory fee. ^[4][3][2]

❓ Frequently Asked Questions

Is the 50% CGT discount being abolished?

Yes — from 1 July 2027 for gains accruing after that date. Replaced with cost-base indexation plus a 30% minimum tax. Gains accrued before 1 July 2027 on existing holdings retain the 50% discount. ^[1][2][5]

What is cost-base indexation?

Your purchase price is adjusted by CPI so only the inflation-adjusted real gain is taxable. If a property rises 4% when inflation is 2.5%, only the 1.5% real gain is taxed. ^[4][6]

Does this affect properties I already own?

Partially — gains accrued before 1 July 2027 keep the 50% discount (split-gain treatment). Post-1 July 2027 gains on those properties use the new regime. Properties bought after Budget night (12 May 2026) get no grandfathering. ^[1][4][2]

Do new builds get better treatment?

Yes — new residential build investors can elect at sale which regime applies: the 50% discount or the new indexation + 30% floor. You choose whichever is lower. ^[5][8][1]

What is the 30% minimum tax?

Even if your marginal rate is below 30%, you can’t pay less than 30% on the real (inflation-indexed) capital gain from 1 July 2027. Limited exemptions for income-support recipients. ^[1][5][6]

⚖️ The Fine Print Verdict

The 50% CGT discount has shaped Australian investment behaviour for 25 years. Its replacement with cost-base indexation and a 30% minimum tax is a fundamental structural change — and unlike many announced tax reforms, this one has clear cut-off dates that create real urgency. For most property investors with existing assets and substantial accrued gains, the economics of selling before 1 July 2027 versus holding into the new regime is a calculation worth doing now with a tax adviser, not in late June 2027 under time pressure. For new purchases, the combination of restricted negative gearing on established properties and the new CGT rules changes the risk-return profile of highly geared established properties dramatically — the tax benefits that underpinned that model on both sides no longer exist. New residential builds are now structurally more tax-advantaged than they have been at any point since 1999. The key message: if you own investment property, your tax position has changed materially, and the window to act on existing gains at the old rate closes 30 June 2027. Make sure you’re making decisions based on what the rules actually are from 1 July 2027 — not what they were.

👉 Map your properties against the key dates. Model your CGT under the new rules. And if you’re considering selling, get advice on the 30 June 2027 deadline before it arrives — not after.

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📚 Sources & References

Budget 2026–27, “Tax reform,” budget.gov.au/content/04-tax-reform.htm
ABC News, “How budget tax changes will affect you — CGT and negative gearing” (13 May 2026), abc.net.au/news/2026-05-13/how-budget-tax-changes-will-affect-you-cgt-negative-gearing/106674212
ATO CGT guidance, ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a
The Guardian, “Federal budget — CGT and capital gains tax for existing property investors” (30 April 2026), theguardian.com/australia-news/2026/apr/30/federal-budget-cgt-capital-gains-tax-existing-property-investors
KPMG, “Australia: proposed legislation — capital gains tax new measures” (May 2026), kpmg.com/us/en/taxnewsflash/news/2026/05/australia-proposed-legislation-capital-gains-tax-new-measures.html
The Guardian, “Australia economy budget myths — CGT reform explained” (23 May 2026), theguardian.com/australia-news/2026/may/23/australia-economy-budget-myths-cgt-capital-gains-tax-reform-business-investment-explained
SBS News, “Where to invest in Australia after budget shake-up,” sbs.com.au/news/article/where-to-invest-in-australia-after-budget-shake-up/uzue5uvag
William Buck, “Federal Budget 2026 — negative gearing,” williambuck.com/tools/federal-budget-2026/negative-gearing/
The Guardian, “Labor appears set to reform CGT discount after parliamentary inquiry findings” (17 March 2026), theguardian.com/australia-news/2026/mar/17/labor-appears-set-to-reform-capital-gains-tax-discount-after-parliamentary-inquiry-findings
ABC News, “How capital gains tax changes could impact you” (5 February 2026), abc.net.au/news/2026-02-05/how-capital-gains-tax-changes-could-impact-you/106309066
Tax Institute, “Strengthening the foreign resident CGT regime — submission,” taxinstitute.com.au/resources/submissions/2026/strengthening-the-foreign-resident-capital-gains-tax-regime-draft-legislation
ATO, “Strengthening the foreign resident CGT regime,” ato.gov.au/about-ato/new-legislation/in-detail/businesses/strengthening-the-foreign-resident-cgt-regime
ABC News, “Labor to change CGT, negative gearing and trusts in budget” (5 May 2026), abc.net.au/news/2026-05-05/labor-to-change-cgt-negative-gearing-and-trusts-in-budget/106640096
IFPA, “29 May 2026,” ifpa.com.au/29-may-2026/

This article is general information only and does not constitute financial or tax advice. CGT rules are based on Budget announcements and ATO guidance current as at June 2026. The 2026 reforms are subject to legislation via the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026. Your specific CGT position depends on your individual assets, holding periods and marginal tax rate. Consult a registered tax agent or financial adviser before making any investment or disposal decision. The Fine Print 🇦🇺 is not affiliated with the ATO or any firm mentioned.

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