One of the most significant measures in this Budget is the replacement of the 50% CGT discount with cost base indexation for capital gains arising on or after 1 July 2027, combined with a new 30% minimum tax on net capital gains.
The 2026–27 Federal Budget, delivered by Treasurer Jim Chalmers on the evening of 12 May 2026, is one of the most significant overhauls of the Australian tax system in nearly three decades.
In a single Budget, the Government has made changes to capital gains tax, negative gearing, trust distributions, superannuation, electric vehicles, research and development, and a range of cost-of-living measures.
Almost every one of our clients will be affected in some way.
Changes to Capital Gains Tax
One of the most significant measures in this Budget is the replacement of the 50% CGT discount with cost base indexation for capital gains arising on or after 1 July 2027, combined with a new 30% minimum tax on net capital gains.
This applies to all CGT assets — including pre-1985 CGT assets, shares, investment properties, and business assets — held by individuals, trusts, and partnerships.
Indexation was the method used for CGT in Australia from 1985 through to 1999 — in effect, we are returning to the pre-1999 approach.
To confirm, the pre-CGT assets have lost their exemption and are now included in the new CGT rules.
CGT - Transitional Rules
The 50% CGT discount continues to apply to all gains arising before 1 July 2027.
If you sell an asset before that date, the existing rules apply in full.
New Rules
If you sell an asset on or after 1 July 2027, the new indexation method applies — your original cost base is indexed for CPI to reduce the taxable gain.
A 30% minimum tax then applies to the remaining indexed gain. Even if your marginal rate is lower, you will pay at least 30%.
What is the meaning of "Minimum" Tax?
If your tax bracket is under the 30% tax bracket, you will be bumped up to pay the "minimum" 30% regardless.
This measure is introduced to stop taxpayers from selling investments when their income in under the 30% tax bracket.
Taxpayers receiving government assisted payments such as Jobseeker and Age Pension will be exempt from the minimum tax.
New Rules for New Builds
There is also a specific concession for new residential properties:
Investors in new builds can choose between the 50% CGT discount or cost base indexation, whichever produces the better outcome.
Income support and Age Pension recipients will be exempt from the minimum tax.
What This Means for Business Owners
For businesses built from scratch — where goodwill has a zero cost base — the impact is particularly significant.
Indexation can only adjust a cost base that exists; a zero cost base produces no reduction.
Every dollar of goodwill gain accruing after 1 July 2027 will be fully taxable at the owner's marginal rate, subject to the 30% minimum tax.
The Small Business CGT Concessions remain available, but their effective value is reduced.
The Budget confirms expanded rollover relief for three years from 1 July 2027 to support businesses wishing to restructure out of discretionary trusts into a company or fixed trust — without triggering a CGT liability at the time of transfer.
This is a genuine and time-limited opportunity
The Capital Gains Tax Changes and How it Will Change the Amount of Tax You Pay
Since 1999, if you have owned an asset for more than 12 months, only 50% of your capital gain has been taxable. From 1 July 2027, that discount is replaced by cost base indexation — meaning your original purchase price is adjusted for inflation (CPI) before the gain is calculated.
A 30% minimum tax then applies to the remaining indexed gain. Even if your marginal rate is lower, you will pay at least 30%.
Below is an Illustrated example:
Suppose you purchased an investment property ten years ago for $600,000. It is worth $1,200,000 today. You are deciding whether to sell now — before 1 July 2027 — or hold for another five years and sell for $1,600,000.
| Sell Now - Prior to 1 July 2027 | Sell in 5 Years - After 1 July 2027 | ||
|---|---|---|---|
| Sale Price: | $1,200,000 | Sale Price | $1,200,000 |
| Original Cost Base: | $600,000 | Indexed Cost Base - 3% CPI x 15 Years (Approx): | $934,800 |
| Total Gain; | $600,000 | Pre-2027 Gain - 50% Discount (Approx): | $333,000 |
| After 50% CGT Discount: | $300,000 | Tax on Pre-2027 Gain at 47% (Approx): | $157,000 |
| Tax at 47% (Approx): | $141,000 | Post-2027 Indexed Gain at 30% (Approx): | $67,000 |
| TOTAL TAX PAYABLE (APPROX): | $224,000 |
In the example above, holding the property for 5 more years results in approximately $83,000 more tax — but also $400,000 more in sale proceeds.
The numbers look very different for each client depending on their tax rate, growth assumptions, and holding period.
There is no universal right answer — which is exactly why the conversation with us matters.
Note: These figures are illustrative only. They assume CPI indexation of 3% per annum over 15 years, a 47% combined marginal rate and Medicare Levy, and a time-proportionate split of gains between pre and post 1 July 2027.
Final methodology is subject to legislation.
What Should You Do Now?
Talk to us before making any decisions. But here is a practical framework for thinking through your situation:
If you are considering selling a Capital Gains Asset:
Before 1 July 2027, the full 50% CGT discount applies to the entire gain to date. After that date, only gains accrued before 1 July 2027 attract the discount.
The decision to sell before or after that date is not straightforward and depends on your individual circumstances. Do not sell — or decide not to sell — without modelling the numbers first.
If you are a long-term holder with no near-term plans to sell:
The CGT changes do not require immediate action but do change the long-term economics of your portfolio.
It is worth updating your holding period assumptions and running a fresh tax projection to understand the full picture.
Other Federal Budget 2026/27 Blogs
Click here to view our Blog on The Budget's Changes to Individual Tax Measures
Click here to view our Blog on The Budget's Changes to Property Investors and Negative Gearing
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