From 1 July 2027 the 50% capital gains discount is replaced, for Australian resident individuals and trusts, by cost base indexation combined with a minimum 30% tax rate on capital gains.
Whether that is better or worse for you is not a matter of opinion. It is arithmetic, and the variable that decides it is inflation.
How the New System Works
Indexation. The cost base of the asset is uplifted by CPI over the period you held it, so only the real gain is taxed. Indexation applies to cost base elements other than ownership costs, and requires the asset to be held for at least twelve months.
The minimum rate. A minimum 30% rate applies to capital gains for resident individuals on gains accruing after 1 July 2027, with the gain treated as the top slice of income.
Who is in. Resident individuals and trusts. Companies, complying superannuation funds, life insurance companies, and foreign and temporary residents are outside these amendments and continue under their own treatment.
What is carved out. Gains that accrued before 1 July 2027, which are preserved as deferred gains and crystallise on eventual sale. New residential dwellings, where the 50% discount can still be elected. Affordable housing, with a discount of up to 60%. Recipients of prescribed government income support payments.
Capital losses are not indexed. Nominal losses are applied against CPI adjusted gains, and there is now a prescribed order for applying losses across four gain categories rather than taxpayer discretion.
Scenario One: Low Inflation, Strong Real Growth
An investor on a 47% marginal rate including Medicare buys an established investment property on 1 July 2027 for $900,000 and sells ten years later for $1,500,000. CPI averages 2.5% a year. Costs of sale and capital works adjustments are ignored to keep the comparison clean. All figures are illustrative.
Under the old system:
- Nominal gain: $600,000
- 50% discount: $300,000 taxable
- Tax at 47%: $141,000
Under the new system:
- Indexed cost base: $900,000 x 1.28 = $1,152,000
- Real gain: $348,000
- Tax at 47%: $163,560
The investor is roughly $22,500 worse off. When real growth is strong and inflation is low, the 50% discount was the better deal, and its removal costs money.
Scenario Two: Higher Inflation
Same property, same purchase price, but CPI averages 5% a year and the property sells for $2,000,000 after ten years.
Under the old system:
- Nominal gain: $1,100,000
- 50% discount: $550,000 taxable
- Tax at 47%: $258,500
Under the new system:
- Indexed cost base: $900,000 x 1.63 = $1,467,000
- Real gain: $533,000
- Tax at 47%: $250,510
The new system is now slightly ahead. Push inflation higher or real growth lower and the gap widens in favour of indexation, because you are no longer paying tax on the portion of the gain that is simply the currency losing value.
The principle is simple. Indexation taxes real gains. The discount halved nominal gains. Whichever produces the smaller number depends on how much of your gain is inflation and how much is genuine value.
The Minimum Rate Is the Quiet Change
Most commentary focuses on indexation. For many investors the 30% floor will matter more.
Consider an investor whose taxable income in the year of sale is low. A semi retired owner, someone taking a career break, a partner who has stepped back from work. Under the old system, a discounted gain was added to a modest income and taxed largely at lower marginal rates. Under the new system, a minimum 30% applies to the gain regardless of how low the rest of your income is.
An illustrative case: a real gain of $200,000 realised by someone with very little other income. Under the old rules, $100,000 taxable spread across the lower brackets produced a materially smaller bill than 30% of the full gain. Under the new rules the floor binds.
The practical effect is that the old strategy of timing a sale into a low income year loses much of its power. Timing still matters, but the lever is shorter.
What the Split at 1 July 2027 Means
Gains are divided into four categories: deferred residential, deferred non residential, residential, and non residential. Deferred gains are the portion that accrued before 1 July 2027 and they retain the old treatment, crystallising when you eventually sell.
The method for apportioning the gain between the pre and post periods is being prescribed separately, and was part of the second tranche consultation that closed on 21 August 2026. If you hold property across that date, the apportionment method decides how much of your eventual gain is taxed under which system. That is not a minor administrative detail. For a long held asset it can be the largest single number in the calculation.
What to Do With This
Ask your accountant to document your position as at 1 July 2027. Valuation evidence, cost base records, capital works history. Whatever the final apportionment method turns out to be, contemporaneous records will make it work in your favour rather than against you.
Stop treating the sale year as the main tax lever. With a 30% floor, deferring a sale to a low income year achieves less than it used to.
Reconsider the entity that holds new purchases. Companies and superannuation funds sit outside these amendments. That does not make them the right answer, since each brings its own trade offs on land tax, flexibility and access, but the relative positions have moved and the comparison is worth redoing.
Give weight to the new dwelling election. New residential dwellings retain access to the 50% discount. In a low inflation scenario that election is worth a great deal.
Keep loss records tighter than before. With four categories and a prescribed application order, sloppy records will cost you money that used to be recoverable through flexibility.
If you want the entity, holding period and stock type questions worked through together rather than one at a time, the team at Elite Wealth Creators can help you frame it and then source accordingly. You can read more on the insights page or book a call.
General information only, not personal financial or tax advice. All figures are illustrative and rounded, current as at August 2026, and elements of the regime remained subject to consultation at that date. Speak with a registered tax agent before acting.