2026–27 Federal Budget · Tax Reform

Australia's CGT Discount:
From Flat Rate to Inflation-Linked (2027)

How the shift from a 50% fixed discount to real-gains indexation affects property investors

Effective 1 July 2027
What's Changing
Old Rule
50%

A flat 50% discount on the nominal capital gain for assets held more than 12 months. Simple, but it rewarded inflation as well as real growth.

New Rule
CPI+

Cost base is indexed to inflation (CPI). Only the real gain above inflation is taxed — restoring the original 1985 intent of CGT.

Minimum Tax Floor
30%

A new 30% minimum tax rate on net capital gains applies from 1 July 2027, so low-income years can no longer dramatically reduce CGT liability.

Key Dates
1985

CGT introduced with cost-base indexation — only real gains taxed.

1999

Howard government replaced indexation with a simpler 50% flat discount for assets held 12+ months.

12 May 2026

Budget night. New negative gearing rules cut in for established properties purchased after this date.

1 July 2027

New CGT indexation rules and 30% minimum tax rate take effect. Gains before this date still use old rules.

Transition

Properties bought before Budget night are grandfathered under old rules for gains up to 1 July 2027.

Inflation Scenario Comparison

The new system's impact varies significantly with inflation. Below is how a $500,000 property purchased at $300,000 (a $200,000 nominal gain) is taxed after a 5-year hold under different inflation rates, assuming a 47% marginal tax rate.

Inflation Rate Indexed Cost Base Real (Taxable) Gain Tax Payable (New) Tax Payable (Old 50%) Outcome
2% (low) $331,224 $168,776 $79,325 $47,000 +$32,325 more
3% (target) $347,782 $152,218 $71,542 $47,000 +$24,542 more
5% (elevated) $382,884 $117,116 $55,045 $47,000 +$8,045 more
7% (high) $420,765 $79,235 $37,240 $47,000 −$9,760 less
10% (very high) $482,882 $17,118 $8,045 $47,000 −$38,955 less
Key insight: The new system only benefits investors when inflation is high (roughly above ~6%). Under the current low-to-moderate inflation environment, most investors will pay more CGT than under the old 50% discount.
Your CGT Estimate
Nominal Gain
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Indexed Cost Base
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Real (Taxable) Gain
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Tax — New Rules
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Tax — Old 50% Discount
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Difference
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Important Notes
Main residence exempt. The CGT changes do not affect the family home. The principal place of residence exemption remains intact.
New builds get a choice. Investors in newly built properties can elect to use either the new inflation-indexed method or the old 50% discount — whichever is more favourable.
Pre-2027 gains protected. Transitional rules mean gains accrued before 1 July 2027 are still calculated under the old 50% discount, regardless of when you sell.

This analysis is general information only and does not constitute financial or tax advice. Consult a registered tax agent for advice specific to your circumstances. All calculations are illustrative and assume gains arise entirely after 1 July 2027.