Capital Gains Tax (cgt) Reform
2026–27 AUsTRALIAN TAX REFORM
“Ownership of CGT assets by an individual, partnership or trust for not less than 12 months.”
For CGT assets including established residential properties, commercial properties and financial assets such as stocks, excluding new residential properties:
1. Assets purchased and sold before 1 July 2027 continue to be subject to the 50% CGT discount, with no changes applying.
Click here to view the example case 1
2. Assets purchased on or after 1 July 2027 are assessed wholly under the new CGT framework, which applies CPI cost base indexation to calculate taxable capital gains and imposes a minimum (floor) tax rate of 30%.
Click here to view the example case 2
3. Assets purchased before 1 July 2027 and sold after that date are taxed in two parts under the “split treatment approach”:
3.1. the capital gain accrued before 1 July 2027 is taxed using the 50% CGT discount (proportionate grandfathering), and
3.2. the capital gain accrued from 1 July 2027 onwards is taxed under the new CGT framework.
Click here to view the example case 3
No impact arises until capital gains are realised (cashed out).
New build exemption – New residential properties only, not applicable to commercial properties:
4. New‑build investors can choose between the 50% CGT discount and the CPI cost base indexation method with the 30% minimum tax when selling the property.
A new build refers to a residential property that contributes to a genuine increase in overall housing supply.
Inclusions:
– dwellings (homes) built on previously vacant land, or
– sites on which existing properties are demolished and subsequently redeveloped with an “increased” number of dwellings.
A property is treated as a new build if it has never been previously sold. The only exception applies where the builder initially owned the property, provided it was not occupied for longer than 12 months before its first sale. The new buyer (second owner) is also qualified for the new‑build exemption when selling the property in the future. Any subsequent buyer will not be entitled to the 50% CGT discount.
CGT CASE STUDIES
2026–27 CGT BUDGET MEASURES
CASE 1: Established residential properties purchased and sold before 1 July 2027
● Property purchase date: before 1 July 2027
● Purchase cost = A$1,000,000 (including settlement price and stamp duty)
● Property disposal (sale) date: before 1 July 2027
● Sale price = A$1,500,000
● Australian resident tax rates 2025 – 2027
| Taxable income thresholds (A$) | 2025-2026 income year | 2026-2027 income year (provisional) |
| 0 – 18,200 | Tax – free | Tax – free |
| 18,201 – 45,000 | 16% | 15% |
| 45,001 – 135,000 | 30% | 30% |
| 135,001 – 190,000 | 37% | 37% |
| 190,001 and over | 45% | 45% |
| Full Medicare levy = 2% of taxable income | ||
Source: Tax rates – Australian resident | Australian Taxation Office
CASE 1: Capital Gains Tax Calculation
| 50% CGT discount applies: Step 1: Capital gain = Sale price – Purchase cost = A$1,500,000 – A$1,000,000 = A$500,000 |
| Step 2: 50% CGT discount = Capital gain × 50% = A$500,000 × 50% = A$250,000 |
| Step 3: Taxable capital gain = Capital gain (Step1) – 50% CGT discount (Step 2) = A$500,000 – A$250,000 = A$250,000 |
| Step 4: Assume other taxable income already exceeds A$190,001 (taxable income threshold for the 45% marginal tax rate). Apply the 47% tax rate = 45% marginal tax rate + 2% Medicare levy Capital gains tax = Taxable capital gain × Tax Rate = A$250,000 × 47% = A$117,500 |
| Step 5: Impact of the Tax Reform on Capital Gains Tax: Fully grandfathered – no impact |
CASE 2: Established residential properties purchased on or after 1 July 2027
● Property purchase date: 1 July 2027
● Purchase cost = A$1,500,000 (including settlement price and stamp duty)
● Property disposal (sale) date: 1 July 2029
● Sale price = A$1,900,000
● Holding period since 1 July 2027 = 2 years
● Annual inflation projection = 2.5%
(click to view the latest RBA inflation forecast)
● Australian resident tax rates 2025 – 2028
| Taxable income thresholds (A$) | 2025-2026 income year | 2026-2027 income year (provisional) | 2027-2028 income year (provisional) |
| 0 – 18,200 | Tax – free | Tax – free | Tax – free |
| 18,201 – 45,000 | 16% | 15% | 14% |
| 45,001 – 135,000 | 30% | 30% | 30% |
| 135,001 – 190,000 | 37% | 37% | 37% |
| 190,001 and over | 45% | 45% | 45% |
| Full Medicare levy = 2% of taxable income | |||
Source: Tax rates – Australian resident | Australian Taxation Office
CASE 2: Capital Gains Tax Calculation
| 50% CGT discount (old rule) | CPI cost base indexation (new rule) |
| Step 1: Capital gain = Sale price – Purchase cost= A$1,900,000 – A$1,500,000 = A$400,000 Step 2: 50% CGT discount = Capital gain × 50% = A$400,000 × 50% = A$200,000 Step 3: Taxable capital gain = Capital gain (Step1) – 50% CGT discount (Step 2) = A$400,000 – A$200,000 = A$200,000 | Step 1: Holding period from the purchase date (1 July 2027) = 2 years Inflation‑adjusted cost to the date of sale (1 July 2029) = Purchase cost × (1+inflation)2 = A$1,500,000 × (1+2.5%)2 = A$1,575,938 Step 2: Taxable capital gain = Sale price – Inflation‑adjusted cost = A$1,900,000 – A$1,575,938 = A$324,063 Note: A$324,063 represents the real capital gain, calculated after adjusting for inflation. |
| Assume other taxable income already exceeds A$190,001 (taxable income threshold for the 45% marginal tax rate). Apply the 47% tax rate = 45% marginal tax rate + 2% Medicare levy Capital gains tax = Taxable capital gain × Tax Rate | |
| Step 4: Capital gains tax = A$200,000 × 47% = A$94,000 | Step 3: Capital gains tax = A$324,063 × 47% = A$152,309 Note: For any tax rate below 30%, a minimum tax rate of 30% must be applied to meet the 30% minimum tax requirement. |
| Impact of the Tax Reform on Capital Gains Tax: No grandfathering applies. |
| A$152,309 – A$94,000 = A$58,309 (A$58,309/A$94,000) – 1 = 62.03% The capital gains tax increases by A$58,309 or 62.03% as a result of the tax reform. |
CASE 3: Established residential properties purchased before 1 July 2027 and sold after 1 July 2027
● Property purchase date: before 1 July 2027
● Purchase cost = A$1,000,000 (including settlement price and stamp duty)
● Property value on 1 July 2027 (cost base) = A$1,500,000
(determined by the ATO tool or an independent property valuer)
● Property disposal (sale) date: 1 July 2029
● Sale price = A$1,900,000
● Holding period since 1 July 2027 = 2 years
● Annual inflation projection = 2.5%
(click to view the latest RBA inflation forecast)
● Australian resident tax rates 2025 – 2028
| Taxable income thresholds (A$) | 2025-2026 income year | 2026-2027 income year (provisional) | 2027-2028 income year (provisional) |
| 0 – 18,200 | Tax – free | Tax – free | Tax – free |
| 18,201 – 45,000 | 16% | 15% | 14% |
| 45,001 – 135,000 | 30% | 30% | 30% |
| 135,001 – 190,000 | 37% | 37% | 37% |
| 190,001 and over | 45% | 45% | 45% |
| Full Medicare levy = 2% of taxable income | |||
Source: Tax rates – Australian resident | Australian Taxation Office
CASE 3: Capital Gains Tax Calculation
Stage 1 calculation – Capital gains tax (CGT) applied to gains accrued before 1 July 2027
| 50% CGT discount applies: Step 1: Capital gain = Property value on 1 July 2027 – Purchase cost = A$1,500,000 – A$1,000,000 = A$500,000 |
| Step 2: 50% CGT discount = Capital gain × 50% = A$500,000 × 50% = A$250,000 |
| Step 3: Taxable capital gain = Capital gain (Step1) – 50% CGT discount (Step 2) = A$500,000 – A$250,000 = A$250,000 |
| Step 4: Assume other taxable income already exceeds A$190,001 (taxable income threshold for the 45% marginal tax rate). Apply the 47% tax rate = 45% marginal tax rate + 2% Medicare levy Capital gains tax = Taxable capital gain × Tax Rate = A$250,000 × 47% = A$117,500 |
Stage 2 calculation – Capital gains tax applied to gains accrued on or after 1 July 2027
| 50% CGT discount (old rule) | CPI cost base indexation (new rule) |
| Step 1: Capital gain = Sale price – Property value on 1 July 2027 = A$1,900,000 – A$1,500,000 = A$400,000 Step 2: 50% CGT discount = Capital gain × 50% = A$400,000 × 50% = A$200,000 Step 3: Taxable capital gain = Capital gain (Step1) – 50% CGT discount (Step 2) = A$400,000 – A$200,000 = A$200,000 | Step 1: Holding period since 1 July 2027 = 2 years Inflation‑adjusted cost to 1 July 2029 = Property value on 1 July 2027 × (1+inflation)2 = A$1,500,000 × (1+2.5%)2 = A$1,575,938 Step 2: Taxable capital gain = Sale price – Inflation‑adjusted cost = A$1,900,000 – A$1,575,938 = A$324,063 Note: A$324,063 represents the real capital gain, calculated after adjusting for inflation. |
| Assume other taxable income already exceeds A$190,001 (taxable income threshold for the 45% marginal tax rate). Apply the 47% tax rate = 45% marginal tax rate + 2% Medicare levy Capital gains tax = Taxable capital gain × Tax Rate | |
| Step 4: Capital gains tax = A$200,000 × 47% = A$94,000 | Step 3: Capital gains tax = A$324,063 × 47% = A$152,309 Note: For any tax rate below 30%, a minimum tax rate of 30% must be applied to meet the 30% minimum tax requirement. |
Stage 3 calculation – Impact of the Tax Reform on Capital Gains Tax (Proportionate grandfathering)
| 50% CGT discount (old rule) | CPI cost base indexation (new rule) |
| Total capital gains tax = A$117,500 (stage 1) + A$94,000 (stage 2) = A$211,500 | Total capital gains tax = A$117,500 (stage 1) + A$152,309 (stage 2) = A$269,809 |
| A$269,809 – A$211,500 = A$58,309 (A$58,309/A$211,500) – 1 = 27.57% The total capital gains tax increases by A$58,309 or 27.57% as a result of the tax reform. | |
CASE 4: New build exemption where construction of new dwellings adds to residential housing supply
Caution: Subdivision or related property development activities may be treated as ordinary income where the intention is to make a profit or the activity amounts to a business, business operation, or commercial transaction. In these circumstances, the activity may also be regarded as a taxable supply for GST purposes. Only a mere realisation (disposal) of a capital asset is taxed under CGT. Source: Subdividing land | Australian Taxation Office
Property (capital asset) improved from a single dwelling to a duplex (two dwellings).
● This case study is a demonstrative example confined to CGT implications and does not consider ordinary income or GST outcomes.
● A capital asset (land) held on a single title is treated on capital account, with the existing dwelling demolished and a duplex (two dwellings) constructed. The property is subsequently sold in a single transaction, and any profit is treated as a capital gain on the basis that the activity does not amount to a profit‑making undertaking or the carrying on of a business.
● Key takeaway: one dwelling → demolished → two dwellings → a genuine increase in overall residential housing supply.
● Completion date of the new dwellings: before 1 July 2027
● Total cost: A$3,000,000 (including investment in original property, demolition and construction of new dwellings)
● Property value on 1 July 2027 (cost base) = A$3,600,000 for two dwellings (A$1,800,000 per dwelling)
(determined by the ATO tool or an independent property valuer)
● Property (capital asset) disposal (sale) date: 1 July 2028
● Sale price = A$4,000,000 for two dwellings (A$2,000,000 per dwelling)
● Holding period since 1 July 2027 = 1 year
● Annual inflation projection = 2.5%
(click to view the latest RBA inflation forecast)
● Australian resident tax rates 2025 – 2028
| Taxable income thresholds (A$) | 2025-2026 income year | 2026-2027 income year (provisional) | 2027-2028 income year (provisional) |
| 0 – 18,200 | Tax – free | Tax – free | Tax – free |
| 18,201 – 45,000 | 16% | 15% | 14% |
| 45,001 – 135,000 | 30% | 30% | 30% |
| 135,001 – 190,000 | 37% | 37% | 37% |
| 190,001 and over | 45% | 45% | 45% |
| Full Medicare levy = 2% of taxable income | |||
Source: Tax rates – Australian resident | Australian Taxation Office
CASE 4: Capital Gains Tax Calculation
Stage 1 calculation – Capital gains tax (CGT) applied to gains accrued before 1 July 2027
| 50% CGT discount applies: Step 1: Capital gain = Property value on 1 July 2027 – Total cost = A$3,600,000 – A$3,000,000 = A$600,000 |
| Step 2: 50% CGT discount = Capital gain × 50% = A$600,000 × 50% = A$300,000 |
| Step 3: Taxable capital gain = Capital gain (Step1) – 50% CGT discount (Step 2) = A$600,000 – A$300,000 = A$300,000 |
| Step 4: Assume other taxable income already exceeds A$190,001 (taxable income threshold for the 45% marginal tax rate). Apply the 47% tax rate = 45% marginal tax rate + 2% Medicare levy Capital gains tax = Taxable capital gain × Tax Rate = A$300,000 × 47% = A$141,000 |
Stage 2 calculation – Capital gains tax applied to gains accrued on or after 1 July 2027
| 50% CGT discount (old rule) | CPI cost base indexation (new rule) |
| Step 1: Capital gain = Sale price – Property value on 1 July 2027 = A$4,000,000 – A$3,600,000 = A$400,000 Step 2: 50% CGT discount = Capital gain × 50% = A$400,000 × 50% = A$200,000 Step 3: Taxable capital gain = Capital gain (Step1) – 50% CGT discount (Step 2) = A$400,000 – A$200,000 = A$200,000 | Step 1: Holding period since 1 July 2027 = 1 year Inflation‑adjusted cost to 1 July 2028 = Property value on 1 July 2027 × (1+inflation)1 = A$3,600,000 × (1+2.5%)1 = A$3,690,000 Step 2: Taxable capital gain = Sale price – Inflation‑adjusted cost = A$4,000,000 – A$3,690,000 = A$310,000 Note: A$310,000 represents the real capital gain, calculated after adjusting for inflation. |
| Assume other taxable income already exceeds A$190,001 (taxable income threshold for the 45% marginal tax rate). Apply the 47% tax rate = 45% marginal tax rate + 2% Medicare levy Capital gains tax = Taxable capital gain × Tax Rate | |
| Step 4: Capital gains tax = A$200,000 × 47% = A$94,000 | Step 3: Capital gains tax = A$310,000 × 47% = A$145,700 Note: For any tax rate below 30%, a minimum tax rate of 30% must be applied to meet the 30% minimum tax requirement. |
Stage 3 calculation – Impact of the Tax Reform on Capital Gains Tax (New build exemption)
| 50% CGT discount (old rule) | CPI cost base indexation (new rule) |
| Total capital gains tax = A$141,000 (stage 1) + A$94,000 (stage 2) = A$235,000 | Total capital gains tax = A$141,000 (stage 1) + A$145,700 (stage 2) = A$286,700 |
| New build exemption: The taxpayer can choose between the old rule and the new rule when calculating CGT. Total CGT payable = the lower of A$235,000 and A$286,700, which is A$235,000. The total capital gains tax is therefore A$235,000 from choosing the 50% CGT discount. | |
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