The 2027 CGT Changes: What Replacing the 50% Discount Means for Investors

From 1 July 2027, Australia's capital gains tax system changes more substantially than at any point since 1999. The 50% CGT discount is being replaced by inflation indexation combined with a 30% minimum tax rate. Whether that leaves you better or worse off depends on two things most commentary skips: your marginal tax rate, and inflation.

Australian context · Educational explainer · Last reviewed July 2026

What is changing

Under the current rules, an individual holding an asset for more than twelve months pays tax on half the nominal gain at their marginal rate. From 1 July 2027, that is replaced by two mechanisms working together:

• Cost base indexation. The original cost base is increased by CPI over the holding period, so only the real gain above inflation is taxable. This revives the approach used between 1985 and 1999.
• A 30% minimum tax rate. The real gain is taxed at the higher of 30% or your marginal rate — so a lower marginal rate no longer produces a lower CGT rate.

The changes apply to individuals, trusts and partnerships across most CGT assets — shares, ETFs, managed funds, investment property and crypto. Companies are largely unaffected, and superannuation funds keep their existing one-third concession. Recipients of means-tested income support, including the Age Pension, are exempt from the minimum tax rate. Investors in new builds may elect between the old and new regimes.

Your existing assets are not fully caught

This is the most misunderstood part of the change. The new rules apply only to gains that accrue on or after 1 July 2027. Growth that accrued before that date keeps the 50% discount.

For an asset held across the changeover, the gain is split between the two regimes. Two methods are available: a time apportionment approach that allocates the gain according to how long the asset was held before and after 1 July 2027, or the asset's market value at 1 July 2027 as a deemed cost base for the new regime. If you hold assets that are hard to value — unlisted shares, business interests — obtaining a valuation around that date is worth discussing with your accountant.

Separately, the long-standing exemption for pre-1985 assets ends. Gains accruing on those assets after 1 July 2027 become taxable, closing a shelter that has operated for over four decades.

Worked example: what the numbers actually do

The figures below take a $100,000 asset growing at 8% per year with 3% inflation, and compare the CGT payable under the current 50% discount against the new indexation plus 30% minimum. They apply the new rules across the full holding period, which is a simplification — see the note after the tables.

After 10 years

$100,000 asset, 8% growth, 3% inflation. Nominal gain $115,892; real gain after indexation $81,501.

Indexation does real work here — it removes $34,391 of purely inflationary gain from the tax base. But the 30% floor more than offsets that benefit at every marginal rate tested.

The 30% floor and lower incomes

Look at the 19% row again: the CGT bill more than doubles, the largest proportional increase in the table. This is the structural consequence of a minimum rate. Someone on a 19% marginal rate currently pays an effective 9.5% on a discounted gain. Under the new rules they pay 30% on the real gain — a tripling of the rate, only partly offset by the smaller tax base.

The stated rationale for the minimum rate is aligning capital gains tax with the average rate paid on wages. The practical effect is that the change is felt most sharply by part-time workers, retirees below Age Pension eligibility, people on career breaks, and anyone realising a gain in a low-income year — a group that includes many ordinary investors rather than only high-income ones.

The inflation crossover — the part nobody mentions

Because indexation shelters inflationary gains, its value rises with inflation. That creates a threshold above which the new system is genuinely better than the old one. Modelling a 25-year ETF holding at 8% growth on a 32.5% marginal rate, varying only inflation:

After-tax gain on a $100,000 ETF holding over 25 years. Current-law figures do not vary with inflation because the 50% discount ignores it.

Somewhere between 5% and 8% inflation, the new system starts favouring investors. Inside the RBA's 2–3% target band the change is a clear tax increase; in a sustained high-inflation era it becomes a shelter. You are, in effect, exchanging a fixed 50% discount for a variable one that tracks inflation — trading certainty for a hedge you may never need.

What it does to the offset-versus-invest comparison

Because the change raises the tax burden on capital gains but leaves mortgage offset accounts untouched — offset savings are avoided expense, never taxed — it shifts the comparison in favour of paying down debt. Over 25 years on default assumptions:

Calculated gains, 32.5% marginal rate, 3% inflation. Not a recommendation.

The ETF's advantage over the offset account narrows by roughly $59,000, and gold's by a similar amount, while the offset figure does not move at all. The ranking does not change on these particular assumptions — but the margin does, and on assumptions closer to your own it may well change the ordering.

An important limitation of these figures

The calculations above apply the new rules across the entire holding period. In reality, an asset you already own gets the 50% discount on growth up to 1 July 2027 and the new treatment only after. That means the modelled impact overstates the effect on existing holdings, particularly ones you have held for years, and is closest to accurate for assets purchased after the changeover.

The model also does not reproduce transitional apportionment methods, the new-build election, the income-support exemption, capital losses, or the Medicare levy. It is built to show the shape and direction of the change, not to calculate anyone's tax bill.

Questions worth raising with your accountant

• Do you hold assets where a market valuation at 1 July 2027 would be worth obtaining?
• Do you have pre-1985 assets whose exempt status is ending?
• If you were already planning to realise a gain, does the timing relative to 1 July 2027 matter?
• Does the 30% floor change anything about which entity holds an asset, or in which year you realise it?
• If your income varies, does the loss of the low-marginal-rate advantage affect your planning?

These are questions for a registered tax agent who knows your circumstances. A calculator can show you the shape of the change; it cannot tell you what to do about it.

Model it on your own numbers

The calculator on this site includes a simplified 2027 indexation mode alongside the current 50% discount, so you can switch between them and see the difference on your own assumptions — your holding period, your marginal rate, and your view on inflation.

Common questions

Do I need to sell before 1 July 2027?

Not for the reason people often assume. Gains accrued before that date keep the 50% discount whenever you sell, so selling early is not required to preserve that benefit. Whether the timing of a realisation suits your circumstances is a question for a registered tax agent, and selling for tax reasons alone carries its own costs and risks.

Does this affect my superannuation?

Complying super funds retain their existing CGT treatment, including the one-third concession on assets held over twelve months. The changes described here apply to assets held in your personal name, or through trusts and partnerships.

Does it affect my family home?

The main residence exemption was not changed by these measures. Your home remains exempt on the same basis as before.

Is indexation better or worse than the 50% discount?

Indexation alone would often be better over long holding periods, because compounding inflation shelters a large share of a nominal gain. The 30% minimum rate is what turns the package into a net increase for most investors at typical inflation levels. The two components pull in opposite directions and need to be assessed together.