50% CGT Discount Reform: Cost Base Indexation + 30% Minimum Tax from 1 July 2027

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

Budget 2026 ended the 50% capital gains tax discount that has been in place since 1999. From 1 July 2027, gains on assets held more than 12 months will be taxed under two new rules instead:

1. Cost base indexation — the cost base of the asset is uplifted by CPI inflation over the holding period, so only real (above-inflation) gain is taxed.
2. 30% minimum tax rate on real capital gains — so the effective tax rate on a gain cannot fall below 30%.

The change applies to individuals, partnerships, and trusts holding most asset types (property, shares, units, crypto, etc.) for ≥12 months. Companies are not affected — they already pay 30% on capital gains. Specific carve-outs remain.

Timeline — when each change takes effect

This reform is fundamentally about dates. The same asset attracts very different tax depending on when you bought it and when you sell it. The five-year window from now to 2027 has several breakpoints:

Date	What happens	Why it matters
12 May 2026	Budget 2026 announces the reform	Markets start pricing in the change. No legal effect yet.
From 12 May 2026	Anti-avoidance integrity rules apply	Treasury has flagged transactions that shift gains across the 1 July 2027 line may be reviewed. Normal arms-length sales unaffected.
30 June 2027 (Wed)	Last full FY under the 50% discount regime for new disposals	The 2026-27 tax year is the final year you can sell an asset and have the full gain taxed under the legacy 50% discount. Settlement must occur on or before this date — contract date alone is not enough.
1 July 2027	Reform start date	Cost base indexation + 30% minimum tax begin. New 12-month holding clock resets for indexation calculations. Any gain ACCRUING after this date is subject to the new rules.
From 1 July 2027	Split-treatment apportionment begins for legacy holdings	If you owned an asset before 1 July 2027 and sell it after, the ATO splits your gain by the days held in each period. Pre-1 July 2027 days keep the 50% discount; post-1 July 2027 days get indexation + 30% min.
From 1 July 2027	Pre-1985 (pre-CGT) assets become taxable	For the first time since CGT was introduced in 1985, pre-1985 assets are subject to CGT — but only on the post-1 July 2027 portion of the gain. You’ll need a 1 July 2027 valuation as the cost base.
31 October 2028	First tax return covering a reform-period disposal	Self-lodging individuals filing for the 2027-28 income year will be the first to use the new rules. Tax agent extension dates apply as normal.
1 July 2042	First new-build 15-year carve-out windows expire	New residential builds owned by the first taxpayer for 15 years from 1 July 2027 onward retain the 50% discount. The first such 15-year hold expires 1 July 2042.

The key practical point: 30 June 2027 is the last chance to realise a gain under the legacy 50% discount on the full gain. Sales contracted before that date but settled after may or may not qualify — settlement date controls for most CGT events.

How time changes your tax bill

The reform is fundamentally a timing tax. Two pieces of timing drive everything:

1. Holding period across 1 July 2027 — the longer you held BEFORE 1 July 2027, the bigger your legacy 50%-discount share. The longer you hold AFTER 1 July 2027, the bigger your reform-portion share.
2. Years past 1 July 2027 at disposal — the more years between 1 July 2027 and your sale, the bigger the CPI indexation uplift, and the smaller the real gain on the reform portion.

These two forces pull in opposite directions on long-held assets crossing the reform line. Here’s the math.

Effect 1 — Holding-period split (assuming a $500,000 nominal gain)

For an asset bought on 1 July 2022 (5 years pre-reform) and sold on a range of dates after 1 July 2027:

Sale date	Years owned	Days pre-reform / total	Legacy share	Reform share
1 July 2028	6 yrs	1,826 / 2,192	83.3%	16.7%
1 July 2030	8 yrs	1,826 / 2,922	62.5%	37.5%
1 July 2032	10 yrs	1,826 / 3,653	50.0%	50.0%
1 July 2037	15 yrs	1,826 / 5,479	33.3%	66.7%
1 July 2042	20 yrs	1,826 / 7,305	25.0%	75.0%

The longer you delay your sale past 1 July 2027, the bigger the reform-portion of your gain — and the more your tax outcome depends on the new rules rather than the legacy 50% discount.

Effect 2 — CPI indexation grows with reform-period years (assuming 2.5%/yr)

The cost base of the reform-portion is uplifted by CPI from 1 July 2027 to disposal. With 2.5%/yr inflation, the indexation uplift compounds:

Years between 1 July 2027 and disposal	Indexation factor (cost base uplift)	What it means
1 year	1.025×	2.5% of cost base added — tiny effect
3 years	1.077×	7.7% uplift — modestly shrinks real gain
5 years	1.131×	13.1% uplift — meaningful on slow-grow assets
10 years	1.280×	28.0% uplift — large effect; can eliminate real gain on inflation-only assets
15 years	1.448×	44.8% uplift — high-yield assets still taxed; low-yield assets fully sheltered

For a high-growth asset (e.g. crypto, ASX growth shares — say 10%/yr nominal), the indexation uplift is small relative to nominal growth, so most of the gain remains taxable. For a low-growth asset (regional residential, infrastructure ETFs, bonds — say 3-4%/yr nominal), the indexation uplift can absorb most of the gain, leaving little to tax.

Effect 3 — The asset’s growth rate interacts with both

Three sensitivity scenarios on a $500,000 nominal gain over a 10-year hold straddling 1 July 2027:

Scenario	Asset growth	Hold spans	Reform portion (real)	Old-rules tax (45% MTR)	New-rules tax (45% MTR)	Difference
High-growth (crypto, growth shares)	9%/yr nominal	5 yrs pre + 5 yrs post	~$217,000	$112,500	$137,265	+22%
Steady-growth (broad ETF, urban property)	6%/yr nominal	5 yrs pre + 5 yrs post	~$185,000	$112,500	$120,810	+7%
Slow-growth (regional property, low-yield bond fund)	3.5%/yr nominal	5 yrs pre + 5 yrs post	~$77,000	$112,500	$90,675	−19%

The reform shifts tax burden from low-growth-asset holders to high-growth-asset holders. A high-growth asset crossing the reform date pays more tax than under the old rules. A low-growth asset can actually pay less.

Effect 4 — The 30% minimum binds for low-marginal-rate taxpayers

For taxpayers on a marginal rate below 30% (typically retirees on low pension income, or low-income earners), the reform’s 30% minimum ratchets up the effective rate on the reform portion. Effect grows with reform-portion share:

Taxpayer MTR	Effective rate on legacy portion	Effective rate on reform portion	Effect of reform on overall tax
15% (low income)	7.5% (after 50% discount)	30% (minimum binds)	Reform portion 4× more expensive
30% (middle income)	15% (after 50% discount)	30% (minimum binds at MTR floor)	Reform portion 2× more expensive
45% (high income)	22.5% (after 50% discount)	45% (above minimum)	Reform portion 2× more expensive

Across all MTRs, the legacy portion is always cheaper than the reform portion. The bigger your reform share, the worse your tax outcome — UNLESS the asset has been so low-growth that indexation shelters most of the reform gain. The interplay is non-trivial, which is why the CGT calculator and scenario compare tools matter more than a back-of-envelope estimate.

Bottom line

• If you’ve held the asset for 10+ years before 1 July 2027 and sell within a few years after, the legacy share dominates — small impact.
• If you held the asset 2-3 years before 1 July 2027 and sell 10 years later, the reform share dominates — large impact on high-growth assets.
• If you buy after 1 July 2027 and hold long enough for indexation to substantially uplift the cost base, the new rules can be kinder than the old 50% discount would have been — especially for slow-growth assets.
• If your marginal rate is below 30%, the 30% minimum can ratchet up your effective rate noticeably.

Effective date and three-bucket transition

The new rules only apply to gains that accrue after 1 July 2027, not to the full capital gain on an asset sold after that date. Treasury structures the transition into three buckets:

Bucket	Description	Rule
A	Asset purchased AND sold before 1 July 2027	No change. 50% discount applies as before.
B	Asset owned before 1 July 2027 and sold after 1 July 2027	Split treatment. Pre-1 July 2027 portion uses 50% discount; post-1 July 2027 portion uses new indexation + 30% min tax rules.
C	Asset purchased after 1 July 2027 (and sold after)	Wholly new rules. Cost base indexation + 30% minimum tax across the full holding period.

The 12-month holding requirement carries over from current rules.

Bucket B: how the split treatment works

For an asset you own at 1 July 2027, you need to determine its value at that date — this becomes the boundary between “old rules” (50% discount on gains up to that date) and “new rules” (indexation + min tax on gains after).

Two ATO-supported valuation methods will be available:

• Actual valuation at 1 July 2027 (use quoted prices for shares, formal appraisal for property, etc.).
• Specified apportionment formula — an ATO calculator that estimates the asset’s 1 July 2027 value based on its overall growth rate over the holding period.

You make the valuation choice when you lodge your tax return in the year you sell the asset.

Pre-1985 (pre-CGT) assets — major change: BP2 p.21 states the reform applies to “all CGT assets, including pre-1985 CGT assets, held by individuals, trusts and partnerships.” For the first time since CGT was introduced in 1985, pre-CGT assets become subject to CGT — but only on the post-1 July 2027 gain. The pre-1 July 2027 gain on a pre-1985 asset remains exempt. Practical effect: if you have held land, shares or other appreciating assets continuously since before 20 September 1985, the cost base at 1 July 2027 (set via the same actual-valuation or apportionment formula as Bucket B) becomes the starting point for any future CGT.

Worked examples (from Treasury explainer)

Jane — split-treatment (house held since 2022)

Jane bought an asset for $800,000 on 1 July 2022 and sells it for $1,600,000 on 1 July 2032 (7.2% annual return). She uses ATO tools to determine the asset’s value at 1 July 2027 was $1,131,371.

• Pre-1 July 2027 portion: gross gain $331,371, with 50% discount = $165,685 taxable.
• Post-1 July 2027 portion: gross gain $468,629; after cost base indexation = $319,958 taxable.
• Total taxable gain: $485,643 (vs $400,000 under a flat 50% discount applied to the whole gain).
• At 47% marginal rate: tax = $228,252 (vs $188,000 under the old rules).

Zoe — wholly new rules (shares bought after policy)

Zoe purchases shares on 1 July 2027 for $100 and sells them 5 years later on 1 July 2032 for $125 — a nominal gain of $25 (4.6% per year).

• With 2.5%/year inflation, the indexed cost base becomes $113.
• Taxable gain after indexation: $12 (vs $13 under the old 50% discount).
• Zoe pays slightly less tax under the new rules because inflation eroded most of her nominal gain.

The key insight from Zoe’s case: low-return assets near or below the inflation rate benefit from indexation compared to the old discount.

Discount equivalent — Treasury’s 20-year comparison

If indexation had been in place for the past 20 years, the effective discount equivalent (the amount of nominal gain not taxed) would have averaged 35–60% depending on asset class and holding period:

Asset class	Hold	Average annual return	Discount for CPI	Effective tax rate @ 32¢	@ 47¢
House	5 yr	5.8%	42%	18.6%	27.3%
House	10 yr	6.1%	36%	20.5%	30.1%
Apartment	5 yr	4.1%	59%	13.1%	19.3%
Apartment	10 yr	4.8%	50%	16.0%	23.5%
ASX 200 shares	5 yr	4.4%	53%	15.0%	22.1%
ASX 200 shares	10 yr	4.3%	56%	14.1%	20.7%

For asset classes with higher than typical real returns (e.g. fast-growth properties or stocks), the indexation discount is smaller than 50% and investors pay more tax. For asset classes with lower real returns, indexation gives a larger effective discount than 50%.

How rate of return changes the outcome

Treasury’s “Different rates of return” cameo for a $500,000 asset purchased July 2027, held 10 years, owner has $100,000 other income:

• David — 5% return (typical residential real estate): taxable gain $174,405 indexed vs $157,224 discounted. Pays $8,075 more in tax under reforms.
• Ben — 2.5% return (returns equal to inflation): no taxable gain under indexation vs $70,021 under old discount. Pays $24,858 less in tax.
• Kate — 7.5% return (high-growth): taxable gain $390,474 indexed vs $265,258 discounted. Pays $58,851 more in tax.

Rule of thumb: real returns above ~5% per year produce more tax under the new rules; below ~2.5% produces less tax.

The 30% minimum tax

A minimum tax rate of 30% applies to real capital gains accruing from 1 July 2027. The rule only bites when your other taxable income is low enough that your marginal rate on the gain would otherwise be under 30%.

Jack — minimum tax bites

Jack has taxable income of $25,000 in 2029–30 and realises a $10,000 capital gain on an asset bought in 2027–28.

• Tax on the capital gain at his marginal rate (excluding Medicare): $1,400 (14%).
• Since 14% < 30%, Jack pays an additional $1,600 to bring his effective rate up to 30%.

Means-tested income support exemptions:

• Age Pension and JobSeeker recipients are EXEMPT from the minimum tax in years they realise a capital gain.
• Tax offsets may also reduce the minimum tax liability.

New residential property — investor election (CGT)

BP2 p.21 builds an explicit incentive for new housing supply: “investors in new residential properties will be able to choose either the 50 per cent CGT discount, or cost base indexation and the minimum tax.” This is a per-disposal election — the investor picks whichever produces less tax. The election is paired with (but separate from) the negative gearing carve-out for new builds covered in Negative Gearing Reform Bucket D. The same Treasury “new build” eligibility table applies (off-the-plan apartments, eligible knock-down rebuilds, vacant-land construction).

Practical effect for a new-build investor selling after 1 July 2027: model both treatments, pick the cheaper one. For high-growth properties the 50% discount typically wins; for low-growth, indexation often wins. The 30% minimum tax applies only if the indexation route is chosen and the investor’s other taxable income is low.

What is unchanged

These CGT settings are NOT affected by the reform:

• Main residence exemption — fully retained.
• Small business CGT concessions — all four concessions retained (15-year exemption, 50% active asset reduction, retirement exemption, rollover).
• 60% CGT discount on qualifying affordable housing — fully retained.
• Companies — no change; companies don’t get a discount currently and pay 30% on gains anyway.
• CGT 6-year main residence absence rule — unchanged.
• CGT events on death (rollover to beneficiary) — unchanged.

Tech and start-up investments: Government will consult on how the CGT reforms interact with early-stage incentives. Status TBD.

EOFY action items

If you currently own appreciating assets

Calculate what your effective tax rate would be under EACH set of rules at your expected sale date. For most established residential property held more than 5 years, the new rules cost more. For low-return assets (poor-performing shares, slow-growth regional property), the new rules may cost less.

If you are planning to sell within the next 14 months

The 30 June 2027 EOFY is the last full-year window where 50% CGT discount applies to gains accrued through to that date. Consider whether your normal selling timeline can be accelerated, balancing:

• Lock-in of the 50% discount on pre-1 July 2027 portion (always available regardless when you sell)
• Marginal rate in 2026–27 vs 2027–28 (your salary may put you in a different bracket)
• Capital loss carryforwards available
• Transaction costs

Run scenarios in the CGT Calculator and the CGT Scenario Compare.

If you have unrealised capital losses

Capital loss carry-forward becomes more valuable under the new rules, not less. A $50,000 loss carried forward against a future $100,000 gain saves more tax when the discount has been narrowed. The CGT Harvest Calculator ranks loss-harvest candidates.

Sources

• Treasury Budget Paper No. 1, Statement 4: Tax reform for workers, businesses and future generations (12 May 2026)
• Treasury fact sheet: Negative Gearing and Capital Gains Tax Reform (12 May 2026)
• Treasury Budget Paper No. 2, Tax Reform — Boosting Home Ownership measure (p21)

Asset-class deep dives

The split-treatment mechanics play out differently for each asset class. Five companion articles walk through worked examples and the asset-specific complications:

• CGT Reform for Property Investors — investment property, main-residence carve-out, new-build 15-year exemption, depreciation cost-base interactions.
• CGT Reform for ASX Share Investors — parcel methods, DRP cost-base proliferation, ESS shares, off-market buybacks.
• CGT Reform for ETFs and Managed Funds — AMIT cost-base adjustments, distributed capital gains, FIF interaction for foreign-asset ETFs.
• CGT Reform for Crypto — Bitcoin/ETH/altcoin parcel matching, hard forks, staking rewards, stablecoin churn.
• Small Business CGT Concessions After 2027 — what’s retained: 15-year exemption, 50% active asset reduction, retirement exemption, rollover relief.

Related reading

• Negative Gearing Reform Budget 2026: What Changed by Purchase Date — paired negative-gearing changes for residential property.
• 50% CGT Discount Under Review: Senate Inquiry Update — pre-Budget context and confirmed outcome.
• Budget 2026 Explained: Winners and Losers — full Budget breakdown.
• How Budget 2026 Changes Your EOFY Plan — combined EOFY 2026 and 2027 implications.