- Australia will replace the 50% capital gains discount with an indexation method starting July 2027.
- A 30% minimum tax rate will apply to net capital gains to align with workers’ tax burdens.
- Gains realized before July 1, 2027 will maintain their current tax treatment under transitional rules.
(AUSTRALIA) — The Australian Federal Government announced it will replace the current 50% discount on capital gains tax with a cost base indexation method and a 30% minimum tax on net capital gains from 1 July 2027.
The change rewrites how many asset sales will be taxed. Under the new approach, the tax system will adjust an asset’s original cost base for inflation, so tax applies only to the gain above inflation rather than to a discounted share of the nominal gain.
That shift affects the treatment that now applies when individuals hold assets for at least 12 months and receive a 50% discount on their CGT bill. From July 2027, that discount will give way to indexation plus a minimum tax floor.
Under the indexation method, the government will increase the original cost base of the asset to reflect inflation. The taxable amount then becomes the real gain after that inflation adjustment, rather than the gain calculated under the current 12-month holding rule.
A minimum 30% tax will apply to net capital gains calculated under that indexed method. The government said the rate aligns with the average tax rate paid by workers during their working lives.
The announcement sets out transitional rules that preserve the existing treatment for gains made before the change starts. Capital gains realised before 1 July 2027 will continue to benefit from the current 50% discount.
Pre-1985 assets realised before 1 July 2027 will also remain exempt from CGT. The new rules apply only to gains arising on or after 1 July 2027.
That timing creates a clear dividing line in the tax system. The date of the gain, not simply the date an asset was bought, will determine whether the current discount survives or the indexation and minimum-rate system applies.
The government also carved out exemptions and special treatment for some groups and transactions. Recipients of income support payments, including Age Pension recipients, will be exempt from the minimum tax rate.
Investors in new residential properties will be able to choose between the 50% discount and the cost base indexation method with the 30% minimum tax. That leaves a dual track for those investments even as the wider system moves away from the current discount model.
The 2026 Federal Budget did not include proposed changes to existing CGT concessions for the main residence exemption or small business CGT concessions. Those parts of the system remain untouched in the announcement.
The changes affect individuals, trusts, and partnerships holding most CGT assets. That reaches beyond one class of taxpayer and into a broad set of ownership structures commonly used for investments and other assets subject to capital gains tax.
For taxpayers covered by the new rules, the practical calculation changes in two ways at once. First, inflation enters the calculation through indexed cost bases; second, the government sets a floor with the 30% minimum tax on net capital gains.
Under the current model, the headline feature is simple: hold an asset for at least 12 months and receive a 50% discount on the gain for CGT purposes. The new model moves away from that broad concession and places the emphasis on taxing the gain above inflation.
That distinction is likely to matter most at the point of sale. A system built around nominal discounts treats all long-held gains through one concession, while an indexed system separates inflation from the real increase in value before applying tax.
The government presented the 30% minimum rate as a benchmark linked to workers’ tax burdens. In effect, the reform couples an inflation adjustment with a minimum level of tax on net gains rather than leaving the outcome to the existing discount structure.
The transitional arrangements also preserve old treatment for a limited period without extending it beyond the start date. Anyone realising gains before 1 July 2027 stays under the current rules, while gains on or after that date fall into the new regime.
That line matters for pre-1985 assets as well. Their exemption remains intact only where the gains are realised before 1 July 2027, after which the new framework governs gains arising from that date onward.
The residential property carve-out stands out because it gives investors in new residential properties a choice rather than a single mandatory treatment. They can remain with the 50% discount or elect indexation with the 30% minimum tax.
No equivalent change appears in the announcement for the main residence exemption. The same applies to small business CGT concessions, which the 2026 Federal Budget left in place.
The reform marks a broad restructuring of how Australia taxes capital gains. Instead of centering the system on a long-standing discount for assets held at least a year, the government will tie taxation more closely to inflation-adjusted gains from July 2027.
That leaves individuals, trusts, and partnerships weighing future sales under two different systems separated by a single date. Gains realised before 1 July 2027 keep the current rules; gains arising after that date move into an indexed capital gains tax regime with a 30% minimum tax and narrower exceptions.
