50% CGT Discount Under Review: What the Senate Inquiry Means for Investors
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Primary tax-year context: Current Australian tax settings
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The 50% CGT discount — one of Australia’s most valuable tax concessions — is facing its most serious political challenge since Labor took it to the 2019 election and lost.
A Senate Select Committee is examining the discount and is due to report by 17 March 2026. The OECD has recommended reforms. The ACTU wants the discount halved. And the Treasurer has declined to rule out changes in the May 2026 Budget.
Nothing has changed yet. But the political momentum is building, and investors holding assets with large unrealised gains should understand what’s being proposed.
What Is the 50% CGT Discount?
When you sell an asset you’ve held for at least 12 months, only half of the capital gain is added to your taxable income. This effectively halves the tax you pay on long-term gains.
The discount was introduced in 1999 under the Howard Government, replacing the previous CPI-indexation method that had been in place since CGT was first introduced in 1985. Under the old system, only real (inflation-adjusted) gains were taxed. The 50% discount replaced indexation with a simpler, more generous flat concession.
Example: You sell shares for a $100,000 capital gain after holding them for 2 years. At the 37% marginal rate:
| Method | Taxable gain | Tax payable |
|---|---|---|
| 50% discount (current) | $50,000 | $18,500 |
| CPI indexation (old method, ~6% cumulative) | $94,000 | $34,780 |
| No concession | $100,000 | $37,000 |
The discount is significantly more generous than the indexation method it replaced, especially when asset prices grow faster than inflation — which they have. Average annual house price growth (6.4%) has far outpaced inflation (2.9%) since 1999.
The Senate Inquiry
On 4 November 2025, the Senate established a Select Committee on the Operation of the Capital Gains Tax Discount. The inquiry was driven by the Australian Greens.
The committee is investigating:
- Whether the discount contributes to housing inequality
- Whether it redirects investment away from productive assets into existing housing
- How the discount’s benefits are distributed
- How trusts use the discount
- Whether it still achieves its original policy objectives
68 submissions were received before the December 2025 deadline. The final report is due 17 March 2026 — just weeks before the expected May Budget.
Who Benefits from the Discount?
This is where the political pressure comes from. Treasury and Parliamentary Budget Office (PBO) analysis shows the benefits are heavily concentrated:
| Group | Share of CGT discount benefit |
|---|---|
| Top 1% of income earners | 50% |
| Top 10% | 73–83% |
| Top 20% | 83% |
| Bottom 50% | 7% |
The total revenue cost of the CGT discount is estimated at $21.8 billion per year (2025-26 Tax Expenditures Statement). The PBO projects that negative gearing and the CGT discount combined will cost $165 billion over the decade to 2033-34.
79% of all investor finance goes toward purchasing existing dwellings rather than new housing — a key argument for those who say the discount inflates prices without adding housing supply.
What’s Being Proposed?
No legislation has been introduced. But several proposals are on the table:
| Proposal | Who | Revenue impact |
|---|---|---|
| Reduce discount from 50% to 25%, phase in over 5 years | Grattan Institute | ~$6.5 billion/year |
| Reduce to 25%, new investments only, 5-year grandfather | ACTU | Similar |
| Reduce to 40%, immediate, no grandfathering | ANU Tax and Transfer Policy Institute | Moderate |
| Abolish entirely | Greens, Australia Institute | ~$19 billion/year |
| No change | Coalition, FAAA | $0 |
The OECD added international pressure in January 2026, recommending Australia remove “favourable tax treatment of residential property ownership, including capital gains tax concessions and negative gearing” to cool demand and reduce upward pressure on house prices.
What Has the Government Said?
On 4 February 2026, Treasurer Jim Chalmers was asked directly whether CGT changes would be in the Budget. He responded:
“Any further changes to taxes, beyond those which we’ve already flagged, would be a matter for cabinet in the usual way.”
He did not rule it out.
This is notable because Labor previously lost the 2016 and 2019 elections campaigning on cutting the CGT discount to 25% and limiting negative gearing. After those defeats, they dumped both policies. The fact that the Treasurer is leaving the door open — despite the political history — suggests the calculus may have shifted.
The Coalition opposes any change and has called the reform “advocated by the Greens.”
Would Changes Apply to Existing Assets?
Almost certainly not retrospectively. Every major proposal includes either grandfathering (existing assets keep the 50% discount permanently) or a phase-in period (the discount gradually reduces over several years).
When CGT was first introduced in 1985, all pre-CGT assets were permanently exempted. When the discount replaced indexation in 1999, taxpayers with pre-1999 assets could choose the more favourable method. Australia has a strong convention against retrospective tax increases on investment income.
The most likely model — if anything changes — would apply to assets acquired after a specified date, with existing holdings retaining the current 50% discount.
What Should Investors Consider?
If you have large unrealised gains, the inquiry timeline is worth watching:
- 17 March 2026: Senate committee reports
- May 2026: Federal Budget (possible announcement)
- 1 July 2026 or later: Any change would most likely take effect from a future date
There is no urgency to sell. Even if changes are announced in May, they would almost certainly apply to future acquisitions, not existing holdings. Rushing to sell before any announcement could trigger unnecessary CGT in the current year.
However, if you were already planning to sell an asset this financial year, the timing question is worth discussing with your tax adviser. Compare the scenarios using the sell this year vs next year comparison.
If you’re considering buying investment property, be aware that any asset purchased from now on could be subject to a reduced discount if legislation passes. This doesn’t make the investment bad — it changes the after-tax return calculation.
If you hold assets through a trust, note that trust distributions of capital gains are specifically mentioned in the inquiry’s terms of reference. Changes could affect how trusts stream capital gains to beneficiaries.
Timeline
| Date | Event |
|---|---|
| 4 Nov 2025 | Senate Select Committee established |
| 19 Dec 2025 | Submissions closed (68 received) |
| Jan 2026 | OECD recommends reforming CGT concessions |
| 3 Feb 2026 | ACTU calls for CGT discount cut to 25% |
| 4 Feb 2026 | Treasurer declines to rule out Budget changes |
| 17 Mar 2026 | Senate committee final report due |
| May 2026 | Federal Budget (possible announcement) |
Key Takeaways
- The 50% CGT discount is under review by a Senate committee reporting in March 2026
- Treasury data shows the discount overwhelmingly benefits high-income earners
- The OECD, unions, and multiple think tanks recommend reducing or abolishing it
- The Treasurer has not ruled out changes in the May 2026 Budget
- Any change would almost certainly grandfather existing assets or phase in gradually
- There is no need to panic-sell, but investors planning sales should consider timing
- If you hold CGT assets, run the numbers now so you’re prepared for any scenario
Model your CGT position now
Use the Capital Gains Tax Calculator to see how much tax you’d owe if you sold today — and compare different timing strategies.