If you own shares, an investment property or a holiday house, the way your profit is taxed when you sell is about to change. The new laws passed Parliament in June and start on 1 July 2027.
The headlines have been alarming. The detail is calmer, and for many older Australians there is good news buried in it.
What is changing
At the moment, if you hold an asset for more than a year and sell it at a profit, only half the gain is taxed. That is the 50 per cent capital gains tax (CGT) discount.
From 1 July 2027, the discount is generally replaced by indexation. Instead of halving your profit, the purchase cost is increased in line with inflation (the CPI), so you are taxed only on the “real” gain above inflation. It is a return to the system Australia used from 1985 to 1999.
There is also a new minimum tax. If the tax on your real gain works out at less than 30 per cent, a top-up brings it to 30 per cent. People who already pay tax at 30 per cent or more on that gain are not affected by the top-up.
The good news first
The gains you have already made keep the discount. For anything you own on 30 June 2027, the law generally treats it as if you sold it and bought it back at market value just before 1 July 2027. The profit up to that point keeps the 50 per cent discount, where eligible, and you pay nothing until you actually sell. Only the growth after July 2027 falls under the new rules.
That means there is no automatic deadline to sell. Rushing to offload shares or property before July 2027 to “beat” the change will not necessarily save you tax on the gains you have already made, because those gains are protected anyway.
Age pensioners are exempt from the 30 per cent minimum. If you receive the Age Pension at any time during the financial year you sell, the minimum tax does not apply to you. The same goes for people on Carer Payment, the Disability Support Pension, DVA service pensions and several other eligible payments.
Your home is still exempt. Your main residence stays free of capital gains tax, subject to the usual eligibility rules.
A capital gain itself is not counted as income for the Age Pension. However, selling an investment property or shares can still affect your pension entitlement, because the proceeds may change your assessable assets and deemed income.
There is no inheritance tax. The Treasurer has said plainly that the reforms do not introduce a tax on inheritances.
Your super fund’s discount is unchanged. The new rules do not touch the one-third CGT discount available to complying super funds, and the SMSF Association says it will still apply.
Who could pay more
Self-funded retirees on modest incomes who are not receiving an eligible government payment are among those most likely to notice the 30 per cent minimum.
Take the government’s own example. Jack earns $25,000 a year and makes a $10,000 real capital gain. Under the normal tax rates, his tax on the gain would be $1,400, or 14 per cent. The minimum tax adds a $1,600 top-up, taking it to $3,000.
Had Jack received the Age Pension at any point that financial year, there would be no top-up. These figures exclude the Medicare levy, and available tax offsets may reduce the final amount payable.
Assets bought before September 1985 have generally been completely free of capital gains tax until now. They stay tax-free for their growth up to July 2027, but any growth after that date will be taxed, subject to applicable exemptions. If you have owned a property or shares since before 1985, this is the change to watch.
Whether indexation leaves you better or worse off depends on how fast your asset grows.
Treasury modelled a $500,000 asset bought in July 2027 and held for 10 years, assuming annual inflation of 2.5 per cent and other income of $100,000 a year.
With investment growth of 2.5 per cent a year, the owner pays $24,858 less tax than under today’s rules. At 5 per cent growth, they pay $8,075 more, and at 7.5 per cent growth, they pay $58,851 more.
Slow growers tend to do better under indexation; fast growers do worse.
Investment property and negative gearing
If you bought an established investment property before 7.30pm AEST on 12 May 2026 (Budget night), nothing changes to your negative gearing arrangements. You keep those arrangements until you sell, including where a contract was entered into before the cut-off but had not yet settled.
For established homes bought after that time, rental losses from July 2027 can only be offset against other residential rental income or residential capital gains, not against your wages or other non-residential income. Unused losses carry forward.
Eligible new builds, commercial property and shares are not affected by these negative gearing restrictions.
There is also an important concession for newly built homes. Investors in qualifying new residential properties will be able to choose between the existing 50 per cent capital gains tax discount and the new indexation system, including its minimum-tax rules, when they sell.
What to do now
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Don’t panic-sell. Your gains to date are protected, so there is no automatic need to sell before July 2027.
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Keep your records. Purchase price, purchase costs, renovations and sale costs all still matter.
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Know your value on 1 July 2027. For listed shares, a quoted market price as at that date may help establish the value. For property, a valuation or an approved apportioning method may be used. The ATO is expected to provide guidance and tools to help.
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Check your payments. If you receive the Age Pension or another eligible payment in the financial year you sell, the 30 per cent minimum will not apply to you.
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Get advice before a big sale. A registered tax agent can run the numbers for your situation.
Still to be finalised
Although the main reforms are already law, further legislation introduced in October 2026 is intended to clarify how the changes apply in more complex circumstances, including calculating gains made before and after July 2027 and exemptions involving deceased estates and certain trusts.
Some implementation details remain subject to finalisation.
Quick answers
When does it start? 1 July 2027.
Do I lose the discount on gains I have already made? No. Eligible growth up to 30 June 2027 keeps the 50 per cent discount.
I’m on the Age Pension. Does the 30 per cent minimum apply to me? No, if you receive it at any time in the financial year of the sale.
Is my home affected? No. Your main residence stays exempt, subject to the usual rules.
Is there an inheritance tax? No.
This article is general information only. It does not take your personal circumstances into account and is not financial or tax advice. Speak to a registered tax agent or licensed financial adviser before making decisions.
