Capital gains tax after the discount: indexation and the 30% minimum
From 1 July 2027 the 50% capital gains tax discount is replaced by two things: your cost is lifted for inflation, and a 30% minimum tax applies to the real gain. The change only touches gains that build up after that date. Whatever your property has gained before 1 July 2027 keeps the 50% discount.
This one confuses people more than negative gearing does, because it does not switch on for a property. It switches on for a date. One asset can have two tax treatments: the old one for growth up to 1 July 2027, the new one for growth after.
The change is in the same Act that limited negative gearing, which became law on 26 June 2026.
Key facts, as at 22 July 2026
- Start date: gains accruing from 1 July 2027
- The 50% discount is replaced by cost base indexation, using the Consumer Price Index
- A 30% minimum tax applies to real capital gains made by individuals
- Applies to CGT assets held at least 12 months, including property and shares
- The main residence stays exempt
- Buyers of new builds can choose the 50% discount or the new method when they sell
Source: Treasury, Negative Gearing and Capital Gains Tax Reform
How the new method works
Today you halve the gain and pay tax on what is left.
From July 2027 you instead raise your purchase cost by inflation, then pay tax on the whole of what is left. If your asset only kept pace with inflation, there is no taxable gain. If it grew much faster than inflation, more of the gain is taxed than under the 50% discount.
So the new method is kinder to slow growth and harder on strong growth.
Treasury shows this with three people. Each buys an asset for $500,000 in July 2027, holds it ten years, and earns $100,000 a year from work. Inflation is 2.5%.
| 50% discount | Indexation | |
|---|---|---|
| Grows 2.5% a year | $70,021 | $0 |
| Grows 5% a year | $157,224 | $174,405 |
| Grows 7.5% a year | $265,258 | $390,474 |
Source: Treasury fact sheet, cameo: different rates of return. Inflation of 2.5% a year.
| Annual growth | Taxable gain, 50% discount | Taxable gain, indexation | Change in tax |
|---|---|---|---|
| 2.5% | $70,021 | nil | $24,858 less |
| 5% | $157,224 | $174,405 | $8,075 more |
| 7.5% | $265,258 | $390,474 | $58,851 more |
Treasury describes 5% a year as "similar to longer term returns on residential real estate". At that rate the extra tax over a decade is $8,075. It is the strong performers that pay.
What happens to a property you own now
You do not lose the discount on growth you already have.
When you sell, the gain is split at 1 July 2027. Growth before that date gets the 50% discount. Growth after it is indexed. To split it you need the property's value on 1 July 2027. Treasury says you can get a valuation, or use a formula the ATO will supply. As at July this year that formula had not been released.
Treasury's example: Michael sells two years after the start date for $560,000. His property was worth $500,000 on 1 July 2027. After two years of 2.5% inflation, his taxable gain for that period is $34,688. Under the old discount it would have been $30,000. At a 47% tax rate, that is $16,303 of tax where it would have been $14,100.
A longer hold shows more. Jane buys for $800,000 in 2022 and sells for $1,600,000 in 2032. Her taxable gain is $485,643. Under the old rules it would have been $400,000. Her tax at 47% is $228,252, up from $188,000.
The 30% minimum
This catches a narrow group: people who sell in a year when their income is low, so the gain would be taxed lightly. Retirees selling after they stop work are the obvious case.
If the tax on your real gain comes to less than 30%, you pay a top up to reach 30%. People who receive an income support payment such as the Age Pension in that year are exempt.
Our view
Get a valuation dated 1 July 2027. Not now, then. It is the number that divides your old gain from your new one, and a proper valuation is easier to defend than a formula.
Do not sell early to dodge this. Your gain to mid 2027 is protected either way. Treasury designed it so there is "no incentive to buy or sell assets before this date".
Slow growth areas look better after tax than they used to. That is new, and worth running through before you choose between two properties.
Negative gearing changed in the same law. We cover it in negative gearing is now law. Our older guide to reducing capital gains tax, written in 2025 under the old rules, is still up as a record.
Frequently asked questions
Is the 50% CGT discount being removed?
For gains that build up from 1 July 2027, yes. It is replaced by cost base indexation and a 30% minimum tax. Gains built up before 1 July 2027 still get the 50% discount when you sell.
Do I pay more capital gains tax on a property I already own?
Only on growth after 1 July 2027. The gain up to that date is taxed under the old rules, with the 50% discount. The gain after it is adjusted for inflation instead.
What is the 30% minimum tax on capital gains?
A top up. If the tax on your real capital gain works out at less than 30%, you pay the difference. People already taxed at 30% or more are not affected, and people on income support payments are exempt.
Is the family home affected by the CGT changes?
No. The main residence stays exempt from capital gains tax.
Sources
- Treasury, Negative Gearing and Capital Gains Tax Reform fact sheet, Budget 2026 to 27. All worked examples are Treasury's.
- Treasury Laws Amendment (Tax Reform No. 1) Act 2026, Act No. 49 of 2026
- Landmark Valuations, what the Act says, 17 July 2026
This is general information, not tax advice. Speak to your accountant about your own position.