Key takeaways
CGT changes apply different tax treatment to gains made before and after 1 July 2027.
Existing investment properties may continue to access transitional arrangements, depending on individual circumstances.
Relationship breakdowns and inheritances may affect how future CGT is calculated.
A qualified tax adviser can help explain how the rules may apply to your circumstances.
Update (July 2026): The Australian Government's capital gains tax (CGT) and negative gearing reforms have now passed into law.
Most of the changes outlined in this article are due to commence from 1 July 2027, with existing investment properties generally continuing under the current tax rules, subject to the legislation. This article has been updated to reflect the enacted reforms.
The 2026 Federal Budget announced one of the biggest changes to capital gains tax (CGT) in more than 25 years. The legislation has now passed, with most changes due to commence from 1 July 2027.
From 1 July 2027, the current 50% CGT discount for assets held longer than 12 months will be replaced with a CPI-based indexation system.
The changes affect more than just investment property. According to the government, the reforms apply to all eligible CGT assets held longer than 12 months, including shares, ETFs and managed funds held by individuals, partnerships and trusts.
If you already own an investment property, are considering buying one, or expect to sell assets in the future, understanding how the proposed changes work may help you make more informed decisions about timing and strategy.
This article is general in nature and does not constitute financial or tax advice. For advice specific to your circumstances, speak with a qualified tax adviser.
What is capital gains tax?
Capital gains tax is not a separate tax. It is the tax paid on the profit made when selling an asset, such as an investment property or shares.
The capital gain is added to your taxable income in the financial year when the asset is sold and taxed at your marginal rate.
Under the current rules, many Australians who hold an asset for more than 12 months may qualify for the 50% CGT discount. That means only half of the capital gain is added to taxable income.
A simple example
Scenario | Current rules |
|---|---|
Purchase price | $600,000 |
Sale price | $800,000 |
Capital gain | $200,000 |
Taxable gain after 50% discount | $100,000 |
Example only. Does not include other costs, taxes or individual circumstances.
Under the current system, only $100,000 would generally be added to taxable income if the asset was held longer than 12 months. From 1 July 2027, the way that discount is calculated changes.
What is changing from 1 July 2027?
The government is replacing the flat 50% discount with CPI-based cost base indexation, a system previously used before 1999. (Sources: Tax reform | CGT and Negative Gearing Factsheet)
Instead of automatically reducing the gain by 50%, the new rules adjust the asset’s purchase price for inflation using the Consumer Price Index (CPI).
Under the proposed model:
investors pay tax only on the gain above inflation
the 12-month holding rule still applies
gains accruing before 1 July 2027 continue under the existing rules
gains accruing after 1 July 2027 move to the new indexation system
A new minimum 30% tax rate on real capital gains accruing from 1 July 2027 will also apply under the new legislation.
According to the government, recipients of means-tested income support payments, including the Age Pension and JobSeeker, are exempt from the minimum rate.
You might also be interested in: Should you buy an investment property before 1 July 2027?
Who do the changes affect?
The reforms apply more broadly than many investors may realise.
According to Treasury, around 7% of tax filers report a net capital gain each year. In 2022–23, this was around 1.1 million individuals.
The changes apply to:
investment properties
shares and ETFs
managed funds
trust-held CGT assets
partnership-held CGT assets
The changes are not limited to property investors. If you hold both shares and investment property, the new rules may affect both asset classes.
How the tax impact may differ
According to Treasury modelling in the official factsheet, the tax impact varies depending on investment returns.
The examples below assume:
an asset purchased in July 2027
held for 10 years
inflation averaging 2.5%
Investor example | Annual return | Estimated outcome vs current rules |
|---|---|---|
Typical residential property | 5% | Approximately $8,075 more tax |
Lower-return asset | 2.5% | Approximately $24,858 less tax |
Higher-growth asset | 7.5% | Approximately $58,851 more tax |
Source: CGT and Negative Gearing Factsheet
According to the government’s modelling, higher-growth assets may generally result in more tax under the new system, while lower-growth assets closer to inflation may result in similar or lower outcomes.
“Investors still need to base decisions on the same fundamentals, including growth potential, rental yield and long-term affordability.” — Matthew Bulmer, Aussie Mobile Broker
What happens to assets you already own?
One of the most important parts of the reform is that existing assets receive split treatment.
The proposed changes apply only to gains accruing after 1 July 2027. Gains built up before that date continue under the current 50% discount rules.
That means investors who already own assets before 1 July 2027 may need to separate gains into two periods:
Period | Tax treatment |
|---|---|
Before 1 July 2027 | Existing 50% CGT discount |
After 1 July 2027 | CPI indexation rules |
According to the government, investors will generally be able to use either:
a formal market valuation as at 1 July 2027
an ATO apportionment formula estimating the value at that date
The ATO is expected to provide tools to help investors calculate the split treatment.
You might also be interested in: What the tax changes mean for property investors
Worked example: property purchased before 2027
The government’s factsheet provides an example of an investor who:
buys a property in 2022 for $800,000
sells it in 2032 for $1.6 million
determines the property value at 1 July 2027 was $1,131,371
Using the proposed split treatment:
Calculation | Amount |
|---|---|
Gain before 1 July 2027 | $331,371 |
Taxable portion after 50% discount | $165,685 |
Gain after 1 July 2027 | $468,629 |
Taxable amount after CPI indexation | $319,958 |
Total taxable capital gain | $485,643 |
Under the current rules, the taxable amount would have been $400,000. At a 47% tax rate, the additional tax in the government’s example is approximately $40,000.
The minimum 30% tax: who it affects
The proposed minimum 30% tax applies only to gains accruing from 1 July 2027.
Importantly:
it does not affect gains already taxed above 30%
most average and above-average full-time earners are already above that threshold
recipients of means-tested income support payments are exempt
If you were planning to sell assets during retirement or another low-income period, it may help to discuss how the proposed changes could affect your strategy with a qualified adviser.
What about new builds?
Investors purchasing eligible new builds retain additional flexibility under the proposed rules.
According to the government, eligible new-build investors can choose whichever method produces the better tax outcome when selling:
the existing 50% CGT discount
the new CPI indexation arrangement
This choice applies only to the first purchaser of an eligible new build. If you are unsure whether a property qualifies as an eligible new build, it may help to confirm the details before exchanging contracts.
“It’s definitely changing the conversation because many investors have traditionally focused on established properties for reasons like location, land value and long-term capital growth, while proposed policy settings may now encourage greater focus toward new builds.” — Samantha Harvey, Senior Mobile Broker
“From my perspective as a broker, the conversation is becoming less about simply chasing tax benefits and more about the overall long-term strategy, cash flow and quality of the investment,” she adds.
You might also be interested in: Why falling clearance rates could be the signal investors have been waiting for
What the changes do not affect
Several existing CGT arrangements remain unchanged.
According to the government, the reforms do not affect:
the principal place of residence exemption for your main home
the existing 60% CGT discount for qualifying affordable housing investments
the four small business CGT concessions
Sources: Australian Government Budget 2026–27 - Tax reform | CGT and Negative Gearing Factsheet
The government has also indicated further consultation will occur regarding early-stage and start-up investment incentives.
What happens to your CGT position when a property is transferred in a relationship breakdown or at death?
Two life events can affect the CGT and negative gearing treatment of an investment property in ways that are easy to overlook: separation or divorce, and the death of an owner.
Relationship breakdown
Under the Australian Taxation Office's (ATO) relationship breakdown CGT rollover, CGT is generally not triggered when an investment property is transferred between separating spouses under a court order or formal agreement made under the Family Law Act 1975.
Instead, the receiving spouse generally takes on the original cost base and acquisition date. This means the split CGT treatment, with the 50% discount applying to gains accrued before 1 July 2027, should generally still be available if the property is sold in the future.
A less clear question relates to the proposed negative gearing grandfathering rules. The legislation quarantines rental losses for properties acquired on or after 12 May 2026. Whether a property transferred under the relationship breakdown rollover is treated as a new acquisition for these purposes, and therefore loses grandfathered treatment, is not explicitly addressed in the legislation.
If you own a grandfathered investment property and are negotiating a property settlement, it may be worth raising this issue with a qualified tax adviser before finalising the agreement.
Death and inherited investment properties
The ATO confirms there is no CGT event when someone dies.
For assets acquired after 20 September 1985, the beneficiary generally inherits the deceased's original cost base and acquisition date. These details are then used when calculating any future capital gain if the property is eventually sold, including how the post-1 July 2027 CGT rules may apply.
The same uncertainty exists around the proposed negative gearing grandfathering provisions. While inherited properties generally retain the deceased's acquisition date under existing CGT rules, the interaction between those rules and the new grandfathering provisions has not been explicitly clarified in the legislation.
Anyone expecting to inherit an investment property may wish to seek advice from a qualified tax adviser about how the new rules could apply.
One aspect that has not changed is the main residence exemption. Where the deceased's home was their main residence and was not producing income at the time of death, the exemption may still apply if the property is sold within two years of death.
This article is general in nature and does not constitute financial or tax advice. For advice specific to your circumstances, speak with a qualified tax adviser.
What investors may want to review now
While the reforms do not begin until 1 July 2027, investors may still want to review how the changes could affect future plans.
Some areas worth discussing with a tax adviser may include:
the current value of investment assets
expected holding periods
whether a formal valuation may be needed before 1 July 2027
how retirement timing could affect future CGT outcomes
how asset growth assumptions may affect future tax outcomes
whether financing structures still align with long-term plans
The proposed CGT changes may affect how some investors think about timing, borrowing structures, and long-term property plans.
While the reforms do not begin until 1 July 2027, understanding how the changes may apply to your situation could help you make more informed decisions ahead of time.
An Aussie Broker can help you review your investment lending structure, borrowing position and future property plans as part of your broader financial goals.
Book a free^ appointment with an Aussie Broker online or in store.
The Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 has passed the House of Representatives and is expected to receive royal assent before 2 July 2026.
