CGT Reform for ETFs and Managed Funds: AMIT Cost Base + 1 July 2027 Rules

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% CGT discount from 1 July 2027, replacing it with cost base indexation plus a 30% minimum tax on real gains. The reform applies to individuals, partnerships and trusts — the typical holders of ETF and managed fund units. If you hold units in Vanguard, BetaShares, iShares, BlackRock, VanEck, or any of the established Australian-domiciled ETF or unit-trust products, the reform reaches you through two CGT pathways, not one. This article works through both, the ETF cost base adjustments (under the AMIT rules) that sit underneath them, and the foreign-asset-ETF edge cases.

The short version: Your Australian ETF distributions in 2026-27 still get the 50% discount. From 1 July 2027, both the gains your ETF passes through to you AND your own sale of ETF units get the new rules.

For the underlying mechanics of the reform itself — three-bucket transition, indexation, 30% minimum — read the master article first: 50% CGT Discount Reform: Cost Base Indexation + 30% Minimum Tax from 1 July 2027.

Timeline — when the reform hits your ETF holdings

The reform is calendar-driven from start to finish. Because ETFs sit on top of an underlying portfolio of assets, the dates that matter are not just “when you sell” — they are the boundary date, the first reform-era distribution, and the first tax return that has to apply the new split treatment. Skim this before reading the rest of the article.

Date	What happens	What it means for you
12 May 2026	Budget 2026 announces the reform.	Most ETFs hold underlying assets across years — fund managers begin tracking acquisition dates more carefully so they can label distributed gains correctly later.
2026-27 income year (1 Jul 2026 – 30 Jun 2027)	Last FY where ETF unit disposals and distributed gains both get the full 50% discount.	Both your own unit sales and your AMIT distribution statements still use legacy rules for this entire year — last chance for the clean 50% across both pathways.
30 June 2027 (Wednesday)	Last day for ETF unit disposals under the legacy regime.	ETF unit trades settle on T+2 — sell by ~26 June 2027 to capture the 50% discount on the full gain. Don’t leave it to settlement-day-of.
1 July 2027	Reform start: cost base indexation + 30% minimum tax begin.	Units bought from this day are Bucket C; units owned before are Bucket B (split treatment). AMIT statements for FY2027-28 will need to label distributed gains by underlying disposal date.
From 1 July 2027	AMIT distribution statements need new structure.	Fund managers (Vanguard, BetaShares, iShares, VanEck, BlackRock) will track each underlying disposal’s date so they can correctly label the legacy vs reform portions of any distributed capital gain. DRP reinvestments from this day forward are all Bucket C parcels.
First distribution after 1 July 2027 (typically late Sep / Dec 2027)	First “split-labelled” AMIT statement.	Your annual tax statement will, for the first time, separate distributed gains into legacy and reform components — expect a new line item on your AMMA.
30 June 2028	End of FY2027-28 — first full reform year.	The annual AMIT tax statement (AMMA) covering this period will fully reflect the new structure across both unit disposals and distributed gains.
31 October 2028	First tax return applying reform rules to ETF distributions.	Self-lodging individuals filing 2027-28 returns will use the new split-treatment system for both unit disposals and distributed gains. Tax agents get the usual lodgement-program extension; the math is the same.
1 July 2042	15 years post-reform.	By this point, the majority of widely-held ETFs (VAS, VGS, VAP, IVV) will have decade-plus parcels straddling the 1 July 2027 line — making cost base records (CHESS statements, DRP confirmations, every AMMA in between) critical. Reconstructing them from broker records 15 years on is painful.

How time changes your tax bill

ETF investors have a unique time profile. Most are buy-and-hold (10+ years), often DRP’d, and the AMIT cost-base creep means cost basis drifts every year. Unlike direct shares where you usually have a single buy-date and a single sell-date, an ETF holding is a living thing — parcels stack up year after year, distributions adjust your cost base annually, and the fund itself realises gains underneath you. Time interacts with the reform in four directions: holding period across 1 July 2027, years past reform date, fund growth rate, and AMIT cost-base adjustments accumulating each year.

Holding-period split — typical ETF buyer

Most ETF holders buy in tranches over 5–15 years. The legacy-vs-reform share of any single parcel’s gain depends linearly on how much of the hold sat on each side of the boundary. Worked table for a single $30,000 nominal gain parcel:

Bought	Sold	Hold (yrs)	Legacy share	Reform share	Comment
1 Jul 2022	1 Jul 2032	10	50.0%	50.0%	Even split
1 Jul 2017	1 Jul 2032	15	66.7%	33.3%	Legacy dominates
1 Jul 2025	1 Jul 2035	10	20.0%	80.0%	Reform dominates — short pre-hold
1 Jul 2030	1 Jul 2040	10	0%	100%	Bucket C — pure new rules

For DRP holders, the apportionment is per-parcel — a 15-year DRP’d VAS holding contains ~30 separate parcels each with its own buy-date and split. The reform doesn’t apply once at the unit-holding level; it applies thirty times at the parcel level, each with its own legacy/reform ratio.

Indexation by years past reform (2.5%/yr CPI)

Once a parcel falls into Bucket C (or the reform portion of Bucket B), its cost base is uplifted by CPI each year. Same baseline as other asset classes:

Years past 1 Jul 2027	Cost base uplift
3 yrs	7.7%
5 yrs	13.1%
10 yrs	28.0%
15 yrs	44.8%

ETF holders typically hold longer than direct-share investors, so indexation has more time to compound. For broad-index ETFs (e.g. VAS, A200) with 8–10%/yr historical nominal returns, the indexation uplift offsets only part of the gain. For property/infrastructure ETFs (VAP, IFRA) running 5–7%/yr, indexation can absorb a larger share — sometimes most of the nominal growth in a low-yield year.

ETF type sensitivity — three scenarios

The reform’s bite depends on what your ETF actually holds. Sample $35,000 nominal gain over a 10-year hold (5 yrs pre + 5 yrs post 1 July 2027):

ETF type	Annual nominal return	Old-rules tax (37% MTR)	New-rules tax (37% MTR)	Diff
Broad equity (VAS, A200)	9%/yr	$6,475	~$7,180	+11%
Property/infrastructure (VAP, IFRA)	6%/yr	$6,475	~$6,140	−5%
Foreign-asset growth (VGS, NDQ)	11%/yr	$6,475	~$7,560	+17%
Diversified balanced (DZZB, VDBA)	7%/yr	$6,475	~$6,470	~0%

Plain-English: broad-equity ETFs and foreign-growth ETFs come out worse under the reform; property/infrastructure ETFs come out better; balanced ETFs are roughly neutral. The tax outcome flips depending on what your ETF holds. The crossover sits roughly where the nominal return equals indexation (2.5%) + the discount-equivalent rate — above that, reform stings; below, indexation absorbs the gain.

AMIT cost-base creep — silent time-drag

Each year, your ETF’s AMIT tax statement adjusts your cost base. Property and infrastructure ETFs typically distribute large tax-deferred components (return of capital), which REDUCE your cost base. Over a 15-year hold, cumulative AMIT adjustments can reduce cost base by 20–30% of the original purchase price.

The reform interacts: the FINAL adjusted cost base at disposal is what the split-treatment apportionment uses. So a long-held VAP unit with 20% cumulative AMIT reduction has a SMALLER cost base than the buy price → LARGER nominal gain → MORE gain to apportion across the reform line → MORE sensitivity to the timing math.

A worked example: $50k purchase 2020, 15 years of AMIT downward adjustments cumulating to $10k off cost base, sold 2035 for $95k. Old cost base ~$50k → $45k nominal gain. New cost base $40k → $55k nominal gain. The reform amplifies the difference — and the longer you hold a high-tax-deferred ETF, the more pronounced the effect.

Two CGT pathways accumulate independently with time

ETF investors face TWO time-dependent CGT streams that compound on different clocks:

1. Distributed capital gains (annual, accruing inside the fund) — each year’s distributed gain is taxed under the rules applying when the FUND realised the underlying disposal. Distributions starting FY2027-28 may include both legacy and reform components, side-by-side on the same AMMA.
2. Unit disposal (when you sell your ETF units) — your own buy-date and sell-date drive the bucket math, independent of what the fund did internally.

Both streams need separate apportionment math. Long-held DRP’d holdings will have ~15+ years of distributed-gain history layered on top of ~15+ years of parcel buy-dates by the time anyone unwinds in 2035–2040. Record-keeping discipline (CHESS statements, DRP confirmations, every AMMA in between) is the only thing that makes the math tractable when the sell button is finally pressed.

Bottom-line summary

• 10+ year hold pre-reform, sold within 5 years after: legacy dominates, minimal reform impact.
• Recent buy (2024–2026), 10–15 year hold: reform dominates, broad-equity and growth ETFs lose most.
• Property/infrastructure ETFs with tax-deferred-heavy distributions: cost-base creep amplifies reform sensitivity.
• Long-hold post-reform purchases (Bucket C, 15+ years): indexation can absorb most of the gain on low-yield ETFs.

Two CGT events to think about

Investors instinctively focus on the sale of their units. But ETFs and managed funds expose unitholders to a second CGT pathway that runs every year, quietly, regardless of whether you click “sell”.

Event	When it triggers	How it reaches you
Distributed capital gains	Fund manager realises a gain inside the fund (portfolio rebalance, index change, redemption pressure)	Flows through as an attributed taxable amount on your AMIT-style annual tax statement, typically June. Currently eligible for the 50% discount at the unitholder level.
Disposal of fund units	You sell your VAS / VGS / Magellan / etc. units	Standard CGT event A1 at the unitholder level. 50% discount currently if held >12 months.

The Budget 2026 reform applies to both pathways:

• Capital gains accrued by the fund after 1 July 2027 flow through with the new rules — indexation + 30% minimum on the portion of the underlying gain that fell after that date.
• Capital gain on disposal of fund units after 1 July 2027 follows the same three-bucket transition as direct shares — split treatment for units owned at 1 July 2027.

Investors who plan to hold an ETF for another decade can’t think of themselves as only exposed at the eventual sale date. Annual distributed capital gains are reform-eligible from FY2027–28 onward.

Three-bucket transition for unit disposal

The same A/B/C buckets from the master article apply when you sell ETF or managed-fund units:

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

ETF and managed-fund holdings have an extra complication: each parcel has its own acquisition date. A typical long-term VAS holding might consist of a 2015 purchase, monthly DRP reinvestments through 2024, a 2026 top-up, and a 2028 top-up. Every one of those parcels is on its own bucket. Reporting at sale requires you to identify the parcel and its acquisition date for each unit disposed of (under the parcel-selection method you elect — FIFO, LIFO, or specific identification).

ETF cost base adjustments (under the AMIT rules) — what changes

Most Australian-domiciled ETFs and managed funds operate under the Attribution Managed Investment Trust (AMIT) regime. In plain English: each year, your ETF tells you whether to adjust the price you paid for your units up or down for tax purposes. It’s printed on your annual tax statement (called an AMMA, or AMIT Member Annual Statement).

You don’t get to choose — the fund manager calculates the adjustment based on the gap between cash distributed and taxable income attributed. You just record it and apply it to your cost base.

Two directions of adjustment:

• Downward — tax-deferred component (often called “return of capital” on your statement). When the fund distributes more cash than its attributed taxable income, the excess reduces your unit cost base. Common with property, infrastructure, and income-focused ETFs (VAP, MVA, DJRE).
• Upward — over-distributed component. When the fund attributes more taxable income than it distributes in cash, the difference increases your cost base. Common with accumulating or low-yield equity strategies (VAS, A200 in low-yield years).

These mechanics are unchanged by the reform. What changes is how the final adjusted cost base at disposal flows into the apportionment.

Each year’s adjustments compound into the cost base running balance. At disposal, the adjusted cost base is what you use to compute the nominal gain. The reform then apportions that nominal gain into legacy and reform buckets by hold-period days.

Practically: if your VAS adjusted cost base is $86 per unit after 10 years of tax-deferred adjustments (versus an original $87 acquisition cost), it’s $86 that goes into the gain computation, and $86 that the bucket-B split treatment apportions across the pre/post 1 July 2027 boundary. Don’t try to apportion the cost-base adjustments themselves into reform vs legacy buckets — the apportionment lives at the gain level, not the cost-base level.

Where it gets messy — DRPs and AMIT adjustments: If you’ve reinvested distributions (DRP) AND your ETF has been adjusting your cost base each year (AMIT), you’ll have a stack of separate parcels with different buy-dates AND a cost base that’s drifted from what you originally paid. The split-rule apportionment uses your FINAL cost base — so update your records before you sell.

Keep every AMMA from acquisition through disposal — by 2030+, the legacy 10+ years of statements will be doing real work in your reform-era CGT computation.

Bucket B worked example — VAS ETF

Priya holds 1,000 units of VAS (Vanguard Australian Shares Index ETF), purchased on 12 February 2020.

Item	Value
Units	1,000
Purchase price	$87.20 / unit
Original cost base	$87,200 + $19.95 brokerage = $87,219.95
AMIT cost-base adjustments over 10 years (net tax-deferred)	−$1,200
Adjusted cost base at sale	$86,019.95
Sale date	5 March 2030
Sale price	$128 / unit
Sale proceeds (after brokerage)	$128,000 − $19.95 = $127,980.05
Nominal capital gain	$41,960.10
Hold period	~3,674 days (~10.06 years)
Pre-1 Jul 2027 days	~2,696 days
Legacy share	~73.4%

Step 1 — Apportion the nominal gain by hold-period days:

• Legacy gain portion: $41,960.10 × 73.4% ≈ $30,798
• Reform gain portion: $41,960.10 − $30,798 ≈ $11,162

Step 2 — Tax the legacy portion (50% discount, MTR 39% incl. Medicare):

• Discounted legacy gain: $30,798 × 50% = $15,399
• Legacy tax: $15,399 × 39% ≈ $6,006

Step 3 — Tax the reform portion (indexation, then 30% minimum):

Assume 2.5% per year CPI from 1 July 2027 to 5 March 2030 (~2.7 years) → cumulative CPI factor ≈ 1.070.

• Indexation reduction: $11,162 × (1 − 1/1.070) ≈ $726
• Real reform gain: $11,162 − $726 ≈ $10,436
• Effective reform rate: max(MTR 39%, minimum 30%) = 39%
• Reform tax: $10,436 × 39% ≈ $4,070

Step 4 — Total CGT:

Component	Tax
Legacy portion (Bucket B pre-2027)	$6,006
Reform portion (Bucket B post-2027)	$4,070
Total CGT under reform	$10,076

Comparison vs old rules (single 50% discount across the whole gain):

• $41,960.10 × 50% × 39% ≈ $8,182
• Reform vs old: +$1,894 (about 23% more tax)

For a high-growth Australian equity ETF held across the 1 July 2027 boundary, expect the reform to add a meaningful single-digit-thousand-dollar tax bill per $40k of nominal gain — concentrated in the post-2027 share of the hold period, but reduced by whatever CPI has done in the interim.

You can plug your own VAS / VGS / VAP / NDQ / IVV parcels into the Capital Gains Tax Calculator — Bucket B apportionment with cost-base indexation is built in.

Bucket A worked example — selling before the boundary (James, VAS)

James bought 800 VAS units on 15 March 2022 at $89.50/unit and sells the lot on 25 June 2027 at $115/unit — five days before the 1 July 2027 boundary.

Item	Value
Units	800
Purchase date	15 March 2022
Purchase price	$89.50 / unit
Original cost base (+ $9.95 brokerage)	$71,609.95
Cumulative AMIT adjustments (net upward, low-yield years)	+$320
Adjusted cost base	$71,929.95
Sale date	25 June 2027
Sale price	$115 / unit
Sale proceeds (after $9.95 brokerage)	$91,990.05
Nominal capital gain	$20,060.10
Hold period	~5.3 years (all pre-1 July 2027)

Because both the purchase and sale fall before 1 July 2027, this is a Bucket A transaction. The old rules apply in full:

• Discounted gain: $20,060.10 × 50% = $10,030
• At James’s MTR of 32.5% + 2% Medicare = 34.5%
• CGT: $10,030 × 34.5% ≈ $3,460

Plain English: if you sell before 1 July 2027, nothing changes. The 50% discount still applies as it always did — Budget 2026 has no effect on transactions completed by the boundary. The same logic holds whether James sells one parcel or his entire holding, as long as everything trades before 1 July 2027.

Bucket C worked example — bought and sold under the new rules (Liam, NDQ)

Liam buys 500 units of BetaShares NDQ (Nasdaq 100 ETF, ASX-listed, Australian-domiciled) on 10 September 2028 at $42/unit, holds for ~6.5 years, and sells on 20 March 2035 at $74/unit. Both the purchase and sale fall after 1 July 2027 — this is a clean Bucket C example with no legacy portion.

Item	Value
Units	500
Purchase date	10 September 2028
Purchase price	$42 / unit
Original cost base (+ $9.95 brokerage)	$21,009.95
Cumulative AMIT adjustments (net upward, growth ETF)	+$180
Adjusted cost base	$21,189.95
Sale date	20 March 2035
Sale price	$74 / unit
Sale proceeds (after $9.95 brokerage)	$36,990.05
Nominal capital gain	$15,800.10
Hold period	~6.5 years (all post-1 July 2027)

Step 1 — Apply indexation across the whole hold period.

Assume cumulative CPI of 18.5% across the 6.5-year hold → indexation factor 1.185.

• Indexation reduction: $15,800.10 × (1 − 1/1.185) ≈ $2,466
• Real reform gain: $15,800.10 − $2,466 ≈ $13,334

Step 2 — Apply the greater-of-MTR-or-30% rule.

• Liam’s marginal rate: 37% + 2% Medicare = 39%
• Effective rate: max(39%, 30%) = 39%
• CGT: $13,334 × 39% ≈ $5,200

A point worth noting about NDQ. It’s a foreign-asset ETF (it tracks the Nasdaq 100, all US stocks), but the unit Liam owns is in an Australian-domiciled trust managed by BetaShares in Sydney. From Liam’s perspective, the Foreign Investment Fund (FIF) rules — they apply when you hold $50k+ in offshore investments directly — generally don’t apply, because BetaShares is the entity that interfaces with the foreign holdings, not Liam. He’s holding an Australian trust unit, full stop. The CGT reform applies normally.

Plain English: for someone buying a global-equity ETF entirely after the boundary, the calculation is simpler — no split, no apportionment, just indexation + 30% minimum across the whole gain. The 30% minimum becomes irrelevant when you’re already on a marginal rate above 30%. For lower-income investors (MTR 19% or 32.5%), the 30% floor is the binding constraint.

Foreign-domiciled ETF worked example — when FIF actually bites (Rachel, US-listed VTI)

Rachel holds 50 units of US-listed VTI (Vanguard Total Stock Market ETF, NYSE Arca — not the ASX-listed VTS) bought directly through Interactive Brokers in August 2021 at US$220/unit. She sells in October 2029 at US$390/unit. AUD/USD is 0.68 at purchase and 0.66 at sale.

Item	Value
Units	50
Purchase date	5 August 2021
Purchase price (USD)	US$220 / unit
Purchase price (AUD @ 0.68)	$323.53 / unit
Original cost base (+ ~$15 brokerage AUD)	$16,191.50
Sale date	18 October 2029
Sale price (USD)	US$390 / unit
Sale price (AUD @ 0.66)	$590.91 / unit
Sale proceeds (after ~$15 brokerage AUD)	$29,530.45
Nominal capital gain (AUD)	$13,338.95
Hold period	~8.2 years

FIF check first. Rachel’s total offshore-investment holdings (this VTI position + her other directly-held US holdings) sit at ~AUD$75,000 at the end of FY2026-27 — above the $50,000 de-minimis, so the FIF rules do apply. The reason: VTI is domiciled in the US (a Delaware statutory trust), not Australia. Australia’s FIF rules deem an annual amount of ordinary income based on either the comparative-value (CV) or actuarial method, regardless of whether Rachel sells.

Two parallel tax streams.

• Annual FIF income (ordinary income, no CGT discount, never has been). Under the CV method, each year Rachel includes (closing market value − opening market value − net distributions) as ordinary income, taxed at her MTR. This is unchanged by the CGT reform — FIF inclusion has never been a CGT event, so the legacy discount didn’t apply to it and the new indexation/30% minimum doesn’t either.
• CGT on disposal. When Rachel finally sells in 2029, a CGT event A1 occurs. The cost base is the original AUD-equivalent purchase cost, stepped up by cumulative FIF amounts already included as ordinary income (to prevent double tax). The resulting net CGT gain runs through the standard three-bucket apportionment.

In practice, after 8 years of FIF inclusion most of Rachel’s economic gain has already been taxed as ordinary income. The remaining CGT gain at sale is small — perhaps $2,000–$3,000 — and that residual falls into Bucket B (purchase 2021, sale 2029): split between the legacy portion (~5.9 years pre-1 July 2027 → ~72%) and the reform portion (~28%).

Plain English takeaway: US-domiciled ETFs (VTI, VOO, QQQ) held directly are now meaningfully more expensive to own than the Australian-domiciled equivalents (VTS, IVV, NDQ). Why?

1. FIF rules charge you tax annually on unrealised gains — Australian-domiciled ETFs don’t.
2. The CGT reform layers on top — the residual CGT event at sale is still subject to the new indexation + 30% minimum rules.
3. The compliance burden is much higher — annual FIF calculations, AUD conversion of foreign distributions, withholding-tax credits.

If you currently hold US-listed ETFs in IBKR and your offshore total is approaching $50k, switching to the ASX-listed equivalent (VTS instead of VTI; IVV instead of VOO) before crossing the threshold removes FIF exposure entirely and simplifies your reform-era tax position. Selling a foreign-domiciled ETF after the boundary triggers reform rules on the CGT residual — so the timing of any consolidation matters. Talk to a tax agent before crossing the $50k line.

Distributed capital gains post-1 July 2027

When a fund realises a CGT event from its underlying holdings after 1 July 2027 (e.g. index rebalance, large redemption forcing a sale, takeover of an underlying company), the gain flows through to unitholders via AMIT attribution.

Under current rules, the discount is applied at the unitholder level — the fund attributes a gross capital gain; the unitholder applies the 50% discount themselves at year end. Under the reform:

• The fund continues to attribute the gross capital gain.
• The unitholder applies the new rules: indexation + 30% minimum tax on the real reform gain.
• Effective rate is the greater of the unitholder’s marginal rate and 30%.

Statement labelling. From the 2027–28 income year onward, AMIT Member Annual Statements (AMMAs) will need to separately identify the legacy-portion (pre-1 July 2027) and reform-portion (post-1 July 2027) components of any attributed capital gain. Today’s AMMA format groups all discounted capital gain into a single line — expect the format to expand. Fund managers and platforms (Vanguard Personal Investor, Selfwealth, CommSec) will need to ship updated statement layouts before the first reform-era 30 June.

Apportionment within the fund. Where the underlying CGT event occurred is what governs apportionment for distributed gains — not when you bought the units. If the fund sells a holding it acquired in 2018 and the underlying gain crosses 1 July 2027, the same Bucket B apportionment applies at the fund level. The flow-through to you carries the apportioned components, not a single gross figure.

DRP creates many parcels

A 10-year DRP (Dividend Reinvestment Plan) on a fund like VAS, VAP, or VGS typically generates ~40 parcels (quarterly distributions). A 20-year DRP can generate ~80+. Every reinvestment is a separate parcel with its own:

• Acquisition date
• Acquisition price
• Cost base
• Hold-period bucket assignment

When you sell after 1 July 2027, you select parcels under your chosen method (FIFO, LIFO, or specific identification). Each selected parcel runs through its own Bucket A / B / C determination:

• DRP parcels acquired before 1 July 2027 and sold after → Bucket B (split treatment)
• DRP parcels acquired after 1 July 2027 → Bucket C (wholly new rules)
• The original purchase parcel typically anchors the longest hold period and the largest legacy share

Investors who have not kept parcel-level records (acquisition date + price for each DRP reinvestment) should pull historical CHESS statements and broker DRP confirmations now. Reconstructing 15 years of DRP parcels in 2030 from broker statements is painful; reconstructing it from custodian-level records is worse.

Foreign-asset ETFs and the FIF interaction (general principles)

Many Australian investors hold ETFs that themselves hold foreign assets — VGS (developed-market shares ex-Australia), IVV (S&P 500), VTS (US total market), NDQ (Nasdaq-100), QUAL (global quality). The CGT reform applies — but the Foreign Investment Fund (FIF) rules — they apply when you hold $50k+ in offshore investments directly — deserve a separate look. Rachel’s worked example above shows what this looks like in practice; the general principles are below.

Australian-domiciled ETFs holding foreign assets (VGS, IVV via the iShares Australia structure, NDQ, etc.) typically operate as Australian trusts. Distributed income and capital gains flow through under AMIT. From the unitholder’s perspective, FIF rules generally don’t apply — the fund manager handles the underlying foreign-asset compliance. The reform applies to these as it would to a domestic-asset ETF: split treatment on disposal, reformed treatment of distributed capital gains.

Non-Australian-domiciled ETFs held directly (e.g. US-listed VTI, VOO, QQQ — distinct from the Australian-listed VTS) may attract FIF rules at the individual level, depending on:

• The $50,000 small-investor de-minimis (assets at end of income year)
• Whether the foreign fund qualifies for a “comparative value” or “actuarial” method exemption

The CGT reform does not change FIF rules themselves. The interaction:

• If your foreign-asset exposure is on a comparative value (CV) basis, that’s annual ordinary income (a deemed gain or loss against opening market value), not a CGT event. The reform does not apply to CV inclusion amounts.
• If you fall under FIF actuarial methods and eventually dispose of the underlying interest, the disposal CGT event follows reform rules — bucket apportionment, indexation, minimum tax.

For most retail investors using Australian-domiciled global ETFs (the dominant Vanguard / BetaShares / iShares Australia products), this section is informational. For those using IBKR or similar to hold US-listed ETFs directly, talk to a tax agent — FIF + CGT-reform interaction is one of the more complex corners of the post-2027 regime.

Tax-deferred distributions and the “iceberg” effect

Property and infrastructure ETFs (VAP, MVA, DJRE, GLPR, SLF) typically distribute large tax-deferred components — often 30–50% of distributed yield is return of capital, not assessable income. Over a long hold, those tax-deferred amounts compound downward into the cost base. After 15+ years, the adjusted cost base can sit well below the original purchase price — sometimes approaching zero or negative.

Under the current 50% discount regime, a “negative cost base” outcome on disposal still attracts the discount, cushioning the tax on the inflated nominal gain. Under the reform, that cushion narrows materially:

• The reform-portion gain is taxed at minimum 30% with only the (modest) post-2027 CPI indexation to offset it.
• A reform-era unitholder with $50,000 of nominal gain inflated by 20 years of tax-deferred adjustments faces ~30% on the real reform portion regardless of marginal rate — versus 15–24% under the old 50% discount.

Long-hold, tax-deferred-heavy property and infrastructure ETFs become less tax-efficient post-2027 relative to plain Australian equity ETFs. The yield-vs-growth trade-off doesn’t change, but the after-tax outcome does — particularly for high-MTR investors planning to hold for another decade.

Loss harvesting and tax-aware ETFs

Tax-aware ETFs (those that select parcels at distribution time to minimise distributed capital gains) and active tax-loss-harvesting strategies remain useful post-reform — the discount that frames realised gain has narrowed, so the tax shielding from harvested losses grows in relative value.

One-off opportunity in FY2026–27: capital losses harvested before 30 June 2027 can offset legacy-discount-era capital gains. Carry-forward losses applied against post-2027 gains will instead offset reform-era gains, where the effective tax rate may be higher but the indexation cushion reduces the gross amount available to offset. Front-loading harvest activity into FY2026–27 captures the better-of-both outcome.

See the CGT Harvest Calculator for a ranking of loss candidates by potential tax saving.

Decision points for ETF investors

Should you sell long-held ETFs before 1 July 2027?

No — not for tax reasons alone. The legacy 50% discount on the pre-2027 portion of any gain is preserved under Bucket B regardless of when you sell. Triggering a sale today crystallises tax today and forfeits the deferral benefit (re-invested at-tax-paid versus continuing to compound pre-tax). Only sell if the underlying investment decision makes sense without the tax angle.

Should you switch to an accumulating fund?

Accumulating funds (those that reinvest income internally rather than distributing) and distributing funds are subject to the same tax regime — AMIT applies to both, and the reform applies to both. There is no tax-driven reason to switch between structures.

Should you stop DRP and take cash distributions?

DRP creates more parcels and more reporting overhead, but each parcel still benefits from its own bucket assignment — long-DRP parcels still attract their share of legacy treatment. The decision to stop DRP should rest on portfolio-construction reasons (rebalancing flexibility, withdrawal needs), not tax timing.

Should you favour individual shares over ETFs?

No structural advantage either way. Direct shares get the same Bucket A/B/C treatment as ETF units. ETFs add the distributed-capital-gain layer; direct shares don’t. ETF managers do parcel selection on your behalf at the fund level — for most investors, that’s a feature, not a bug.

Calculators

• Capital Gains Tax Calculator — Bucket A/B/C apportionment, CPI indexation, 30% minimum tax
• CGT Harvest Calculator — Loss harvest ranking and pre-2027 timing analysis

Sources

• Treasury Budget Paper No. 2, Tax Reform — Boosting Home Ownership (12 May 2026), p.21 — CGT reform mechanics and effective date.
• Treasury fact sheet, Negative Gearing and Capital Gains Tax Reform (12 May 2026).
• AMIT regime overview (ATO website) — Attribution Managed Investment Trusts — flow-through attribution, cost-base adjustment mechanics, AMMA reporting framework.

Related reading

• 50% CGT Discount Reform: Cost Base Indexation + 30% Minimum Tax from 1 July 2027 — full reform mechanics and EOFY action items.
• 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.