In this article:
How Capital Gains Tax Changes From 1 July 2027
What this means for business owners
What is subject to capital gains tax?
The three dates that shaped CGT
How will the new regime work?
Old regime and new regime at a glance
Cost base indexation and the 30% minimum tax
The two methods for valuing your asset at 1 July 2027
Capital gains, losses and offsetting
How are superannuation funds different?
The Rest of This Guide
How Capital Gains Tax Changes From 1 July 2027
If you own an investment property, shares or a business asset, the way your profit is taxed when you sell is about to change. The 2026–27 Federal Budget, handed down on 12 May 2026, announced that from 1 July 2027 the 50% capital gains tax (CGT) discount will be replaced — for most taxable CGT assets held by individuals, trusts and partnerships — with CPI cost base indexation and a 30% minimum tax.
Important carve-outs remain, including the main residence exemption, eligible new builds, superannuation, affordable housing and the small business CGT concessions. It is the largest change to CGT since the discount began in 1999.
These are announced measures. At the date of writing, no draft legislation or final ATO calculation tools have been released, so the detail can still change. The announced start date is 1 July 2027. Part 1 explains how the new rules work; Part 2 works the numbers; Part 3 covers family trusts.
The Immediate Task
Most owners should not rush to sell. The immediate task is to identify the assets you may sell after 1 July 2027, model the tax outcome under the old rules against the new transitional split, and decide whether a 1 July 2027 valuation is needed. Before selling or getting a valuation, ask Westcourt to model your specific position — the right answer depends on the asset, the owner and the structure.
What is subject to capital gains tax?
CGT applies when a “CGT event” happens to a “CGT asset”. The most common CGT event is a sale. A CGT asset is almost anything you own that can rise in value: real estate, shares, units in a trust, an interest in a partnership, goodwill in a business, and crypto assets.
Your main residence is generally exempt, and that exemption is not changing. Some assets are taxed as ordinary income, not under the CGT rules — for example, land bought and developed as a business. The label you give an asset does not decide the answer. How you acquired and used it does.
The three dates that shaped CGT: 1985, 1999 and 2027
Australian CGT history turns on three dates. Each one changed how a gain is calculated.
20 September 1985 — CGT began. Assets acquired before this date are “pre-CGT” assets and have, until now, been fully exempt from CGT when sold.
21 September 1999 — the 50% discount replaced the older indexation system. Long-term gains were halved instead of adjusted for inflation.
1 July 2027 — for most CGT assets, the 50% discount is replaced with cost base indexation and a 30% minimum tax. This is the day the new regime starts; a CGT event before that date generally stays under the old rules.
The Trigger
The trigger is 1 July 2027, not 30 June 2027 — and for most sales the date is when the sale contract is signed, not when it settles. A CGT event before 1 July 2027 should generally stay under the old rules, but the timing depends on the type of CGT event and should be checked for the specific transaction.
How will the new regime work?
Nothing changes. If the CGT event happens before 1 July 2027, the 50% discount applies in full, provided you have held the asset for at least 12 months. A pre-1985 asset sold before this date stays fully exempt.
An asset bought on or after 1 July 2027 and held for at least 12 months is taxed under the new regime when sold: cost base indexation, with a 30% minimum tax, and no 50% discount. The indexation method applies to assets that satisfy the 12-month holding condition. An asset sold within 12 months has never qualified for the discount and does not qualify for indexation either — the whole nominal gain is taxed at marginal rates, as now.
This affects most current owners. If you own an asset on 1 July 2027 and sell it later, the gain is split into two parts, calculated when you sell:
- The pre-1 July 2027 part — growth from your purchase price up to the asset’s market value on 1 July 2027. Taxed under the old rules, so the 50% discount applies. For a pre-1985 asset, this part stays fully exempt.
- The post-1 July 2027 part — growth from the 1 July 2027 value up to the final sale price. Taxed under the new regime: indexation and the 30% minimum tax.
This is why the old pre-1985, pre-1999 and post-1999 categories no longer matter for a future sale. Whatever date you bought the asset, if you hold it across 1 July 2027 the same two-part split applies. A pre-1985 asset is simply more generous on the first part — exempt rather than discounted.
Whether the new regime costs you more depends on the asset. Indexation favours the owner where inflation is high relative to growth, and over very long holding periods. It is harsher on assets that grow strongly over short-to-medium periods, where there is little inflation to strip out and the 50% discount is genuinely lost. As a rule of thumb: strong growth held for a short period is worse off; steady assets held for the long term are closer to neutral.
Cost base indexation and the 30% minimum tax
For the post-1 July 2027 part of a gain, the new regime works in two steps, in order.
- First, cost base indexation. The starting value is increased in line with the Consumer Price Index over the holding period. This is similar to the indexation that operated between 1985 and 1999. Only the “real” gain above inflation is taxed.
- Then, a 30% minimum tax. The 30% floor is applied after indexation, to the post-2027 real gain. If your marginal rate is below 30%, the minimum applies. If it is above 30%, your marginal rate applies. It is a floor, not a cap.
Income support recipients, such as Age Pension and JobSeeker recipients, are expected to be exempt from the 30% minimum tax. A separate rule is also expected for new residential builds: investors in eligible new dwellings may be able to choose, at sale, between the old 50% discount and the new method. Both points are stated from Budget commentary and should be checked against the law.
The two methods for valuing your asset at 1 July 2027
A formal valuation. A market valuation as at 1 July 2027. For listed shares a quoted price exists. For property, business goodwill or closely held interests, a qualified valuer is needed.
A prescribed apportionment formula. An ATO formula that estimates the 1 July 2027 value from the asset’s growth rate over the whole period you owned it. It avoids the cost of a valuation but applies an averaged result.
The Right Option
The valuation is not paperwork — it sets the dividing line that decides the tax. A higher 1 July 2027 value pushes more gain into the discounted or exempt pre-2027 part and lifts the indexed cost base on the post-2027 part. For property and business assets, a defensible valuation dated 1 July 2027 is the single most valuable thing an owner can put in place. Choose between the two methods on the numbers — for a fast-growing asset the formula often understates value and costs tax; for a steady asset it can be adequate and cheaper.
Capital gains, losses and offsetting
Capital losses still work broadly as they do now. A capital loss offsets a capital gain in the same year, unused capital losses carry forward, and a capital loss cannot be offset against ordinary income such as salary. The ordering matters, and it is easy to get wrong.
Under the current rules, capital losses are subtracted from the gross capital gain before the 50% discount is applied — not after. A dollar of capital loss therefore cancels a full, undiscounted dollar of gain. Against a gain that is about to be halved, that makes a loss worth more than the post-discount figure suggests.
The old 1985–1999 indexation method, which the new regime resembles, worked the same way. Because a loss offsets a gross gain dollar-for-dollar, a taxpayer with capital losses often preferred indexation over the 50% discount — a smaller gain that is not going to be halved can beat a larger one that is.
An open question
The Budget did not state how capital losses interact with the post-1 July 2027 regime — whether a loss is offset before or after indexation, and how losses are ordered across a pre-2027 discountable gain and a post-2027 indexed gain on the same asset. The historical treatment, loss against the gross gain, is the better guide. This is a design point, not a detail, and must be confirmed against the legislation when released.
How are superannuation funds different?
The new indexation-and-minimum-tax regime is announced to apply to individuals, trusts and partnerships. Superannuation funds, including self-managed super funds (SMSFs), are expected to stay outside it and keep their current treatment — a one-third (33.33%) CGT discount on assets held more than 12 months, and assets supporting a retirement-phase pension generally exempt.
If that holds, super becomes comparatively more attractive for long-term growth assets after 1 July 2027. But it is expected, not confirmed — the Budget fact sheet did not put the SMSF position beyond doubt. Do not move assets into super on the assumption alone; confirm the treatment against the draft law first.
How are non-residents affected?
Foreign residents and Australian expats need separate advice. The transitional split may still apply to an asset held across 1 July 2027, but it does not sit on its own. Foreign and temporary residents already have restricted access to the full 50% CGT discount for gains accruing after 8 May 2012, and the taxable Australian property rules, foreign resident capital gains withholding, and the denial of the main residence exemption for foreign residents can all materially change the outcome.
This sits alongside a broader, separate reform of the foreign resident CGT regime that expands the range of assets on which non-residents are taxed. For anyone who is, or may become, a non-resident, tax residency itself is the gating question — it is decided on facts, not a single bright-line test, and should be settled with advice before any sale.
What happens to a capital gain made inside a company?
Companies have never received the 50% CGT discount, so removing the discount does not change a company’s own position — it is taxed on the full gain at its company tax rate, which is 25% for most private trading companies (base rate entities) or 30% for others. The question is what happens when the gain is paid out to shareholders.
Take a company on the 30% rate that makes a $1,000,000 capital gain. It pays tax of $300,000, leaving $700,000. That $700,000 is distributed as a franked dividend. The shareholder includes the dividend in their income and claims the franking credit. The gain does not keep its “capital” character in the shareholder’s hands — it is dividend income, with no CGT discount and no indexation on the dividend itself. Payments to shareholders or their associates that are not properly declared dividends can also raise Division 7A.
The Budget did not announce a special rule for company gains flowing to shareholders, so the ordinary dividend, franking and Division 7A rules continue to apply. The interaction with the new individual-level regime has not been spelled out and must be confirmed once the law is released. Holding growth assets in a company has never been a CGT-efficient choice, and nothing in this reform changes that.
The rest of this guide
This is Part 1 of three. Part 2 — “Should You Sell Before 1 July 2027? CGT Examples” — works the numbers on a single property and gives a clear view on who should sell and who should hold. Part 3 — “Family Trust Tax Changes 2028: Bucket Companies, Income Splitting and Restructures” — covers the separate 30% minimum tax on discretionary trusts from 1 July 2028, the three-year restructure rollover, and the small business CGT concessions. A hub page, “CGT and Trust Tax Reform 2027–2028: Guide for Private Business Owners”, links all three.
Do not panic-sell. Do model before you sign, value or restructure. Book a CGT transition review with Westcourt: we model the old-rule outcome, the post-2027 transitional split, valuation sensitivity, trust distribution impact, bucket-company exposure, and restructure cost and duty risk — before you sell or restructure.
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