Last updated: 12 May 2026
2026-27 Budget · Tax
50% CGT discount replaced with indexation and a 30% minimum tax
The 2026-27 Budget rewrites how capital gains are taxed in Australia. From 1 July 2027, the flat 50% capital gains tax (CGT) discount that has applied since 1999 is being replaced with cost base indexation and a 30% minimum tax on real capital gains for individuals, trusts and partnerships. The change is paired with negative gearing reform and is forecast to raise $3.6 billion over the forward estimates.
The two parts of the reform
Part 1
Return to cost base indexation
The cost base of an asset is uplifted by CPI over the holding period. Only the real gain – the portion above inflation – enters taxable income. This was the rule before 1999 and is how most OECD countries treat capital gains.
Part 2
30% minimum tax on real gains
Real capital gains face an effective tax rate of at least 30%, the same minimum being applied to discretionary trusts. The minimum removes the incentive to sit on an asset until your marginal rate falls (for example, in retirement).
Why the change?
Treasury argues the flat 50% discount over-compensates investors for inflation in some asset classes and under-compensates them in others. Over the past 20 years, the inflation share of nominal property capital gains averaged:
| Asset | 5-year hold | 10-year hold | 20-year hold |
|---|---|---|---|
| Capital-city house | 40% | 34% | 29% |
| Capital-city unit | 56% | 48% | 38% |
| Regional unit | 67% | 63% | 59% |
| S&P/ASX 200 shares | 53% | 56% | 50% |
The 50% discount has typically over-compensated detached-house investors and under-compensated investors in units and shares. The return to indexation tracks each asset's actual inflation experience, removing the distortion that has funnelled capital toward existing standalone houses.
Source: Table 4.1, Budget Paper No. 1, Statement 4. Cotality Data, ASX and Treasury.
How transitions work
The change is prospective. For assets held before 1 July 2027 but sold after:
- The 50% CGT discount applies to the gain between the original cost base and the asset's value on 1 July 2027.
- Indexation and the 30% minimum tax apply to any gain accruing after 1 July 2027 (the asset's value at that date forms the new cost base).
- Taxpayers can either obtain a valuation at 1 July 2027 or use an ATO apportionment formula that estimates the value based on the average return over the holding period.
- Pre-1985 (pre-CGT) assets are now within the regime, but only for post-1 July 2027 gains.
- New-build property investors can choose between the 50% discount and the new system when they sell.
What stays the same
- Main residence CGT exemption – unchanged. Your family home is still tax-free on sale.
- Superannuation tax arrangements – unchanged.
- Small business CGT concessions – unchanged.
- Companies – never had the 50% discount, so this reform does not apply to corporate taxpayers.
- Pensioners and other income support recipients – exempt from the 30% minimum tax.
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Related reading
- Negative gearing limited to new builds from 1 July 2027
- 30% minimum tax on discretionary trusts
- 2026-27 Budget: all property and tax changes explained
Frequently asked questions
When does the CGT discount end?
From 1 July 2027. The 50% capital gains tax discount for individuals, trusts and partnerships is being replaced with cost base indexation and a 30% minimum tax on real capital gains. Companies are not affected – they never had the 50% discount.
What is cost base indexation?
Indexation lifts the cost base of an asset in line with CPI so that only the real (inflation-adjusted) gain is taxed. It was the rule before 1999, when the Howard government replaced it with the flat 50% discount.
How does the 30% minimum tax work?
After indexation, real capital gains face a minimum effective tax rate of 30%. If your marginal rate would already be 30% or higher, the minimum is irrelevant. If you are on a lower marginal rate – say after retirement – the 30% floor still applies.
Who is exempt from the minimum tax?
Pensioners and other income support recipients are exempt, ensuring people with low income and low wealth aren't disadvantaged. The main residence CGT exemption is unchanged, and superannuation tax arrangements are not affected. Small business CGT concessions continue as-is.
What about assets I already own?
Gains accrued up to 30 June 2027 are still calculated under the 50% discount. For the value at 1 July 2027 onwards, you use indexation plus the minimum tax. You can either get a valuation at that date or use an ATO apportionment formula. Investors who buy new builds can choose either the old or the new system.
Are pre-1985 assets affected?
Yes, for the first time. Pre-CGT assets are being brought into the regime, but only for gains earned from 1 July 2027 onwards. Gains accrued before that date remain CGT-free.
Source: Budget Paper No. 1, Statement 4 (pages 146-156), Australian Treasury, 12 May 2026.
Disclaimer: This information is general in nature and does not constitute financial, legal, or tax advice. Calculations are estimates only and may not reflect your exact circumstances. Eligibility criteria and dollar amounts may change without notice. Always verify with the relevant government authority, your mortgage broker, or a licensed financial adviser before making decisions.