CGT Reform Passed: What the Final Law Says 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.

It is done. Australia’s capital gains tax reform passed both houses of Parliament on 25 June 2026 and received royal assent on 26 June 2026, becoming the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026) and the Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (Act No. 50 of 2026).

The one-sentence version: for CGT events on or after 1 July 2027, the 50% CGT discount is abolished for individuals, trusts and partnerships, replaced by CPI cost base indexation for assets held at least 12 months plus a 30% minimum tax on the post-reform portion of capital gains.

Two things make this article necessary even if you read the Budget-night coverage. First, the Senate amended the package — 33 amendments passed (30 on the Government’s sheet AU131 and 3 on the Greens’ sheet 3886, the product of a Labor-Greens deal; the Opposition and One Nation opposed the bills). Anything written before late June describes the proposal, not the law. Second, official guidance is lagging: as of early July 2026 the ATO’s own measure page still describes the reform as not yet law. It is law.

What passed — the core mechanics

The core parameters are exactly what the May Budget proposed:

• Discount abolished for individuals, trusts and partnerships for CGT events on or after 1 July 2027.
• CPI cost base indexation replaces it for assets held 12 months or more. All cost base elements are indexed except the third element (costs of ownership).
• 30% minimum tax applies to the post-reform portion of capital gains, under a new Division 119.
• Complying super funds keep the 33 1/3% discount — they are excluded from the new regime.
• Companies are unchanged (they never had the discount), the main residence exemption is unchanged, and foreign and temporary residents are excluded from indexation (they already lost the discount in 2012).

For the full mechanics and worked examples, see the cost base indexation explainer. This article covers what is different in the final law.

What changed in the Senate

Five substantive changes separate the Act from the Budget proposal. Most pre-passage coverage does not reflect them.

1. Only new dwellings keep the 50% discount — the ministerial power is gone

The proposal let the Minister determine additional asset classes that would retain the discount. That power was removed. The only asset class retaining the 50% discount is new residential dwellings, as a taxpayer’s choice: take the 50% discount, or take indexation instead — but choosing indexation also opts that gain into the 30% minimum tax. Affordable housing keeps its existing up-to-60% discount. Claims that new builds get the discount “for 15 years”, or that the Minister could add more classes, do not reflect what passed.

2. The welfare exemption is now a hard-coded statutory list

The exemption from the 30% minimum tax for income-support recipients was going to run on a ministerial instrument. The final law instead hard-codes the list in section 119-15: Age Pension, Disability Support Pension, JobSeeker, Carer Payment, Parenting Payment, Youth Allowance, Austudy, Special Benefit, Double Orphan Pension, Family Tax Benefit, the stillborn baby payment, Farm Household Allowance, Parental Leave Pay, ABSTUDY living allowance, and specified DVA/MRCA payments.

This is the most misreported point in circulation: recipients are exempt from the 30% minimum tax only. They still lose the 50% discount, and their gains are still computed under indexation. Any claim that pensioners “keep the 50% discount” is wrong — see the retirees and Age Pension deep dive.

3. A charity fix

New in the Senate: the minimum-tax base is reduced by Division 30 gift and donation deductions and Division 31 conservation covenant deductions — so a large donation in a gain year can still reduce tax below the 30% floor.

4. Small business: the active-asset reduction threshold jumps to $10 million

All four Division 152 small business CGT concessions survive. The Senate went further: the 50% active-asset reduction (Subdivision 152-C) turnover threshold rises from $2 million to $10 million aggregated turnover, effective from the income year that includes 1 July 2027 (FY2027-28) onwards (section 152-205(2)). The 15-year exemption, the retirement exemption and the rollover keep the existing $2 million turnover / $6 million net asset value tests. The 50% reduction stacks on top of either the discount (where still available) or indexation — see the small business deep dive.

5. SMSF borrowing: an entirely new restriction

A Greens amendment nobody saw in the Budget: from 10 August 2026 (45 days after assent), new SMSF limited recourse borrowing arrangements over real property are restricted to business real property — no new LRBAs for residential investment property. Existing arrangements, and refinancings of them, are grandfathered. If your SMSF was contemplating a geared residential purchase, the window closes in weeks — see the SMSF and super deep dive.

The deemed sale on 30 June 2027

The transitional rule — Subdivision 112-E — is in the Act but was largely absent from Budget-era coverage, and it affects every asset owner in the country.

Every CGT asset you hold at 30 June 2027 is deemed to be disposed of just before 1 July 2027 and immediately reacquired. No tax is payable at that moment. Instead:

• The notional gain accrued up to 1 July 2027 is calculated under the old law — the 50% discount is preserved for that portion — and deferred until you actually sell.
• Growth after 1 July 2027 is taxed under the new rules (indexation plus the 30% minimum tax).

The split is measured primarily by market valuation at 1 July 2027. A Minister-determined apportioning method is available as a taxpayer election (sections 112-155(3) and 112-165(3)), but valuation is the primary method — content describing the split as purely time-apportioned is out of date.

Under the new section 102-6 architecture, gains fall into four categories — deferred non-residential, deferred residential, non-residential and residential — and capital losses are applied against them in that order.

The practical takeaway: get and keep evidence of market value at 1 July 2027. For listed shares and ETFs the closing price does the job; for property, a contemporaneous valuation or appraisal is far cheaper than reconstructing one years later. This applies even to pre-CGT assets (acquired before 20 September 1985): gains accruing after 1 July 2027 on those assets become taxable for the first time, while pre-July-2027 accruals stay exempt — so assets that never needed a valuation now do.

One more transitional detail: the frozen-indexation choice available for assets acquired between 1985 and 1999 can only be used for CGT events before 1 July 2027.

Timeline: every date in the Acts

On the negative gearing quarantine, the exceptions in the final law: new residential dwellings, dwellings acquired before 7:30pm AEST 12 May 2026 (grandfathered), fringe-benefit amounts, widely-held trusts and complying super entities.

What was claimed but did NOT pass

Plenty of amendment sheets circulated during the debate. Only two became law: the Government’s AU131 and the Greens’ 3886. Specifically:

• The Greens’ “one dwelling only” grandfathering election (sheet 3834) did not pass. Negative gearing grandfathering for dwellings acquired before 7:30pm AEST 12 May 2026 is unlimited — there is no per-taxpayer dwelling cap. Coverage suggesting investors must elect a single grandfathered property is wrong.
• Senator Pocock’s amendment sheets did not pass. None of the changes floated in those sheets are in the Acts.

If you are relying on an article, adviser note or forum thread written before 25 June 2026, check its claims against this list before acting.

FAQs

Is the CGT reform actually law now?

Yes. Both bills passed Parliament on 25 June 2026 and received royal assent on 26 June 2026, as Act No. 49 and Act No. 50 of 2026. The ATO’s measure page had not yet been updated as of early July 2026 — the Acts, not that page, are the current state of the law.

Do I lose the 50% discount on assets I already own?

Not on the gain you have already made. Under the deemed-sale rule, the gain accrued up to 1 July 2027 keeps the 50% discount and is deferred until you actually sell. Only growth after 1 July 2027 is taxed under the new rules. Weigh your options with the sell before 30 June 2027 decision guide.

Do pensioners keep the 50% discount?

No. Recipients of the payments listed in section 119-15 (Age Pension, JobSeeker, DSP and others) are exempt from the 30% minimum tax only. Their gains still lose the discount and are computed under CPI indexation like everyone else’s.

Do I need a market valuation of my assets at 1 July 2027?

Practically, yes. Market value at 1 July 2027 is the primary method for dividing pre-reform from post-reform gain (the apportioning-method election is the alternative). Closing prices cover listed assets; property owners should keep a contemporaneous valuation or appraisal. Pre-CGT assets need this too, since their post-1 July 2027 growth becomes taxable.

What happened to the small business CGT concessions?

All four Division 152 concessions survive, and the 50% active-asset reduction gets more generous: its turnover threshold rises from $2 million to $10 million aggregated turnover from FY2027-28. The other three concessions keep the $2 million turnover / $6 million net asset value tests.

Did the Senate change anything for property investors?

Yes, twice over. Negative gearing grandfathering stayed unlimited (the one-dwelling election did not pass), and new residential dwellings became the only asset class retaining the 50% discount. Separately, SMSFs lose the ability to write new residential LRBAs from 10 August 2026.

Sources

• Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026)
• Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (Act No. 50 of 2026)
• APH bill homepages for both Acts (passage record and amendment sheets AU131 and 3886)
• ATO new-legislation measure page (pre-passage framing; flagged stale above)

Related reading

• 50% CGT Discount Reform: Cost Base Indexation Explained — full mechanics with worked examples
• Should I Sell Before 30 June 2027? — the decision framework
• CGT Reform for Small Business
• CGT Reform for SMSFs and Super — including the new LRBA restriction
• CGT Reform for Retirees and Age Pensioners
• Negative Gearing Reform: 4-Bucket Explainer
• Federal Budget 2026-27 Summary — the original announcement, measure by measure