If you own shares or an investment property, the way capital gains tax works is due to change. The 2026–27 Federal Budget announced that, from 1 July 2027, the 50 per cent CGT discount for individuals, trusts and partnerships will be replaced by cost base indexation, with a 30 per cent minimum tax on real capital gains.
This article explains what the Government has said so far, in plain language, and the questions worth asking before you sell anything. These are announced reforms, so the details can change before they take final form.
What is changing
Today, if you hold an asset for at least 12 months, you generally pay tax on only half of your capital gain. From 1 July 2027 that discount is replaced. Instead, the asset’s cost base is lifted each year in line with inflation (CPI), so you are taxed on the gain above inflation, which is called the real gain.
A 30 per cent minimum tax rate then applies to real gains that build up from 1 July 2027, and it is paid only when you sell. The minimum tax does not affect people whose gains are already taxed at 30 per cent or more.
What stays the same
| Item | What the Budget explainer says |
|---|---|
| Gains before 1 July 2027 | Gains that built up before that date remain under the 50 per cent discount. |
| Your main home | The main residence exemption is unchanged. |
| Pre-1985 assets | Gains that built up before 1 July 2027 remain exempt. |
| Small business concessions | The four existing small business CGT concessions are unchanged. |
How the starting point works
If you already own an asset, the new rules do not apply to the whole gain. The asset’s value on 1 July 2027 becomes its new cost base for the post-July gain. The explainer says you can work that value out using a valuation or an ATO apportionment formula. In practice, that means it is worth keeping records of what you paid and what the asset was worth around that date.
What it could mean if you receive the Age Pension
The Budget explainer says recipients of means-tested income support payments, such as the Age Pension or JobSeeker, are exempt from the 30 per cent minimum tax if they receive any payment in the financial year the gain is realised. That makes the year you sell something to think about, because it is the year of sale that counts.
Selling an asset can also change your Age Pension in other ways. A sale can change the assets and income Centrelink counts, so the full picture matters, not just the tax.
Negative gearing is changing too
The same package changes negative gearing on residential property. Established properties you held at 7:30pm AEST on 12 May 2026 keep their current treatment until sold. For established properties bought after that, losses can be deducted against other income only up to 30 June 2027, and from 1 July 2027 they cannot be negatively geared against other income. Excess losses can be carried forward against future residential property income, including capital gains. New builds are treated differently, and super funds, including SMSFs, are excluded from this change.
Will you pay more or less?
It depends. The Government’s own description of the reform is that some investors will pay more tax and some will pay less, depending on their investment returns, inflation and how long they hold the asset. Indexation protects you from being taxed on growth that simply matched inflation. The minimum tax works the other way, because it sets a floor on the rate applied to real gains for people not already paying 30 per cent or more.
New builds have their own option. The explainer says buyers of a new build can choose either the 50 per cent discount or indexation plus the minimum tax when they sell. Later buyers of that property cannot use either the discount or negative gearing.
Where this fits in a retirement plan
Many retirees hold an investment property or a share portfolio outside super, and plan to sell some of it over time to fund spending, help family or move home. A change to the tax on those sales is worth building into the plan early. The timing of a sale, which financial year it falls in and what else you own can all change the outcome.
Questions worth asking before you sell
There is no one right answer for everyone. These questions help you see where you stand.
When did I buy the asset, and what did I pay? When might I sell, and which financial year would the sale fall in? Do I receive, or expect to receive, a part or full Age Pension? Would selling change my income, my assets or my other entitlements? And is the final law the same as the Budget announcement?
Because the rules start on 1 July 2027, there is time to plan rather than react. Working through your own numbers now is far calmer than doing it with a sale pending.
If you would like to talk it through, we are happy to help.
This article contains general information only and does not take into account your objectives, financial situation or needs. Consider whether it is right for you and seek personal advice before acting on it.
Jason Bell and Compass Retirement and Aged Care are Authorised Representatives of Millennium3 Financial Services Pty Ltd (AFSL 244252).
Sources: Australian Government, Budget 2026–27 tax explainer, Negative Gearing and Capital Gains Tax Reform (budget.gov.au/content/factsheets/download/tax-explainers-negative-gearing-capital-gains-tax.pdf); Treasury, Capital Gains Tax and Negative Gearing (consult.treasury.gov.au/c2026-792170); Treasurer, Second reading speech, Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 (ministers.treasury.gov.au).
