The 2026 Federal Budget, handed down by Treasurer Jim Chalmers on 12 May 2026, announced the most significant changes to Australia's capital gains tax framework in more than two decades. Full implementation is expected by 1 July 2027.
At a glance: for individuals, trusts, and partnerships, the existing 50% CGT discount is being replaced by inflation-adjusted (CPI) indexation for gains accrued from 1 July 2027 forward, plus a minimum 30% tax on the indexed gain. The 30% floor only bites where the investor's marginal rate is below 30%; means-tested income support recipients are exempt. Companies are not within scope (they were never eligible for the CGT discount either). Complying superannuation funds continue under the existing one-third (33⅓%) discount, unchanged. Owners of new-build residential property (as defined in the Budget materials: dwellings on vacant land, and knock-down rebuilds that increase the dwelling count) may elect either the 50% discount or indexation. Crypto, shares, managed funds, and investment properties are all within scope of the broader reform.
This article explains what the changes are, when they take effect, and what share investors should be doing now to prepare. We have not taken a position on the policy itself; the rules apply from 1 July 2027 and this guide focuses on how they operate mechanically.
The headline change: a three-category framework
Under the existing rules, almost every capital gain falls into one of two buckets: discounted (held over twelve months) or non-discounted (held under twelve months). From 1 July 2027, capital gains will fall into one of three categories, each with its own treatment.
Category 1: Short-term gains
Gains on assets held for less than twelve months at the time of disposal. Treated as ordinary capital gains with no discount and no indexation. This is unchanged from the current short-term treatment.
Category 2: Discounted gains
Gains attributable to the pre-1 July 2027 holding period of an asset held for more than twelve months. The existing 50% CGT discount for individuals, trusts, and partnerships continues to apply to this portion.
Category 3: Indexed gains
Gains attributable to the post-1 July 2027 holding period of an asset held for more than twelve months. Instead of applying the discount, the cost base is indexed by the Australian Consumer Price Index from the start of the indexation period to the disposal quarter. The indexed cost base is then subtracted from proceeds to determine the gain. The mechanism is similar to the CPI indexation arrangements that operated in Australia between 1985 and 1999.
The indexed gain is then taxed at the investor's marginal rate, subject to a minimum effective tax rate of 30%. For investors whose marginal rate is already 30% or higher, the floor has no effect and the gain is taxed at their marginal rate. For investors below 30% (for example, low-income earners), the floor lifts the effective rate on the indexed gain to 30%. Means-tested income support recipients are exempt from the 30% floor.
Indexation is expected to be calculated using the Australian Consumer Price Index, drawing on the All Groups CPI series published by the Australian Bureau of Statistics (Catalogue 6401.0). The exact publication mechanism for tax-purpose indexation values is still to be specified by the ATO; the Budget materials indicate that the ATO will provide guidance on how indexation will apply, with reference to the quarterly indexation arrangements that operated between 1985 and 1999.
Government framing
Treasurer Jim Chalmers framed the reform alongside broader measures targeting housing affordability and what the Government has described as intergenerational unfairness in the existing tax framework.
Whether one agrees with the framing or not, the rules apply from 1 July 2027. This guide does not take a position on the underlying policy decision; it sets out how the new system is intended to operate.
Straddle assets: the transitional rule
The most operationally complex part of the new regime is the treatment of straddle assets: assets acquired before 1 July 2027 but disposed of on or after that date.
Under the transitional rule, a straddle asset is treated as having two portions for CGT purposes:
- Pre-1 July 2027 portion. The gain attributable to the period from acquisition to 1 July 2027. Eligible for the existing CGT discount, subject to the twelve-month holding period rule.
- Post-1 July 2027 portion. The gain attributable to the period from 1 July 2027 to disposal. The cost base for this portion is the asset's market value at 1 July 2027, indexed by CPI to the disposal quarter.
Both portions apply to the same units. The split is a tax computation, not a physical division of the holding. The two portions sum to give the total tax outcome for that parcel.
Why the value at 1 July 2027 matters
For every straddle asset, a value at 1 July 2027 is needed. This value serves two purposes:
- It is the deemed sale price for computing the pre-portion discounted gain.
- It is the cost base for computing the post-portion indexed gain.
The Budget materials present two taxpayer-elected methods for arriving at the 1 July 2027 value, and both are available for any asset:
- Market valuation. Seek a valuation of the asset as at 1 July 2027. For listed shares, this is the quoted market price on the last trading day before the cutoff, retrievable from broker statements, ASX end-of-day data, or financial data providers. For unlisted or illiquid assets, an independent valuation may be needed.
- Apportionment formula. A government-specified formula that estimates the asset's value on 1 July 2027 based on its growth rate over the total holding period. The ATO has indicated it will provide tools to support this approach.
The choice between the two is strategically important. The market valuation reflects actual conditions on 1 July 2027, which may benefit assets that ran ahead of their long-term trend in the period leading up to the cutoff. The apportionment formula smooths the growth across the entire holding period, which may benefit assets where the bulk of appreciation happened after 1 July 2027 (a higher pre-cutoff value yields a larger discounted portion). Investors should expect to compare both before committing to one for a given disposal.
Two notable carve-outs
- Owners of new-build residential property may elect either the 50% discount or indexation on the full gain. "New build" is a defined term in the Budget materials covering dwellings constructed on vacant land and knock-down rebuilds that increase the dwelling count. One-for-one knock-down rebuilds (replacing one dwelling with one dwelling) are explicitly excluded.
- Pre-1985 (pre-CGT) assets are brought into scope of taxation on gains accruing after 1 July 2027. The cost base is effectively reset to the asset's 1 July 2027 market value; gains accrued before that date remain CGT-free.
Treasury worked examples
Alongside the Budget, Treasury published a fact sheet ("Tax explainer: Negative Gearing and Capital Gains Tax Reform") containing worked examples that illustrate how the new rules operate in practice. These are the canonical reference for the mechanics of the regime.
The examples cover, among other things:
- A fully post-cutoff acquisition (a parcel of shares bought on 1 July 2027 and sold five years later), showing the basic indexation calculation in isolation.
- A straddle asset held across the cutoff, demonstrating the two-portion split using a deemed value at 1 July 2027.
- A straddle example applied to residential property, showing the same two-portion calculation for a property held across 1 July 2027.
- A trio of return-rate variations on the same $500,000 post-cutoff asset held over ten years (5%, 2.5%, and 7.5% nominal annual returns against 2.5% inflation), illustrating the three possible reform outcomes for individual investors: paying more, paying less, or paying substantially more, depending on the real rate of return.
- A cameo showing the 30% minimum tax floor in operation: a low-marginal-rate taxpayer whose marginal-rate tax on a capital gain is mechanically topped up to meet the 30% floor.
CGT Strategist's implementation is being validated against the CGT-specific examples in the fact sheet as part of our test suite, with results matching within rounding.
The calculations are substantially more complex
Under the existing rules, a long-held disposal is a single arithmetic step: proceeds minus cost base, multiply the gain by the discount rate. Most investors can complete the maths on the back of an envelope, and many do.
Under the new regime, the same disposal of a straddle asset becomes a multi-step calculation:
- Look up or compute the asset's market value at 1 July 2027.
- Compute the pre-1 July 2027 portion of the gain (deemed sale at the 2027 value, original cost base) and apply the CGT discount.
- Look up the applicable CPI value for the disposal quarter and the baseline quarter (to be specified by ATO guidance). The ATO is expected to publish both the CPI values used for indexation and tools to support the calculations.
- Compute the indexed cost base for the post-1 July 2027 portion (2027 value multiplied by the cumulative CPI factor).
- Compute the indexed gain for the post-portion (proceeds minus indexed cost base, no discount applied).
- Sum the two portions for the total tax outcome on that parcel.
Multiply this by every parcel sold in the financial year, and the workload grows quickly. Investors with multiple buy parcels of the same security, FX-denominated holdings, corporate actions across the cutoff, or assets without a quoted 1 July 2027 price will face additional steps on top of the base calculation.
The new netting rules add a further layer. Capital losses now need to be ordered across three categories rather than two, and the application order can affect the final tax position. The ordering rules across the three categories are still being finalised, and applying them consistently across a real portfolio will not be trivial.
On top of all that, for every straddle asset there is a taxpayer choice between market valuation and the apportionment formula for arriving at the 1 July 2027 value. Different choices give different splits between the discounted portion and the indexed portion, which in turn give different tax outcomes. Treating that as a routine decision rather than a strategic one is a recipe for leaving money on the table.
In short: the rules introduce more variables, more lookups, and more inter-dependencies into what used to be a straightforward calculation. Spreadsheet-based workflows that worked for the existing regime will be substantially harder to maintain after 1 July 2027.
What changes for share investors
For disposals before 30 June 2027
Nothing changes. Existing CGT rules continue to apply right up to the cutoff. Investors who realise gains before 1 July 2027 will be calculated under the current discount framework.
For disposals on or after 1 July 2027
Every disposal needs to be classified by whether the asset was held under twelve months, fully post-cutoff, or across the cutoff. The classification determines which of the three categories applies and whether one or two portions are required.
For ongoing record-keeping
Accurate acquisition dates and cost bases become even more important. Two new data points enter the workflow: the value of each holding at 1 July 2027, and the CPI index value at each disposal quarter from that date forward.
Investors should also retain records of any corporate actions (splits, demergers, mergers, dividend reinvestment, returns of capital) affecting holdings across the cutoff, as these flow through to both portions of a straddle calculation.
What CGT Strategist is doing
We are actively updating CGT Strategist to support the new regime in full. The work includes:
- A three-category netting engine that classifies each disposal into short-term, discounted, or indexed and applies the correct treatment.
- Straddle splitting for assets held across the cutoff, with both portions surfaced in the Evidence Pack so the reader can audit each step.
- CPI indexation driven exclusively from the ATO-published CPI series, with the indexation factor shown on every disposal so the maths are traceable.
- A 1 July 2027 valuations page that supports both taxpayer elections: entering a market valuation as at 1 July 2027, or applying an apportionment formula based on the asset's growth rate over the holding period. Our current implementation of the apportionment path uses a geometric (compound-growth) formula and will switch to whichever formula the ATO publishes in the final guidance.
The new regime is gated behind a feature flag that activates automatically on 1 July 2027. Until then, the existing rules remain in force inside the platform. Investors using CGT Strategist do not need to take any action right now.
Everything will be production-ready well before the regime takes effect on 1 July 2027.
What investors should do now
There are roughly fourteen months between this Budget and the 1 July 2027 commencement date. Acquisition dates and cost bases just became significantly more valuable: for any asset owned before 1 July 2027 and sold after it, every dollar of the pre-cutoff cost base reduces the portion that flows into the new indexed framework.
1. Keep complete acquisition records
The 1 July 2027 split relies on accurate acquisition dates and cost bases for every parcel held across the cutoff. Now is a good time to consolidate broker statements and verify that every holding has a documented purchase trail.
2. Track corporate actions through 1 July 2027
Splits, demergers, mergers, returns of capital, and DRP acquisitions all affect the cost base used in both portions of a straddle calculation. Keeping a clean record of these events as they occur is simpler than reconstructing them later.
3. Consider obtaining 1 July 2027 valuations
For listed shares, the closing market price on the last trading day before 1 July 2027 will be readily available via broker statements, ASX end-of-day data, or financial data providers. For other assets, including unlisted shares, managed funds with limited quoted prices, or private holdings, investors may want to consider obtaining or documenting a valuation as of 1 July 2027.
4. Continue using existing CGT rules
No early action is required for disposals before the cutoff. The existing discount framework continues in force right up to 30 June 2027.
Frequently asked questions
Is there a minimum tax rate on capital gains under the new rules?
Yes. From 1 July 2027, the indexed capital gain on long-held assets is subject to a minimum effective tax rate of 30%, applied after CPI indexation. Investors whose marginal rate is already 30% or higher pay their marginal rate as normal. Investors below 30% have their effective rate on the indexed gain lifted to 30%. Means-tested income support recipients are exempt from the floor.
Are the new rules final?
The rules were announced in the 2026 Federal Budget and the 1 July 2027 commencement date has been confirmed by the Government. Detailed legislation and accompanying ATO guidance are still being prepared; some operational mechanics (including the publication path for tax-purpose CPI values and the precise treatment of capital losses across the three categories) remain to be finalised.
Does this affect superannuation funds?
No. Complying superannuation funds continue under the existing one-third (33⅓%) CGT discount, unchanged by the new framework.
Does this affect companies?
No. The new regime applies to CGT assets held by individuals, trusts, and partnerships only. Companies are not within scope and continue under the existing CGT treatment for corporate taxpayers (which has never included the 50% discount).
What about capital losses?
The general principle remains that capital losses offset capital gains. The ordering and application of losses across the three new categories is one of the operational details still to be finalised in the implementing legislation and ATO guidance.
Will CGT Strategist support both old and new rules?
Yes. The platform continues to support the existing rules for disposals before 1 July 2027, and applies the new regime automatically for disposals from that date forward. For straddle assets, both portions are calculated and shown in the same report.
Summary
The 1 July 2027 changes introduce a three-category CGT framework for individuals, trusts, and partnerships. Short-term gains remain unchanged. Long-held assets acquired before 1 July 2027 continue to receive the 50% CGT discount on the portion of the gain accrued before that date. Long-held assets acquired on or after 1 July 2027, and the post-cutoff portion of straddle assets, use CPI indexation instead of the discount, with the indexed gain taxed at the investor's marginal rate subject to a minimum effective tax rate of 30% (means-tested income support recipients are exempt). Complying superannuation funds continue under the existing one-third (33⅓%) discount. Companies are not within scope. Crypto, shares, managed funds, and investment properties are within scope of the broader reform.
The cutoff applies to the date of disposal, not the date of acquisition. Gains realised on or before 30 June 2027 are calculated under the existing rules.
CGT Strategist is being updated to handle every part of the new regime, validated against the Treasury fact sheet examples, and will be ready before the rules take effect.
Sources
- Treasury fact sheet — Tax explainer: Negative Gearing and Capital Gains Tax Reform (the primary government document containing the worked examples referenced throughout this article).
- 2026 Federal Budget — budget.gov.au (top-level entry point for Budget announcements and associated fact sheets).
- Corrs Chambers Westgarth — Australian Federal Budget 2026-27: Corporate Tax Measures (scope of affected entities, 30% minimum tax wording, transitional treatment).
- William Buck — Federal Budget 2026: Capital Gains Tax (taxpayer-elected valuation vs apportionment methods, pre-CGT asset reset, residential property concession).