In the 2026 budget, the government changed the 50% Capital Gains Tax (CGT) discount. So what does that mean for you? As of 1 July 2027, the discount will be assessable based on cost base indexation with a 30% minimum CGT due on any profits when you sell any assets.
What changes
The following are the changes affecting CGT:
1. Buying or selling an asset after 30 June 2027 means that any profit you make is subject to a minimum 30% tax.
2. Buying and selling an asset before 1 July 2027, you still receive the 50% discount.
3. Buying an asset before 1 July 2027 and selling it afterwards (so your ownership sits across both sides of this date) means you can get the discount based on its market value up to July 1 and, after July 1, the capital gains are based on indexation so you pay a minimum of 30% in tax on the profit.
Note: The new CGT rules are not restricted to only real estate and apply to the gains on the sale of all assets.
Assets subject to Capital Gains Tax
In general, the new CGT rules apply to the following assets (this list is not exhaustive):
· All real estate except the family home.
· Shares and units when you sell them or receive a distribution (as long as it is not a dividend) from a managed fund.
· Managed investment trust distribution payments that are not assessable and are capital gains. Your trustee will let you know if a discount for CGT applies.
· Exchange traded funds when disposed of or sold even when you receive them from a distribution reinvestment plan.
· Crypto assets unless they are a personal asset and then may be exempt. Crypto becomes a personal asset if its primary use is for day to day purchases.
· Personal use assets if they cost more than $10,000.
Professional valuation
The Australian Taxation Office does not require a “professional valuation” to calculate the CGT owed if the rules only require a market value. But you do need a “comparative value” and, if it is real estate, a letter from a real estate agent.
Keep in mind though that if the Commissioner questions your market value, you need to prove that the value you submitted is better than the Commissioner’s valuation.
Getting the timing right
It is important to get the timing right when selling an asset. It is better to profit from your assets in a year where your income is lower than usual. For example, in a year you have capital losses. This minimises your tax on the profit from the sale of an asset. This is important with the minimum CGT changing to a minimum of 30% in 2027, especially if you are planning to retire soon.
You also need to consider if the new CGT system will be more advantageous than the 50% discount. This is actually possible when you own the asset for many years. It also applies if the shares you own only rise a little in value with inflation. If so, then indexation may give you a better result.
The new CGT rules can make selling assets complex, which may affect your financial planning. Call us. Make an appointment to discover how to make the best of the new CGT rules.
Original article
Budget Changes to CGT Discount
So, what do the Budget changes to the CGT discount mean to you?
And what these changes will do is to allow any capital gain that accrues up to 1 July 2027 to continue to be entitled to the 50% discount – but thereafter the assessable gain will be worked out under an indexation base indexation rule and gain itself will be subject to a minimum 30% tax rate.
But firstly, here are the specific rules regarding the proposed changes in a nutshell:
Firstly, if you buy and sell an asset after 30 June 2027, the new rules apply (ie your gain will be calculated by reference to inflation based indexation only and a minimum 30% tax rate will apply to the gain).
Secondly, if you buy and sell an asset before 1 July 2027, the existing 50% discount rules will continue to apply and there is no minimum tax rate.
Thirdly, if you buy an asset before 1 July 2027 but sell it after that date (ie your ownership of the asset straddles this key date), then you will get the discount up to the asset's market value on 1 July 2027 and thereafter the gain is calculated under indexation and a minimum 30% tax rate will apply to the gain.
Importantly, the new rules apply to all assets (eg. shares) – and not just real estate.
A fundamental feature of this rule is as it applies to the straddling situation, is the need to determine the asset's market value as at 1 July 2027. This will be easy in some cases (eg publicly listed shares on the ASX). But harder in other cases – including real estate.
But here it is worth noting that the ATO currently takes the view that you do not have to get a professional valuer where the CGT rules requires a market value – and that a "comparative valuation" will do instead (eg. comparative sales of similar houses in the neighbourhood (and perhaps supported by a real estate agent's letter).
However, if the Commissioner challenges your market valuation then the onus will be on you to show that your valuation is better than the Commissioner's valuation.
Another key thing to bear in mind is whether the new indexation system will give you better advantage than the discount – which is possible, especially if you have owned the asset for a long time. Also, if shares you have owned on the share-market have only risen a little with inflation, indexation may also give a better result.
The timing of sale is also important because it is better to realise a capital gain in an income year in which your other income is low (or you have capital losses or a tax loss) – so that you therefore pay less tax on the gain. And with the minimum tax rate of 30% applying from 1 July 2027, this is an important matter – especially if you are considering retiring in the near future.
Suffice to say, these CGT discount matters are ones on which important planning decisions can be made. So, make an appointment to see us to discuss how they apply to your assets.