Last Update: July 2026
The 50% CGT discount changes announced in the Federal Budget are the part of the reform that quietly matters most to long-term investors. The negative gearing changes get the headlines, but the CGT reform touches every personally-held investment asset in the country.
The good news: existing gains are grandfathered. Every dollar of capital appreciation up to 1 July 2027 keeps the 50% discount when you eventually sell. Only growth from 1 July 2027 onwards sits under the new regime, which replaces the flat discount with inflation indexation plus a 30% minimum tax rate.
The implication: investors with long-held assets now have two cost bases to track. The original cost base and the market value at 1 July 2027. Getting that valuation right becomes important infrastructure.
This article is the playbook. It walks through what actually changed, what the new regime looks like in practice, the worked maths for typical scenarios, the six-step decision framework for the next 14 months, and the structure decisions that matter post-2027.
For the broader budget context, Federal Budget 2026: what it actually means for you is the pillar post.
What actually changed (the 60-second version)
From 1 July 2027, the 50% CGT discount for individuals, trusts and partnerships is replaced with:
- Inflation indexation of the post-1 July 2027 cost base, plus
- A minimum 30% tax rate on the indexed gain
This is closer to how the CGT system worked before September 1999, when the flat 50% discount was introduced.
What didn’t change:
- Gains accrued before 1 July 2027 keep the 50% discount. This is the critical detail. The reform isn’t retroactive.
- Super funds keep existing CGT treatment, effectively 10% for long-held gains.
- Small business CGT concessions are fully preserved, including the 15-year exemption.
- Age Pension recipients are exempt from the new 30% minimum CGT rate.
- The main residence exemption for your home isn’t affected.
That’s the entire reform. The headline “the CGT discount has been abolished” is misleading. What’s actually happened is that the post-2027 portion of any gain sits under a different regime.
How the new regime actually works
Take a share portfolio bought in 2015 for $200,000, valued at $500,000 on 1 July 2027, and sold in 2035 for $800,000.
Pre-1 July 2027 gain: $500,000 − $200,000 = $300,000 (50% discount applies)
Post-1 July 2027 gain: $800,000 − $500,000 = $300,000 (indexation + 30% minimum applies)
On the pre-2027 portion:
- Discounted gain: $150,000
- Taxed at marginal rate (say 47%): $70,500
On the post-2027 portion:
- Indexation reduces the gain. If cumulative CPI over the 8-year holding period is, say, 25%, the indexed cost base becomes $500,000 × 1.25 = $625,000
- Indexed gain: $800,000 − $625,000 = $175,000
- Minimum 30% tax applies: $52,500 (if the investor’s marginal rate is below 30%, the 30% minimum applies; if above 30%, the marginal rate applies)
Total tax on the sale: $70,500 + $52,500 = $123,000
For comparison, under the old rules (50% discount on the whole gain):
- Discounted gain: $300,000
- Taxed at 47%: $141,000
In this scenario, the new rules produce a lower tax bill because inflation indexation over an 8-year period creates a larger effective cost base than the 50% discount on a relatively short-held portion of the gain.
In a separate scenario, if the indexed gain is ultimately taxed at the investor’s 47% marginal rate, the total tax rises to $152,750. That’s around $11,750 more than under the previous rules, illustrating that outcomes depend heavily on the relationship between inflation, investment returns and the investor’s tax rate.
The point: the new regime isn’t uniformly worse. For long-held, inflation-sensitive assets it can be more generous. For short-held assets with strong nominal growth and low inflation, the old 50% discount was better.
Who’s actually worse off under the new regime
The investors who get hurt:
- Short-term holders of high-growth assets, where there’s no inflation to index away and the 50% discount used to cut tax in half
- High-marginal-rate investors with assets growing well above inflation
- Lower-marginal-rate investors with significant gains, who used to pay tax on discounted gains at their lower bracket and now face the 30% minimum floor
The investors who break even or come out ahead:
- Very long-term holders (10+ years), where inflation indexation can exceed the value of the flat 50% discount
- Higher-yield/lower-growth assets like franked dividend payers, where the discount mattered less because growth was a smaller part of total return
- Investors who already hold significant pre-2027 gains, where the bulk of their eventual gain is grandfathered
Playbook step 1: get a valuation strategy in place
The single most valuable administrative move in the next 14 months is planning your 1 July 2027 valuation infrastructure.
You’ll need a defensible market value on that date for every personally-held investment asset with material unrealised gain. This applies to:
- Investment properties
- Share and ETF portfolios (these are easy, closing market prices on the day)
- Managed funds (unit prices on the day)
- Business equity held personally
- Holiday homes or land
- Crypto holdings
- Any other CGT asset with embedded gain
For shares and listed assets, the valuation is just the market close. Easy. For property, business equity, and unlisted assets, you’ll want a professional valuation around 30 June 2027 to 1 July 2027, formal enough to defend in an ATO review years later when you eventually sell.
The ATO’s cost base page is the rule reference for what counts as a defensible market value.
What to start now:
- List every CGT asset you hold personally
- Identify which ones will need formal valuations (property, business equity, art, illiquid holdings)
- Get quotes from valuers and book them in for late June 2027
This is the kind of admin that, if you don’t do it, creates avoidable headaches when you eventually sell.
Playbook step 2: assess pre-2027 selling decisions
For the next 14 months, every disposal decision now has a “before vs after 1 July 2027” dimension.
The reflexive answer (“sell before 2027 to lock in the 50% discount”) is wrong for almost every long-term investor. The reasons:
- Existing gains are already grandfathered. Holding doesn’t lose you the discount on the pre-2027 portion.
- Selling crystallises CGT now instead of years from now. The deferred-tax compounding benefit is real.
- Transaction costs (agent fees on property, spread on shares, time and admin) compound the wrong way.
When pre-2027 selling actually makes sense:
- The asset is genuinely a bad asset and you were going to sell anyway. Bring the decision forward.
- You have capital losses sitting on the books that can offset the gain. Use them now if there’s no other reason to hold.
- You’re in a low-income year (parental leave, sabbatical, business loss year) and can absorb the gain at a low marginal rate.
- The asset is part of a structure restructure (e.g., into a holding company under the trust rollover window). Combine the transactions.
For the underlying framework on selling decisions and tax efficiency, tax-efficient investing in Australia is the baseline.
Playbook step 3: rethink your investing time horizon
The new regime rewards long-term holding. Inflation indexation is more generous the longer the holding period, because cumulative inflation compounds.
The strategic implication: if your investing approach was already “buy quality, hold for decades, harvest dividends along the way”, the reform reinforces that approach.
If your approach was “trade in and out, harvest the 50% discount whenever I sell with a gain”, the reform makes that significantly less attractive. The discount falls away after 12 months; indexation requires real elapsed time and real inflation to build up.
For high-turnover investors, the new regime is a meaningful drag. For buy-and-hold investors, it’s roughly a wash.
Playbook step 4: rethink your structure mix
The CGT reform interacts with the trust reform (covered in family trust changes 2028 playbook) and the negative gearing reform (covered in negative gearing changes 2027 playbook) to shift the relative attractiveness of each ownership structure.
Personal name: Still works for assets where you expect the bulk of return to be growth-driven and you’ll hold long enough for indexation to do real work. The 47% top marginal rate still bites on the gain, but indexation softens it.
Trust: The trust now has a 30% floor on undistributed income and the CGT discount in the trust flows through to beneficiaries at their marginal rates as above. Combined with the 2028 trustee tax reform, a 30% minimum tax would apply at trust, with non-corporate beneficiaries receiving non-refundable credits for tax paid – this makes trusts slightly less attractive for short-term capital gains and income-streaming to low-bracket beneficiaries.
Company: Companies don’t get the CGT discount under current rules, and they don’t get inflation indexation under the new rules either. They’re taxed at 30% (or 25%) on the full nominal gain. The post-2027 maths makes companies relatively less attractive for long-term investments, and relatively more attractive for income-producing assets or short-term high-growth assets where the company rate caps tax efficiently.
Super: Effectively 10% for long-held gains. The clear winner post-reform for assets you can lock away until retirement. Subject to contribution caps, of course.
The structure decision was always nuanced; post-2027 it’s more nuanced. For a deeper view on which assets fit which structure, saving tax with the right investment structure is the framework.
Playbook step 5: use the super carry-forward lever
For investors planning a meaningful asset sale in the next 5 to 10 years, super carry-forward concessional contributions become a more valuable tool post-reform.
The mechanic: if you haven’t used your full concessional contribution cap in a given year, the unused portion carries forward for five years. In a year you realise a significant capital gain (say, an investment property sale), you can use multiple years of carried-forward cap to make a large concessional contribution, reduce your taxable income, and offset some of the CGT bite.
This isn’t new, but it’s more valuable post-reform because:
- The CGT impact on a high-gain year is potentially larger under the new regime (no 50% discount on the post-2027 portion)
- Super remains the lowest-tax wrapper for long-term assets
- The carry-forward window is finite (5 years) so it pays to plan disposals around it
A pre-disposal super contribution can shift tens of thousands of dollars from a 47% bracket to a 15% bracket. Worth modelling explicitly in the year of a major disposal.
Playbook step 6: lock in the valuation calendar
Practical admin steps for the 14-month runway:
Now to December 2026:
- Inventory every CGT asset held personally
- Identify which need formal valuations
- Get valuation quotes; book the valuers for late June 2027
- Update your record-keeping system (cost base, acquisition dates, improvements)
January to June 2027:
- Finalise valuer bookings
- Decide if any pre-2027 disposals make sense (and execute them with proper advice)
- Model the post-2027 tax position for your expected disposals over the next decade
Late June to early July 2027:
- Execute the formal valuations
- File and store valuation reports professionally. These documents may sit unused for 10+ years before they matter.
- Update your portfolio records with the new “second cost base”
The post-reform world has more documentation to keep. The investors who run this admin tightly will quietly outperform the ones who don’t. For the patterns the ATO consistently penalises, tax mistakes to avoid in Australia is a useful reference.
Common mistakes to avoid
Mistake 1: Selling assets to “lock in the discount” without modelling the alternative. The grandfathering protects pre-2027 gains regardless of when you sell. Crystallising tax now to avoid different tax later usually loses.
Mistake 2: Skipping the 1 July 2027 valuation on illiquid assets. Years later, when you sell, the ATO will want a defensible market value. Reconstructing it after the fact is painful and expensive.
Mistake 3: Treating the reform as uniformly worse. For long-held inflation-sensitive assets, the new regime can be more generous. Run the actual numbers.
Mistake 4: Ignoring the super contribution lever. Pre-disposal super contributions can meaningfully reduce the tax impact of a high-gain year.
Mistake 5: Restructuring purely on the CGT angle. The CGT reform interacts with the trust and negative gearing reforms. Restructuring one in isolation usually creates new problems.
The wrap
The 50% CGT discount changes are the part of the budget that touches the most assets. Every personally-held investment with embedded gain now has a “before vs after 1 July 2027” dimension.
The good news: existing gains are grandfathered, the new regime isn’t uniformly worse, and the 14-month runway is more than enough to plan the valuation infrastructure properly. For long-held investors, the reform is roughly a wash. For short-term traders, it’s a real drag. For super and small business CGT concessions, it’s a non-event.
The investors who get hurt are the ones who sell early to “lock in the discount” without modelling the alternative. The investors who do best build clean valuation records, plan disposals deliberately, and use the super lever where it fits.
If you want some help with your money and want to learn how financial advice can help you, you can schedule a quick call here.