CGT Changes

The Government’s recently announced budget night changes to the Capital Gain Tax (CGT) rules on asset disposals has given everyday taxpayers who invest in through a trust, partnership or in their own name a lot to think about in relation to wealth creation and the potential taxing implications of investment asset disposals.

Treasury Laws Amendment (Tax Reform No.1) Bill 2026 [and related Bill] (Schedule 1) has introduced the following changes to how the Australian Tax System will deal with CGT on asset disposals from 1 July 2027. These changes will affect individuals, trusts and partnerships. Companies and superannuation funds are excluded from the proposed rules. The changes are as follows:

• The 50% discount will no longer be available to assets purchased post 30 June 2027.
• Cost base indexation will apply to assets purchased from 1 July 2027.
• Pre CGT assets will now have CGT applied on any gains accruing post 1 July 2027.
• A 30% minimum tax rate will apply to capital gains accruing from 1 July 2027. An exemption will apply for certain income support recipients.

Transitional CGT Rules

The transitional CGT rules are summarised as follows:

• Assets purchased and sold before 1 July 2027:
  • Taxed under the current CGT rules, meaning if an asset is held more than 12 months then the CGT discount will apply.
• Assets purchased before and 1 July 2027 and sold after:
  • Any capital gains accrued up to 30 June 2027 are tax under the current CGT rules; and
  • Any capital gains accrued post 30 June 2027 up until disposal are taxed under the new indexation rules.
• Assets purchased and sold from 1 July 2027:
  • Any capital gains on disposal will be tax under the new indexation rules.

Valuation of Transitional Assets

Where an investment is held post 30 June 2027, a valuation of the asset will be necessary to determine its market value at 30 June 2027.

For investments traded on the stock market this information will be easily available from real time information via the relevant stock exchange. However, it might be a lot more difficult to ascertain the value of an unlisted investment or investment property.

Investors will need to consider having a valuation performed by a professional to determine the underlying value of an asset.

Pre CGT Assets

Pre CGT asses are assets that were purchased prior to 19 September 1985. Under the proposed rules released on Budget night, these assets will now enter the CGT system.

The mechanics of dealing with Pre CGT assets under the new rules are detailed below.

• If a Pre CGT asset is disposed of before 1 July 2027, then it will continue to be exempt from CGT.
• If a Pre CGT asset is disposed of after 30 June 2027, the cost base of the asset is reset to its market value at 1 July 2027. If the asset is disposed for a value above this reset market value, then the CGT indexation rules will apply.

An example of how this would work is shown below.

30% Minimum Tax on Net Capital Gains

Finally, the Government’s reform bill also introduced a new minimum 30% tax on Net Capital Gains. This measure has been introduced to disincentivise deferring the disposal of assets to lower marginal tax rate years for investors.

Investors need to reconsider their investment structures to ensure they provide the best outcomes based on the current and new CGT and tax rules.

New Residential Property Builds and CGT

One of the carve outs from proposed rules is where a taxpayer invests in the building of new residential premises, the taxpayer will be able to choose their CGT Method upon disposal of the asset, either:

• The 50% CGT discount; or
• Cost base indexation

The investor has the ability to pick the method that provides the lower capital gain. This gain will also be tax at the taxpayer’s marginal tax rate rather than the minimum 30% tax rate.

In light of the changes taxpayers need to review their investment and wealth creation strategies to carefully consider the CGT and taxing implications of holding or disposing of investments prior to 1 July 2027.