16/07/2026
Australia’s New Capital Gains Tax Rules
The Federal Government's May 2026 Budget introduced a package of tax reforms that will significantly reshape the taxation of investment assets in Australia. Following negotiations in the Senate, the Government secured the support of the Greens to pass the legislation, although several key proposals were watered down.
The reforms focus on changes to the capital gains tax (CGT) regime and restrictions on negative gearing for residential property.
Replacement of the 50% CGT discount
The most significant reform is the replacement of the longstanding 50% CGT discount for individuals and trusts.
The existing discount will continue to apply to gains accrued until 30 June 2027. From 1 July 2027, future gains will instead be calculated using an indexed cost base, effectively taxing only gains above inflation.
Practical Tip: Investors may choose between an apportionment method and a market valuation of assets as at 30 June 2027 to assess their CGT liability on future disposal.
How does the indexation method compare?
From 1 July 2027, the existing discount model is replaced with the indexed cost base adjustment mechanism used in Australia from 1985 to 1999. This is designed to ensure that taxpayers are only assessed on capital gains to the extent that they exceed inflation during the time they have held the relevant asset.
Practical Tip: Investors who purchase new residential premises may choose either the 50% CGT concession, or the indexation method, to calculate their capital gain. Indexation may produce a better result for investors who hold new residential premises for longer periods of time or where the capital gain is relatively small.
What is the minimum CGT rate?
A minimum effective tax rate of 30% on net capital gains will apply from 1 July 2027, designed to limit the ability of investors to reduce their tax liability through structuring, or deferring the sale of an asset until a year where their taxable income from other sources is low.
Practical Tip: The minimum rate of 30% on net capital gains is unlikely to impact investors unless their taxable income from other sources for the relevant income year is less than $45,000.
What happens to pre-CGT assets?
Pre-CGT assets (those acquired before 20 September 1985) will continue to be exempt from CGT for any increase in value up until 30 June 2027. However, under the new rules, any increase in value from 1 July 2027 will be taxed under the new CGT system. This makes record-keeping and valuation at that date important for anyone holding long-owned assets.
What is happening to the CGT small business concessions?
During negotiations with the Greens, the Government announced that the CGT small business concessions would be broadened to include businesses with an annual turnover of up to $10 million (previously $2 million). This change will allow many small business restructures and disposals to remain outside the CGT increases.
Will my superannuation be impacted by CGT changes?
No. Complying superannuation funds, including self-managed funds, can continue to access the discount concession that reduces their CGT liability from 15% to 10%.
Trust taxation proposals still outstanding
While the negative gearing and CGT reforms have progressed through Parliament, several additional measures announced in the May Budget and afterwards have not yet been addressed. For example, the introduction of a minimum 30% tax rate on trust income and the subsequent watering down of these rules for “genuine” testamentary discretionary trusts. We await the release of draft legislation to assess the impact of these changes.
What should taxpayers be doing now?
Although the reforms are not yet fully implemented, taxpayers should begin reviewing their position.
Key considerations include:
whether planned asset disposals or acquisitions should be accelerated or delayed; and
whether business succession plans require adjustment considering the CGT changes.
Key takeaways
The passage of the CGT and negative gearing reforms represents a substantial shift in Australian tax policy, particularly in relation to property investment.
The practical impact of these reforms will depend not only on the legislation itself, but on how taxpayers and the markets respond in structuring investments, transactions and intergenerational wealth planning over the coming years.
Taxpayers must also consider the possibility that these measures will be overturned should there be a change in government following the next Federal Election.
At Milicevic Lawyers, we specialise in helping businesses stay ahead of legislative changes. Whether you need assistance reviewing current business structures or asset holdings, our experienced legal team is here to guide you through every step.
Contact us today to ensure you are prepared for some of the biggest tax changes in decades.
Ph: 1300 558 803
