The 2027 capital gains tax changes, explained

Capital gains tax in Australia is not a separate tax with its own rate. When you sell an asset for more than it cost you, the gain is added to your taxable income for the year of the sale and taxed as though you had earned it. That is why two people can sell the same parcel of shares for the same profit and hand over very different amounts: what matters is the rest of their income, and how long they held.

The rules on that second point are changing. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (assent 26 June 2026) replaces the 50% discount for individuals with a different mechanism, for CGT events on or after 1 July 2027. This article sets out how each regime calculates a bill, and where the two produce different answers. It does not tell you what to do about it.

How CGT works under the current rules

Start with the cost base: what you paid for the asset, plus the costs of acquiring and disposing of it — brokerage on both sides, conveyancing, agent commission, stamp duty on a property purchase. Sale proceeds minus that cost base is the gross capital gain. A negative result is a capital loss, and a loss is not taxed.

If you held the asset for more than twelve months, 50% of the gain is discounted and only the remainder is added to your taxable income. That assessable portion is then taxed at the ordinary resident rates. In 2026-27 the first $18,200 is tax free, income from there to $45,000 is taxed at 15%, from $45,000 to $135,000 at 30%, from $135,000 to $190,000 at 37%, and everything above that at 45%. The Medicare levy of 2% sits on top.

The arithmetic of the discount is straightforward: halving the assessable gain halves the tax on it, so the effective rate on the whole gain is roughly half your marginal rate, including the levy. Take a $50,000 gain in the hands of someone earning $100,000. Sold inside twelve months, the full gain is assessable and the tax is $17,050 — an effective 34.1% of the gain. Sold after twelve months, only $25,000 is assessable and the tax is $8,000, or 16.0%. The difference on the same sale price is $9,050.

Note what the current discount does not care about: inflation, and how far past twelve months you held. A gain made in thirteen months and a gain made over thirty years are halved in exactly the same way.

What changes from 1 July 2027

Under the reform as enacted, the 50% discount for individuals ends and two things replace it.

The cost base is indexed to inflation. Instead of halving the gain, the cost base is lifted by CPI for each year the asset was held, and only the gain above that indexed figure — the real gain — is assessable. Indexation applies to assets held at least twelve months, and it cannot create or enlarge a capital loss: if indexing the cost base pushes it above the sale price, the taxable gain is nil rather than negative.

A minimum rate applies. The tax is the higher of the ordinary marginal-rate calculation on the real gain, or 30% of it. It is a floor, not a flat rate: someone on a high marginal rate pays their marginal rate, and someone whose marginal rate would produce less than 30% pays the floor.

The rate scale the real gain lands on also shifts. The legislated cut to the second bracket means that in 2027-28 income between $18,200 and $45,000 is taxed at 14% rather than the 15% that applies in 2026-27. The 30%, 37% and 45% bands are unchanged.

One figure in the 2027-28 calculations below is an assumption rather than a rate set by law: the CPI used for indexation. Future inflation is not knowable, so the tools here index at 2.5% a year unless told otherwise. Change that number and the answers move, as the second table shows.

Assets you already hold: the deemed disposal

The new regime does not reach back over gains that accrued before it started. An asset held across the changeover is treated as disposed of and immediately reacquired just before 1 July 2027. The gain up to that moment is worked out under the current rules, and growth after it falls under the indexation-plus-minimum regime. A real bill on an asset bought years ago and sold years later is therefore a blend of the two, not one or the other. The CGT calculator prices each regime whole so the mechanics are visible; a blended assessment is a matter for the ATO or a registered tax agent.

How the two regimes behave over different holding periods

The table below prices the same asset under both sets of rules. It is bought for $200,000, grows at 5% a year — the nominal capital-growth rate this site uses across its property tools — and is sold by someone with $100,000 of other income. The current-rules column applies the 2026-27 scale to the discounted gain; the 2027-28 column indexes the cost base at 2.5% a year and applies the 2027-28 scale, with the 30% floor.

Two patterns show up. Over a short hold the two regimes land close together, because indexation has had little time to lift the cost base and the discount has little gain to halve. Over a long hold at this growth rate they diverge sharply: at 30 years the current rules produce $146,481 and the new rules $199,441.

The reason is that the 50% discount removes half of a gain however large it has grown, while indexation only removes the part attributable to inflation. When an asset compounds well above CPI, most of the gain is real, and the new regime taxes nearly all of it at full marginal rates. When an asset barely keeps pace with CPI, indexation removes almost the entire gain and the new regime taxes very little. The comparison is not really about time — it is about how far the growth rate sits above inflation, which longer holds simply amplify.

Why the inflation rate drives the answer

Holding everything else fixed — the same $200,000 purchase, the same 5% growth, the same 10-year hold, the same $100,000 of other income — here is what different average CPI rates do to the 2027-28 bill. The current-rules figure on the same sale is $22,077, and it does not move at all, because the 50% discount takes no account of inflation.

Across that range the tax on an identical sale moves from $29,522 to $9,514. That sensitivity is the design of the regime rather than a quirk of the example: indexation is explicitly a mechanism for taxing real gains, so the higher inflation runs, the smaller the slice of any nominal gain that counts as real.

Where the minimum rate bites

The 30% floor changes the outcome only for people whose marginal rate on the gain would otherwise be lower than that — which, given the scale above, means lower-income sellers. Take a $20,000 gain on an asset held two years by someone with $30,000 of other income. Indexation lifts the cost base to $84,050, leaving a real gain of $15,950. Their marginal rate would tax that lightly, but the floor applies instead, so the tax is 30% of the real gain: $4,785, an effective 23.9% of the nominal gain. The same sale under current rules is $2,022.

For a seller already in the 30% band or above, the floor is inert — the marginal calculation is always the larger of the two. It is a rule about the bottom of the income scale, not the top.

What these figures assume

Every number above is arithmetic on published rates, not a projection of any real asset. The calculations assume a single Australian resident individual, no other capital gains or losses in the year, no capital losses carried forward, the Medicare levy at 2% with no surcharge, and no other offsets. Growth is applied smoothly at a constant rate, which no real asset does. Indexation is modelled as compounding CPI on the whole cost base, at an assumed 2.5% unless stated. Different assets and different owners carry their own rules — a main residence, and assets held through a company or trust, are separate questions this article does not cover.

Which regime produces the larger figure on a given sale depends entirely on the inputs: the gain, the holding period, inflation over that period, and the seller's other income. You can put your own figures through the CGT calculator, which prices both regimes side by side, or check where a sale would sit against your salary with the take-home pay calculator. What that arithmetic means for your circumstances is a question for a registered tax agent or a licensed adviser, and the ATO is the authority on how the Act applies to a particular disposal.