The Short Version
From 1 July 2027, the way capital gains tax is worked out on investment property is changing. The long-standing 50% CGT discount is being replaced, for affected gains, with an inflation indexation method and a 30% minimum tax on the real gain.
This is not a change to your main home, which keeps its usual exemption. It is a change to how the taxable gain on an investment property is calculated once the new rules commence. If you own, or are planning to buy, a rental property, it is worth understanding the shape of the difference now rather than at sale time.
You can model the two methods against your own figures with our CGT reform calculator as you read.
The Background Story
The 50% CGT discount has been part of the system since 1999. Before that, Australia used an indexation method — you were taxed only on the gain above inflation, not on the paper gain that simply kept pace with rising prices. The 1999 change swapped indexation for a simpler flat 50% discount on assets held longer than twelve months.
The reform effectively brings indexation back for investment property, and pairs it with a minimum rate of tax on the real gain. The stated intent is to tax the genuine, above-inflation return on investment property rather than a nominal figure inflated by CPI, while carving out new housing supply.
The change was legislated as part of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 — the same package that restricted new SMSF residential borrowing and adjusted negative gearing. The measure was announced on Budget night, 7:30 pm AEST 12 May 2026, which acts as the announcement cut-off, with the CGT changes commencing on 1 July 2027.
Because the mechanics are still being finalised in guidance, treat the detail below as the general shape of the reform. Always confirm the current, enacted position with the ATO before acting — links are at the end of this article.
Key Dates
| Milestone | Date |
|---|---|
| Announcement (cut-off) | 7:30 pm AEST 12 May 2026 |
| Reform commences | 1 July 2027 |
| Sold before commencement | Existing 50% discount model |
| Gain accruing on or after 1 Jul 27 | Indexation + 30% minimum tax |
An asset you already hold and sell after the date is not treated as wholly "new". It is split at 1 July 2027 — more on that below.
What Is Actually Changing
Under the existing model, an eligible individual who holds an investment property for more than twelve months halves the nominal capital gain before it is taxed at their marginal rate. The whole gain is discounted, whether it came from real growth or simply from inflation.
Under the proposed post-reform model, for affected gains:
- The 50% flat discount is removed.
- The nominal gain is reduced by inflation over the holding period (indexation), so only the real gain above inflation is taxed.
- A 30% minimum tax is applied to that indexed gain.
The practical consequence depends heavily on inflation. When inflation over your holding period is high relative to your gain, indexation can leave very little taxable — sometimes nothing. When inflation is low, the old flat 50% discount is often more generous. There is no single answer; it turns on your numbers.
The two methods side by side
| Feature | Existing 50% discount | Post-reform indexation |
|---|---|---|
| What is reduced | Half the nominal gain | The inflation portion of the gain |
| Rewards | Holding > 12 months | Real (above-inflation) growth |
| Better when | Inflation is low | Inflation is high vs the gain |
| Rate applied | Your marginal rate on 50% | 30% minimum on the indexed gain |
Assets Held Across the Reform Date
This is the part most current owners care about.
If you bought before the 12 May 2026 announcement and sell after 1 July 2027, the gain is split into a pre-reform portion and a post-reform portion, using an estimated market value at 1 July 2027:
- The pre-reform portion (growth up to 1 July 2027) keeps the 50% discount treatment.
- The post-reform portion (growth after that date) uses the indexation plus 30% minimum tax method.
Because the split depends on what the property was worth on 1 July 2027, that valuation matters. In the calculator it is your own estimate; in a real sale it is a figure you would want supported properly. Keeping records — purchase documents, improvement costs, and a defensible 1 July 2027 valuation — will make the eventual calculation far easier.
The New Residential Housing Carve-Out
The reform includes a carve-out intended to keep new housing supply attractive. Eligible new residential builds can be compared under both the legacy 50% discount model and the post-reform indexation model, which is designed to preserve the incentive to build.
Eligibility rules are specific, and confirming a property is an eligible new build is a question for the enacted rules and your adviser — not something a calculator can determine for you.
A Few Practical Pointers (Not Advice)
None of the below is tax or financial advice, and the right answer depends entirely on your own circumstances. These are simply the questions the change tends to raise, to take to your accountant or registered tax agent:
- Keep good records. Your cost base — purchase price, buying and selling costs, and capital improvements — drives the whole calculation under either method. Gaps here cost you at sale time.
- Note a 1 July 2027 value. If you will hold a property across the reform date, a supportable market value at that date is worth organising, because it fixes the pre/post split.
- Do not assume the new method is always worse. For higher-inflation holding periods, indexation can tax less of your gain than the flat discount would. Run your own figures rather than relying on a rule of thumb.
- Timing is a question for your adviser. Whether to bring a sale forward, hold, or do nothing depends on your marginal rate, other income, capital losses and plans — not on the headline alone.
- Get the eligibility questions checked. Main residence exemption, joint or trust ownership, foreign residency and new-build eligibility all change the outcome and sit outside any simplified tool.
For the arithmetic, our CGT reform calculator lets you compare the two methods on your own numbers, and our mortgage repayment calculator can help on the financing side if a purchase or refinance comes out of those conversations.
Common Misunderstandings
"CGT is being abolished." No. The way the taxable gain is calculated is changing for investment property; capital gains are still taxed.
"This affects my family home." The main residence exemption is not the target of this change. Your own home keeps its usual treatment.
"My whole gain will be taxed the new way." Not if you already own the property. Gains are split at 1 July 2027, and the pre-reform portion keeps the 50% discount treatment.
"The new method is always more expensive." It depends on inflation over your holding period. Sometimes indexation taxes less than the flat discount would.
Final Thoughts
The reform shifts investment-property CGT from a flat 50% discount to an inflation-indexed method with a 30% minimum tax from 1 July 2027, with existing owners' gains split at that date and a carve-out for eligible new builds. Whether it helps or hurts a given owner comes down to their own numbers and inflation over the hold.
Where we can help is the finance side. If a lending question comes out of a conversation with your accountant — buying, selling and rebuying, or refinancing around a sale — contact us and we can work alongside your tax adviser. There is no obligation.
Official Sources
This area is technical and the detail is still being finalised in guidance. Please rely on the primary sources rather than this summary:
This article is general information only and was prepared on 4 August 2026. It does not take into account your objectives, financial situation or needs, and it is not financial, credit, taxation or legal advice. Nothing in this article is a recommendation to acquire, dispose of or continue to hold any property or financial product.
The reform described here is drawn from announced measures and published commentary and is accurate to the best of our knowledge at the date of writing; the detailed rules, thresholds and commencement arrangements may change after publication. You should confirm the current, enacted position with the ATO and obtain advice from a registered tax agent, accountant or licensed adviser before making any decision about buying, selling or holding an investment property.
Levio Pty Ltd (ACN 618 540 775) is a Credit Representative (Credit Representative Number 563108). We provide credit assistance only. We are not licensed to provide financial product or taxation advice, and nothing in this article should be taken as such advice. Any credit assistance we provide is subject to a full assessment of your circumstances, and lending is subject to lender approval, terms, conditions, fees and charges.
