CGT Reform 2027: Indexation + 30% Min on Real Gains

The most significant CGT changes 2027 budget has delivered in a generation landed on 12 May 2026 when Treasurer Jim Chalmers handed down the 2026-27 Federal Budget. As proposed — subject to passage of enabling legislation — Australia’s 50% CGT discount will be replaced from 1 July 2027 with an indexation-based discount paired with a 30% minimum tax on real gains. If you hold investment property, a share portfolio, crypto, or any asset that generates a capital gain, the way your profit is taxed is set to change materially. This guide explains what was announced, who it affects, how the mechanics work, and what you can do before commencement.

Disclaimer: This article provides general information only and does not constitute tax advice. Tax and investment decisions should be made in consultation with a registered tax agent and a licensed financial adviser. All budget measures described here are proposals — subject to passage of enabling legislation and potential amendment during the parliamentary process.

What the 2026-27 Budget Proposes

According to Budget Paper No. 2, the Government proposes to replace the existing 50% CGT discount with two concurrent changes, effective for capital gains events on or after 1 July 2027.

First, indexation returns to the capital gains tax framework. Under the proposal, an asset’s cost base will be adjusted for inflation between the date of acquisition and the date of disposal. The adjustment factor will be based on movements in the Consumer Price Index (CPI) over the holding period. The taxable gain is then calculated on the difference between the sale proceeds and the inflation-adjusted cost base — that is, only the real gain is brought to account.

Second, a 30% minimum tax rate applies to those real gains. Where an individual taxpayer’s marginal rate would otherwise apply at a rate below 30%, the minimum ensures a floor. Where the marginal rate exceeds 30%, the marginal rate continues to apply to the real gain. In effect, the old mechanism — take the gross gain, halve it, add it to your income — is replaced by a mechanism that strips inflation out of the gain and then floors the effective rate.

For new residential housing investments specifically, the proposal includes an election: investors acquiring new housing can choose between the indexation method or the old 50% discount. This carve-out is explicitly aimed at supporting housing supply by not discouraging investment in new dwellings. No equivalent election is proposed for established property, shares, crypto, or other asset classes. Detailed draft legislation has not yet been released; Treasury is expected to consult on the mechanics through 2026 ahead of a 1 July 2027 start.

The ATO’s capital gains tax page continues to reflect current law. As the ATO updates its guidance to reflect enacted legislation, we will link to the relevant pages in the Updates section below.

Who’s Affected

Individuals selling investment property, shares, or crypto from 1 July 2027

Any individual who realises a capital gain on or after 1 July 2027 will be subject to the new regime — as proposed. This includes investment property sales (established residential, commercial, and rural), listed and unlisted shares, exchange-traded funds, cryptocurrency disposals, and collectibles above the relevant threshold. Assets held for at least 12 months will be subject to the indexation-based discount rather than the 50% flat discount. The effective tax outcome will depend on the length of the holding period, the inflation rate over that period, and the taxpayer’s marginal rate.

Trusts and partnerships realising capital gains

Capital gains flowing through discretionary trusts and family trusts to individual beneficiaries are currently eligible for the 50% discount when the underlying asset has been held for 12 months or more. Under the proposal, those gains would instead be discounted by indexation, with the 30% minimum applied at the trust or beneficiary level — the precise point of application is one of the mechanics that will need to be resolved in draft legislation.

If you hold investments through a discretionary trust or a partnership structure, the interaction with the new regime deserves specific professional attention. Layered on top is the separate Budget proposal for a 30% minimum tax on trust distributions — proposed to commence 1 July 2028 — which we cover in detail in our post on discretionary trust 30% minimum tax 2028.

Sole traders selling business assets

Sole traders who sell business assets — fit-out, equipment, vehicles, intellectual property, goodwill — and realise a capital gain are in scope of the CGT rules, subject to the small business CGT concessions. Those concessions (the 15-year exemption, the 50% active asset reduction, the retirement exemption, and the rollover) are a separate layer of the tax code, and the Budget paper does not explicitly address how they interact with the new minimum and indexation mechanics. We are flagging this as an area of genuine uncertainty. If you operate as a sole trader and are considering selling your business or its assets before or after 1 July 2027, get specific advice from a registered tax agent — do not rely on general summaries.

Taxpayers with main residences — not in scope based on the Budget paper

The main residence exemption — which makes your principal place of residence CGT-free — is not proposed to change under this measure. If the home you live in is your main residence and qualifies fully for the exemption, the CGT reform does not affect that asset. As always, partial exemptions (for periods of absence, dual use, or homes that were never fully owner-occupied) require individual analysis. Confirm with a registered tax agent before relying on the exemption for any specific transaction.

How Indexation Actually Works

Indexation was part of the Australian CGT framework from its introduction in 1985 until 1999, when the Howard Government replaced it with the 50% flat discount. The proposal effectively revives the indexation approach, with the addition of the 30% minimum rate that did not exist in the original regime.

The core mechanics work like this. When you sell an asset, you calculate your cost base — broadly, what you paid for it plus certain acquisition and improvement costs. Under the proposal, each component of the cost base is multiplied by an indexation factor reflecting CPI growth between the year of acquisition and the year of disposal. The indexed cost base is subtracted from the sale proceeds to produce your real gain. That real gain is what gets included in your assessable income, subject to the 30% minimum.

To make this concrete: suppose (illustrative figures only — actual indexation rates will be set by Treasury and will depend on CPI movements between acquisition and disposal) you purchased an asset for an indexed cost base that, by the time of sale many years later, has been lifted 30% by inflation. Your real gain — the economically meaningful profit above inflation — is smaller than the gross nominal gain. Under the old 50% discount, you got a flat haircut regardless of how much inflation had actually eroded your purchasing power. Under indexation, the discount is proportional to actual inflation over your holding period. In high-inflation environments and long holding periods, the indexed cost base adjustment can be substantial. In short holding periods or low-inflation periods, it may be smaller than the 50% flat discount was.

The 30% minimum rate is the other key variable. Under current law, a taxpayer in the lower marginal brackets might end up paying well below 30% on a discounted capital gain. The minimum closes that gap. For taxpayers already in the 37% or 45% bracket, the minimum is not the binding constraint — their marginal rate already exceeds 30%.

Treasury will publish the indexation methodology, the reference CPI tables, and the interaction rules in draft legislation. Until that legislation is released, the exact mechanics remain subject to change.

Interaction with Other Budget Changes

The CGT reform does not sit in isolation. Two other Budget measures announced on 12 May 2026 create a layered picture for property investors and trust-held assets.

Negative gearing limits — also proposed to commence 1 July 2027 — cap the amount of rental losses an investor can offset against other income in any given year. We cover the detail in our post on negative gearing changes 2026 budget. For a property investor holding established residential real estate, both changes land simultaneously: the deductibility of losses narrows at the same time the CGT treatment of eventual gain changes. The combined effect on after-tax investment returns for established property is significant, and modelling both changes together — not in isolation — is important.

Discretionary trust 30% minimum tax — proposed for 1 July 2028 — applies to trust distributions to beneficiaries whose effective tax rate on the distribution falls below 30%. For trust-held investment assets that will also be subject to the CGT minimum from 1 July 2027, the stacking of these measures warrants careful structural review. See our dedicated post on discretionary trust 30% minimum tax 2028 for detail.

What to Do Now (Before 1 July 2027)

The 14-month window between Budget night and the proposed commencement date gives investors and business owners time to prepare — but not time to be complacent. Here is a practical starting point.

Get advice before transacting. Tax-driven selling — rushing to dispose of assets before 1 July 2027 to lock in the 50% discount — is rarely the right strategy in isolation. CGT is one input among many in a disposal decision, alongside the asset’s growth prospects, your income position in the disposal year, transaction costs, and reinvestment options. A registered tax agent at taxr.io/for/accountants/ can run the numbers for your specific situation. A licensed financial adviser can address the broader portfolio question. Get both perspectives before acting.

Take stock of your CGT-eligible assets. Do you know every asset you hold that could generate a capital gain post-1 July 2027? Work through the list: investment properties, share portfolios, managed funds, ETFs, cryptocurrency holdings, and business assets above the instant asset write-off threshold. For each, note the acquisition date, your cost base (including improvement expenditure), and the current approximate market value. This inventory is the starting point for any meaningful planning conversation and, importantly, the foundation of a defensible cost base calculation if you do eventually sell under the new regime. Our post on tax planning for the new financial year covers the broader habit of proactive financial record-keeping.

Review trust structures. If you hold investment assets through a discretionary trust, the layering of the CGT minimum (from 1 July 2027) and the trust distribution minimum (from 1 July 2028) is worth a specific structural review with your accountant and legal adviser. Restructuring trust arrangements takes time and may have its own tax costs — leaving this to mid-2027 is too late.

Build your cost base documentation now. Under both current law and the proposed new regime, the accuracy of your cost base directly determines your taxable gain. Every invoice, settlement statement, stamp duty receipt, renovation receipt, and brokerage confirmation that forms part of your cost base should be captured and stored. For property investors, this means going back through every improvement and repair expenditure over the life of the asset. The difference between a well-documented and a poorly-documented cost base can easily be tens of thousands of dollars in a single disposal.

Watch for draft legislation. Treasury will release exposure draft legislation for consultation. The ATO will publish updated guidance. The Senate will scrutinise the measures. Subscribe to updates from the Australian Government Budget site and your professional advisers. We will also update this post as legislation progresses.

Risk: This Measure Is Likely to Be Amended

Bluntly: the CGT discount is one of the most politically contested settings in Australian tax law. Previous governments have proposed changes to it and backed away. The 50% flat discount has a large constituency — every investor holding a negatively geared property, a share portfolio, or a crypto position has a direct financial interest in preserving it.

The current proposal will face Senate scrutiny. The interaction between the 30% minimum, the indexation methodology, the housing election, the trust provisions, and the small business concessions involves genuine technical complexity that exposure draft consultation will surface. It is entirely plausible that the final legislation — if it passes at all — differs materially from the Budget night proposal in its mechanics, its rates, its commencement date, or its scope.

We are reporting the measure as proposed. We are not modelling it as a certainty. Check this post for updates as legislation progresses.

Common Misconceptions

A few things already circulating in the press and online that are worth correcting directly.

“The 50% CGT discount is being abolished.” Not quite. The proposal replaces the 50% flat discount with an indexation-based discount. In many scenarios — particularly long holding periods in inflationary environments — the indexation discount may be meaningful. The change is to the mechanism of relief, not the elimination of relief entirely. The 30% minimum is a separate and additional constraint.

“Main residences are affected.” The Budget paper does not propose any change to the main residence exemption. If your principal home qualifies fully for the exemption, the CGT reform does not touch it. Media coverage conflating investment property changes with family homes is incorrect based on the Budget paper as released.

“Only property investors are affected.” Anyone who realises a capital gain on or after 1 July 2027 is in scope — subject to existing exemptions. Shareholders, cryptocurrency holders, managed fund investors, and business owners selling assets all need to consider how the new regime applies to them. This is not a property-only measure.

“I should sell everything before 1 July 2027.” This is the most dangerous misconception. Crystallising a capital gain in 2026-27 under the 50% discount makes sense in some circumstances and is actively harmful in others, depending on your marginal rate in that year, your cost base, your need for the proceeds, and the future growth trajectory of the asset. Run the analysis with a professional, not a headline.

Frequently Asked Questions

When does the CGT reform take effect?

From 1 July 2027, as proposed in Budget Paper No. 2 — subject to passage of enabling legislation. The new rules apply to capital gains events on or after that date. Gains realised before 1 July 2027 are assessed under current law.

Does the main residence exemption change?

The Budget paper does not propose changes to the main residence exemption. Your principal home remains CGT-free under existing rules. Confirm with a registered tax agent before relying on this for any specific transaction — partial exemptions and complex ownership arrangements are not one-size-fits-all.

Will the 50% CGT discount be entirely abolished?

The proposal replaces the 50% discount with an indexation-based discount, paired with a 30% minimum tax rate on real gains. New housing investors can elect either method, but for most other assets the 50% flat discount is gone. Whether the indexation alternative is more or less generous depends on your holding period and the inflation rate over that period.

How does indexation work?

Indexation increases your asset’s cost base in line with inflation between purchase and sale. The “real gain” is the sale price minus the indexed cost base — only the inflation-adjusted profit is taxable. The 30% minimum rate then applies to that real gain. The precise CPI tables and indexation methodology will be confirmed in draft legislation.

Should I sell assets before 1 July 2027?

Tax-driven selling is rarely the right call on its own. Get advice from a registered tax agent and a financial adviser before transacting. The CGT timing question depends on your asset type, your holding period, your marginal rate in the disposal year, your cost base, and your broader portfolio plans. A rushed sale that locks in poor timing or crystallises losses elsewhere can cost more than any CGT saving.

Are crypto, shares, and small business assets affected?

The Budget proposal applies broadly to capital gains events. Specific carve-outs for small business CGT concessions — the 15-year exemption, the 50% active asset reduction, the retirement exemption, and rollover relief — need verification against the final legislation. The interaction is not addressed explicitly in the Budget paper. We will update this post as draft legislation appears.

Updates

No legislation amendments yet. We will track Senate progress and Treasury consultation here.

CGT reform makes recordkeeping more important, not less. The indexation method means the accuracy of your cost base — every acquisition cost, improvement expense, and associated outlay — determines your taxable gain directly. A poorly-documented cost base cannot be reconstructed years later from memory. Taxr captures every business-asset receipt, every property-related expense, every cost that may one day form part of an indexed cost base. Download Taxr and stop hunting for receipts when you eventually sell. You can also use our sole trader tax calculator to model how changes to your taxable income affect your overall position.