The 50% capital gains tax discount is being replaced by cost base indexation from 1 July 2027. The part most people miss: growth up to that date keeps the 50% discount, even if you sell in 2035. You are not losing what you have already built up. Sales this financial year are unaffected.
First, the thing worth calming down about
Every conversation we have had about this starts the same way, with someone assuming they are about to lose half a discount they have spent fifteen years accruing. That is not what happens.
This page is the detail. If you just want to know whether any of it is about you, start with selling before July 2027, or after, which sorts that out in a minute.
Growth up to 1 July 2027 is worked out under the current rules, including the 50% discount, and that treatment is locked in. Only growth after that date moves to the new system. Sell in ten years and the pre 2027 half of your gain is still discounted.
And for the year we are in right now, nothing has changed at all. If you sell before 1 July 2027, the existing rules apply to the whole gain.
What actually changed, and when
28 May 2026
Two Bills introduced to Parliament, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Bill 2026.
25 and 26 June 2026
Passed Parliament, then Royal Assent. This is law, not a proposal.
30 June 2027
Nearly every CGT asset held by an Australian resident individual or trust is treated as sold just before 1 July 2027 and bought back again. Nothing physically happens and no tax is payable at that point. New residential dwellings, affordable housing and assets caught by the foreign resident rules sit outside it.
1 July 2027
The 50% discount stops applying to new growth for individuals and trusts, and cost base indexation takes its place. Pre CGT assets come into the CGT net, although the growth they built up before that date stays exempt. A 30% minimum tax on capital gains starts. Negative gearing on certain residential dwellings is restricted.
Companies, superannuation funds and life insurance companies are not affected by the discount change. Their existing settings continue.
The deemed sale, in plain terms
This is the mechanism that protects your existing growth, and it is simpler than it sounds.
On 30 June 2027 the law pretends you sold the asset and bought it straight back. It works out a notional gain to that date under the old rules, with the 50% discount where it applies, and then parks it. No tax is due. Nothing appears on that year’s return for an asset you did not actually sell.
When you genuinely sell, years later, two pieces get added together:
- The parked pre 1 July 2027 gain, calculated the old way with the discount
- The growth since then, calculated the new way using an indexed cost base
So the change is not retrospective. It just draws a line and treats the two sides differently.
The choice you will have to make, and why it is awkward
To split the gain you need a value as at 30 June 2027, the moment just before the new rules start. There are two possible ways to get one.
Market value just before 1 July 2027. An actual valuation. Accurate, and for a house, a private company or anything else that is not listed on a market, potentially expensive. This is the default in the legislation, and for a lot of assets it is the only option.
An apportioning method. A formula that works the value out for you, with no valuation needed. The catch is that it does not exist yet. Treasury released a draft in August 2026 and consultation closed on 21 August, but nothing has been registered and the draft is still stamped as a draft only.
Two things about that draft are worth knowing now, because both are widely misunderstood. It is not a simple split based on how long you held the asset. It assumes the asset grew at a steady compounding rate across your whole ownership and reads the 2027 value off that curve, which can land a long way from where a straight time split would put it. And as drafted it only covers real property and assets with no readily available market value, so listed shares sit outside it entirely.
Here is the awkward part. You do not have to choose until you lodge the return for the year you actually sell. That is genuinely generous. It also means you can hold an asset for a decade without knowing which answer will suit you better.
The practical upshot: for anything significant you expect to hold past 1 July 2027, it is worth thinking about whether you want a defensible valuation as at that date. A valuer can still work backwards to 30 June 2027 years later, so this is not a deadline. But evidence gathered at the time is cheaper, and a great deal easier to defend if it is ever questioned.
The explanatory material promises guidance, calculators and tools to help with this. At the time of writing they have not been released.
What replaces the 50% discount
Two things replace it, and the second one is routinely misread.
Indexation lifts your cost base in line with inflation, so you are taxed on real growth rather than growth that was only ever the dollar losing value. It applies to most elements of the cost base, though not to the ongoing costs of owning the asset, and the asset has to have been held at least twelve months.
Whether it leaves you better or worse off than a 50% discount depends entirely on inflation and how long you hold. It is not a straight swap.
One consequence worth knowing if you are building a business: indexation does very little for an asset with little or no cost base. Internally built goodwill, or shares in a company you started, have almost nothing to index. Under the discount those gains were halved. Under indexation they largely are not. The small business CGT concessions still exist and still matter a great deal here, and the Government has said it is consulting on the treatment of small and start up business gains, so this may yet move.
Indexation is also not available to foreign or temporary residents, and on the current drafting being a foreign resident for even one day during your ownership can disqualify you entirely. That is stricter than the current apportionment approach, and it is a real trap for anyone who has worked overseas.
The 30% minimum tax is not a flat 30% on your gain. It is a top up, and for plenty of people it comes to nothing at all. The calculation takes 30% of your post 2027 gain, then subtracts the tax you are already paying on that gain at your marginal rate. Only a shortfall is payable. If your marginal rate on the gain is already 30% or more, there is no shortfall and no extra tax.
Which means it does not really target high earners. It reaches people whose taxable income in the year of sale is low, which in practice often means someone retired selling an investment. It applies only to individuals, it never touches the parked pre 2027 gain, and it does not apply at all if you received any of a long list of payments during the year, including the age pension, JobSeeker, a carer payment or family tax benefit.
If you run your business from home
This is where the two topics meet, and it is why we wrote this page.
Your main residence is still exempt from capital gains tax, and none of this changes that. But if part of your home qualifies as a place of business, part of the eventual gain is not covered by the exemption, and that exposed part is a capital gain like any other. It rides on exactly the rules above.
So the arithmetic in running your business from home and what it does to your capital gains tax holds for growth up to 1 July 2027, and changes shape after that. It does not change the decision itself, which still turns on whether the room genuinely is a place of business. It does mean that if you are weighing that up, the year you are in now is a sensible time to get it settled rather than drifting.
What to do about it now
- Do not panic sell. Growth to 1 July 2027 keeps its discount whenever you sell. Rushing a sale to beat a deadline that does not exist is how people turn a tax question into a bad commercial decision.
- Work out which of your assets this actually touches. Individuals and trusts, held past 1 July 2027. Not company assets, not your super.
- Think about valuations early for anything hard to value that you expect to hold: property, private company shares, business interests. Not because you lose the chance later, but because evidence gathered at the time costs less and stands up better.
- Flag any period of foreign residency with us, because on the current wording it can cost you indexation entirely.
- If you were already planning an exit in the next few years, this is worth modelling properly rather than assuming either outcome.
This is a large change and parts of it are still bedding down, including consultation on small business gains and guidance that has not been published yet. We are watching it and will tell you when something moves that affects you.
Want to know how this lands on your situation?
Tell us what you hold, roughly what you paid and when, and what you were planning to do with it. We will tell you whether this changes anything for you, and whether a 2027 valuation is worth organising.
Level 1, 561 Olive Street, Albury NSW 2640. Registered Tax Agent 20651000.
Sources: Treasury Laws Amendment (Tax Reform No. 1) Act 2026 and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026, which passed Parliament on 25 June 2026 and received Royal Assent on 26 June 2026, read directly. Everything above about the apportioning method comes instead from Treasury’s exposure draft of the Income Tax Assessment (Method for Apportioning Capital Gains and Capital Losses) Determination 2026, released in August 2026, on which consultation closed on 21 August 2026 and which had not been registered as law when we checked. Rules checked 10 September 2026. Further guidance is expected and we will update this page when it lands. This is general information and not advice about your circumstances. Please talk to us before acting on any of it.
