Understanding the New Capital Gains Tax Rules
What the changes could mean in real numbers for long-term investors
Recent changes to Capital Gains Tax (CGT) have understandably raised questions for many investors. Whenever tax rules change, it is natural to wonder whether action is needed immediately or whether existing investments may be affected. The reassuring point is that, under the transitional arrangements, many long-term investors may have more flexibility than they initially think.
The key message: the changes do not necessarily mean investors need to sell long-held investments before 30 June 2027.
What is changing?
The core CGT reform is now law and commences on 1 July 2027. ¹˒² Until 30 June 2027, eligible Australian-resident individuals can generally apply a 50% CGT discount to gains on assets held for at least 12 months, with tax applied to the discounted gain at their marginal rate.³
From 1 July 2027, real gains accruing after that date will generally be calculated using CPI indexation and will be subject to a 30% minimum tax, subject to exceptions. Eligible new builds can retain a choice of the 50% discount, and super funds keep their separate rules.¹
A key detail many investors are missing
For assets already held before 1 July 2027, the growth up to 30 June 2027 generally keeps the current treatment, including the 50% CGT discount.¹˒⁴ In simple terms, capital growth is split into two periods:
Growth up to 30 June 2027: the 50% CGT discount generally applies.
Growth from 1 July 2027: the gain is reduced by CPI indexation, and the remaining real gain is taxed at your marginal rate, with a 30% minimum. ¹
What this looks like in real numbers
To illustrate, consider an established investment purchased for $600,000 on 30 June 2022 and sold on 30 June 2032, assuming inflation of 2.5% a year. We look at two growth scenarios: 10% a year and 6% a year.⁵
| 10% growth p.a. | 6% growth p.a. | |
|---|---|---|
| Value at 30 June 2027 | $966.3k | $802.9k |
| Growth to 30 June 2027 (50% discount) | $366.3k | $202.9k |
| Sale value in 2032 | $1,556.2k | $1,074.5k |
| Growth from 1 July 2027 | $589.9k | $271.6k |
| Less 5-year CPI uplift | $127.0k | $105.5k |
| Post-2027 gain after CPI | $463.0k | $166.1k |
Figures rounded. Annual compounding. Assumed annual CPI of 2.5% simplifies statutory CPI indexation.
How much tax could this be at different tax rates?
The table below compares the tax on the full gain if the old rules had continued against the tax under the new split rules, at three illustrative tax rates.⁵
| Tax rate | Growth | Old rules | New split rules | Difference |
|---|---|---|---|---|
| 30% | 10% p.a. | $143.4k | $193.8k | $50.4k more |
| 30% | 6% p.a. | $71.2k | $80.3k | $9.1k more |
| 37% | 10% p.a. | $176.9k | $239.1k | $62.2k more |
| 37% | 6% p.a. | $87.8k | $99.0k | $11.2k more |
| 45% | 10% p.a. | $215.2k | $290.8k | $75.6k more |
| 45% | 6% p.a. | $106.8k | $120.4k | $13.6k more |
Each rate is applied as a flat rate to the whole gain for comparison only. This is not a progressive-bracket calculation or a personal tax estimate. Excludes Medicare levy, transaction costs, improvements, capital losses and offsets.
Two things stand out. First, higher growth assets are affected more, because more of their gain sits after 1 July 2027 and less is absorbed by CPI indexation. Second, inflation matters. At 4% inflation, the same 6% growth investment taxed at 37% would pay around $14.1k less under the new rules than under the old rules, while the 10% growth investment would pay around $31.7k more.⁵
Does this mean investors need to sell before 30 June 2027?
Not necessarily.
In the examples above, the growth to 30 June 2027 keeps the 50% discount whether the asset is sold in 2027 or years later. Selling early simply to protect that growth may bring forward tax, create transaction costs and mean giving up a quality long-term investment.⁴ What matters is keeping good evidence of each asset's value at the transition date.
Practical considerations for investors
Pull together purchase contracts and cost-base records for every investment property and share parcel you own.
Discuss evidence of the transition-date value and the applicable method with your accountant.
Check whether your investments still align with your long-term goals and cash flow needs.
Get your adviser and accountant in the same conversation, ideally before July 2027.
Good financial decisions are rarely driven by tax alone. They should be guided by your overall objectives, cash flow and long-term plans.
Final thoughts
Tax changes often create uncertainty, but they also create opportunities for informed planning. For many long-term investors, growth already built up by 30 June 2027 is not lost under the new rules. We will continue to monitor developments and keep our clients informed.
If you have any questions about how these changes may affect your situation, we are always happy to help.
Your Vision Financial Solutions Pty Ltd ABN 64 650 296 478 and its Advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This article has been prepared without taking into account your personal objectives, financial situation or needs.
References
1. Australian Taxation Office - Tax reform: capital gains tax
2. Australian Government - Budget 2026-27 tax overview
3. Australian Taxation Office - CGT discount
4. PwC Australia - CGT changes and the 30 June 2027 transaction deadline
5. Patricia Garcia, Your Vision Financial Solutions - Budget, Bricks & Balance presentation https://static1.squarespace.com/static/63e58eaeebdc006803d9da2c/t/6ad1ca47a9058f60f0415d60/1792133703350/Budget+Bricks+and+Balance+-+Patricia+Garcia.pdf