Legislative status: now law
The three core changes
From 1 July 2027, capital gains made by individuals, partnerships and trusts are taxed under a new framework. The changes apply to all CGT assets, including shares, property and assets acquired before 20 September 1985, held for at least 12 months.
The 50% CGT discount no longer applies to gains that accrue from 1 July 2027. Gains that accrued before that date keep the discount when the asset is eventually sold.
The cost base is indexed to the Consumer Price Index (CPI). Only the real gain, the part above inflation, is taxed.
The real gain is taxed at the higher of the person's marginal tax rate or 30%. An individual who receives a social security, social support, veterans' or military compensation payment at any time during the income year is excepted from the 30% minimum under section 119-15, which reaches further than the Age Pension.
The four existing small business CGT concessions remain in place.
How indexation works
Part of an asset's growth in value is simply inflation. Under the new rules, that inflationary part is not taxed.
The cost base is increased in line with CPI over the period it is held from 1 July 2027 (or from the purchase date, if bought after that). The indexed cost base is then taken away from the sale price to find the real gain.
How gains made before 1 July 2027 are protected
Most CGT assets held at the end of 30 June 2027 are treated as sold just before 1 July 2027 and bought back at market value, with exclusions in Subdivision 112-E for assets held by a foreign or temporary resident and for assets where the new residential dwelling rules in section 115-102 or the affordable housing rules in section 115-125 apply to the later gain. Nothing is actually sold and no tax is payable at that point. It simply draws a line that splits the gain into two parts when the asset is later sold.
Growth from the purchase date up to the market value at 1 July 2027 stays under the current rules, including the 50% discount where the asset has been held for at least 12 months.
Growth above the 1 July 2027 market value falls under the new rules: cost base indexation and the 30% minimum tax rate.
How the split is measured
The Act sets market value at 1 July 2027 as the default, with an optional alternative.
Default: market value
The asset's market value at 1 July 2027 sets the dividing line. For listed shares and ETFs this is the closing price. For property it is a contemporaneous valuation or appraisal.
Optional: apportioning method
The Act allows the Minister to set an alternative apportioning method by legislative instrument (section 112-185). The choice between methods is made in the tax return for the year the asset is sold. Check the Federal Register of Legislation for whether this instrument has been made.
A simple illustration of the split
This shows how a gain is divided. It does not calculate tax, which depends on income, holding period, CPI and other factors.
Bought for $500,000
An investment property is purchased well before the reform.
Worth $1,400,000 at 1 July 2027
The $900,000 of growth up to this date stays under the current rules and keeps the 50% discount.
Sold later for $1,800,000
The $400,000 of growth after 1 July 2027 falls under the new rules. It is reduced by indexation for inflation, and the real gain left over is taxed at the higher of the marginal rate or 30%.
Model a sale with real numbers
The CGT calculator compares current rules with the 2027 rules.
Whether a sale attracts more or less tax under the new rules depends mainly on how fast the asset grows compared with inflation. Assets growing well above inflation generally lose more from the removal of the discount than they gain from indexation. Assets growing close to inflation may be taxed less.
The first investor to buy a new residential dwelling can choose, when the property is sold, between the 50% discount and the new rules. This choice does not carry over to later buyers.
From 1 July 2027, negative gearing for residential property bought after 7:30pm AEST on 12 May 2026 is limited to new builds. Properties held before that time keep their existing treatment.
The Tax Reform No. 2 Act (Act No. 71 of 2026) added rules so this grandfathered treatment is kept when a dwelling passes to someone through inheritance or relationship breakdown.
Read the negative gearing guideWhat is still being finalised
The core changes are law. A second tranche of detail rules was released in draft, and Treasury consulted on it from 3 August 2026 to 21 August 2026. The draft covered:
- the definition of a "new residential dwelling"
- how the changes apply to trusts, including attribution managed investment trusts
- making sure certain CGT events do not bring forward tax on deferred gains
Part of this has since been enacted. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026, Act No. 71 of 2026, dated 26 August 2026, added rules in Schedule 4 so that current treatment is kept when a dwelling passes through inheritance or relationship breakdown, covering both negative gearing and new residential dwelling status, and so that a dwelling does not lose that treatment only because a main residence is later used to produce income. Those amendments apply to the 2027-28 income year and later income years. The remaining detail rules in the draft package were still being finalised as at October 2026. This page will be updated as further legislation passes.
Key takeaways
The CGT reform is law. It applies to gains accruing from 1 July 2027.
Gains made before 1 July 2027 keep the 50% discount, measured by market value at that date.
Gains from 1 July 2027 are indexed for inflation and taxed at the higher of the marginal rate or 30%.
The rules cover shares and property alike, held by individuals, partnerships and trusts.
Related calculators and guides
Sources
- Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Act No. 49 of 2026 (Federal Register of Legislation)
- Treasury Laws Amendment (Tax Reform No. 2) Act 2026, Act No. 71 of 2026 (Federal Register of Legislation)
- Treasury consultation: Capital Gains Tax and Negative Gearing, Tranche 2 Legislation
- Second reading speech, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026
- Australian Taxation Office