Australia's CGT Discount Is Going in 2027. Here's What Replaces It.

The 2026-27 Federal Budget confirmed it. From 1 July 2027, the 50% capital gains tax discount that has sat at the centre of every property exit calculation since 1999 is going. What replaces it is a combination of cost-base indexation and a 30% minimum tax on net capital gains — a fundamentally different calculation that rewards long holds through inflationary periods and punishes medium-term gains that used to be cheap.

Neither measure is yet law — legislation is required, and the final detail may differ from what’s been announced. But both are confirmed Budget commitments from a government that took them to an election. The direction is clear enough that modelling both methods across your holdings now is worth doing before you next consider a sale or acquisition.

This isn’t tax advice. Your adviser should be across the specifics for your situation and structure.

What changes — and what it means in numbers

Under the current 50% discount, the length of your hold beyond 12 months is irrelevant to how much discount you get. A property held 14 months and one held 14 years both get the same haircut on the nominal gain.

From 1 July 2027, that changes. The new regime replaces the 50% discount with two layered rules:

Indexation uplifts your cost base by CPI over the holding period, so you’re taxed only on the real gain above inflation. The longer you hold and the higher inflation runs, the more of your gain is sheltered.

A 30% minimum tax applies to net capital gains on assets held more than 12 months. Even if the indexed gain is small, this floor sets a minimum tax rate on whatever remains taxable.

The crossover point — where indexation beats the old 50% discount — depends on your holding period and CPI. For short-to-medium holds in moderate inflation, the old discount often still wins. A property bought in 2018 for $700,000, sold in 2027 for $1.1M, has a $400,000 gain. Under the old discount, $200,000 is taxable. Under indexation at cumulative CPI of roughly 30% over that period, your cost base rises to about $910,000, leaving $190,000 taxable — slightly lower, with the 30% minimum tax then applying to that $190,000.

Push the hold to 2035 with sustained inflation and the gap widens further in indexation’s favour.

What the disposal date means for every property you own

The rules apply to gains realised on or after 1 July 2027 — so it is the date of sale, not the date of acquisition, that determines which regime applies. A property you’ve held since 2015 and sell in June 2027 falls under the old rules. The same property sold in August 2027 falls under the new ones.

That means every sale you’re already planning in 2026 or early 2027 carries a clear decision: does the timeline still make sense, or is there a case for accelerating disposal before July 2027 to lock in the 50% discount?

Acquisition date still matters for a related reason: transitional arrangements for newly built residential properties allow owners to choose between the 50% discount and the new indexation method at disposal. That election won’t exist for established stock purchased after Budget night (12 May 2026).

The companion change: negative gearing restriction

The CGT changes didn’t come alone. The same Budget confirmed that from 1 July 2027, negative gearing losses on established residential investment properties will no longer be deductible against salary and other personal income for new investors — only against future rental income or capital gains from those properties.

Properties held at 12 May 2026 (Budget night, 7:30pm AEST) are fully grandfathered under the existing rules. Newly built properties remain exempt from the restriction.

These two changes interact. If you’re a higher-rate taxpayer planning to buy established investment properties after July 2027, the tax position of those assets changes on two fronts simultaneously: the exit tax calculation shifts, and the annual negative gearing offset disappears. The analysis that previously justified a particular hold-for-growth strategy may not hold under the new numbers.

Restructuring: the temptations and their limits

The obvious question is whether moving assets between structures now captures a better outcome later. Be careful. A transfer between entities — into a trust, SMSF, or SPV — is a CGT event today, typically plus stamp duty in most states. The upfront cost frequently erases any benefit you were chasing.

Where structure matters is on new acquisitions. If you’re buying after Budget night, the entity the property sits in affects both the CGT method available post-2027 and whether the negative gearing restriction applies. Superannuation funds and widely held trusts are exempt from the negative gearing changes. An individual or a discretionary trust buying established stock from July 2027 is not.

Modelling both methods before you decide

The practical work is comparing two exit numbers for every property at several sale dates under realistic inflation assumptions. Do that across a six-property portfolio held across individuals, trusts, and an SMSF, and a spreadsheet becomes unwieldy fast.

What you want is to model each property at its likely sale date under both methods, at a couple of inflation scenarios, and see where the crossover falls. A property approaching the indexation advantage might justify holding longer. One firmly in discount territory may be a cleaner candidate to sell before any transitional window closes. And if you’re planning to realise gains across multiple properties, staggering disposals across financial years to manage your marginal rate interacts with which CGT method applies to each — getting both levers modelled together per owner and structure is the difference between a plan and a guess.

The legislation isn’t through yet. But the investors modelling both scenarios now will be making deliberate decisions in the next 12 months, not reacting when the law passes.

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