Tax Flash – CGT Changes are now law from 1 July 2027
Tax Flash
July 2026
TAX FLASH – CGT CHANGES ARE NOW LAW FROM 1 JULY 2027
The Federal Budget in May announced sweeping changes to the CGT provisions centred around the abolition of the 50% CGT Discount from 1 July 2027 and taking us back to the pre 1999 system of CPI based indexation of the cost of an asset to determine its “real” gain. The changes also applied a minimum 30% CGT tax rate where the actual tax rate on the gain falls below this rate.
After a few necessary amendments (but not enough in our view), the Tax Laws Amendment (Tax Reform No. 1) Act 2026 was passed by both Houses on 25 June 2026 ready for a 1 July 2027 start date.
These changes will apply to ALL CGT assets (except “new builds” as below) acquired from 1 July 2027 and held by individuals, partnerships and trusts for at least 12 months. Super Funds will retain access to the 33.33% CGT Discount.
An important reminder that this also includes your business.
Whilst these changes take effect from 1 July 2027, they will be prospective in that gains accruing on existing investments prior to 1 July 2027 will still retain access to the 50% CGT discount. From 1 July 2027, the “value” of the CGT asset will then be indexed under the CPI indexation model to determine the actual net capital gain on disposal.
The determination of value as at 1 July 2027 can be via two alternative methods:
• seek a valuation of the asset as at 1 July 2027, or
• use a specified apportionment formula that estimates the asset’s value on 1 July 2027, based on its growth rate over the asset’s holding period. The ATO will provide tools to estimate this value for taxpayers.
In what was a surprise when announced earlier, the legislation includes pre-CGT assets, exempting the unrealised pre-CGT gain as at 1 July 2027 but subjecting any increase in value of the pre-CGT asset, after CPI indexation from this date, to CGT.
The following summary from the Explanatory Memorandum is useful:
| Situation | Treatment under the new law |
| 1. CGT asset acquired and disposed of before 1 July 2027 | Capital gains and losses are handles under the old law that applied prior to these amendments commencing. The new law does not apply. |
| 2. Pre-CGT asset (acquired before 20 September 1985) | Gains on pre-CGT assets accrued before 1 July 2027 will continue to be exempt (noting rules under the tax law that could already tax these gains, such as CGT event K6 continue to apply). Gains made from CGT events that happen on or after 1 July 2027 are taxed on the portion of the gain that has accrued from 1 July 2027.
Note, this applies broadly to all entities, including companies. |
| 3. CGT asset acquired between 1985 and 1999 | There is a choice whether to index the cost base or apply the CGT discount in relation to a CGT asset that applies until 1 July 2027. From 1 July 2027, individuals (including partners in a partnership)and trusts are only able to apply the 50 per cent CGT discount on eligible CGT assets up until 1 July 2027. New settings apply to gains accrued after 1 July 2027 for these assets. Other entities, including companies, may retain the current treatment. |
| 4. CGT asset acquired before 1 July 2027 and CGT event happens on or after 1 July 2027 | The capital gain or loss is calculated in the income year in which the CGT asset is disposed of. It consists of two components reflecting the pre and post 1 July 2027 periods as follows:
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| 5. CGT asset acquired and CGT event happens after 1 July 2027 | The new law applies: for resident individuals, the capital gains may be subject to cost base indexation and a minimum 30 per cent tax. |
A special exemption from these new rules applies for “new builds” of residential properties that “genuinely add to supply”. This includes dwellings constructed on vacant land, or where existing properties are demolished and replaced with a greater number of dwellings.
These properties will remain able to access the 50% CGT Discount, or to choose CPI indexation, whichever is best.
Whilst we had hoped for more time and consultation to occur before the changes were legislated, the Government was able to find support with one of the minor parties to essentially pass the key parts of their proposed changes, with a few minor amendments.
The full extend of these proposed changes will take some time to fully understand and apply to our private client groups, including whether that requires a restructure of current asset holdings or more likely, consideration of which entity acquires new assets.
One thing that has definitely become clearer is that acquiring appreciating capital assets within companies from 1 July 2027 (and potentially earlier) is a serious consideration given the removal of the 50% CGT discount AND the 30% minimum tax on capital gains.
Our recommendation is to hold fire on any potential restructuring of existing asset holdings, but to seek advice on new asset purchases to ensure that what is legislated to apply from 1 July 2027 is fully considered before the asset is acquired.
If you would like to discuss any of these proposed CGT changes, please contact your Maroo Advisory adviser.
