The proposed 2026/27 CGT discount changes.

Australia's current capital gains tax discount was introduced in 1999 by the Howard government, on the recommendation of the Review of Business Taxation chaired by John Ralph.¹ The reform reduced the tax payable on capital gains by half: for assets held more than twelve months, only 50 per cent of the nominal gain is included in the holder's taxable income. The remaining half is tax-free.

The Review gave three reasons for the change:²

• Simplification. A flat discount avoided the multi-year inflation calculations the previous regime had required.
• Capital mobility. A flat discount reduced the disincentive to sell long-held assets.
• International competitiveness. A flat discount aligned Australia more closely with comparable jurisdictions that taxed nominal gains at concessional rates.

The New Business Tax System (Capital Gains Tax) Act 1999 gave effect to the recommendation, and the 50 per cent discount has applied to assets sold on or after 21 September 1999.³

For 27 years, every Australian taxpayer who has bought a long-term investment has structured their decisions around this rule. It is the system the 2026/27 budget proposes to remove.

The 2026/27 federal budget proposes to remove the 50 per cent capital gains tax discount and replace it with a more complex regime that taxes investors more heavily.⁴ The new regime is scheduled to commence on 1 July 2027.

Treasury's own description of the change, in Budget Paper No. 2:

From 1 July 2027, the 50 per cent CGT discount will be replaced by cost base indexation for assets held for more than 12 months, with a 30 per cent minimum tax on net capital gains.⁵

Two mechanisms apply together. The first — cost base indexation — replaces the 50 per cent discount with an inflation adjustment to the asset's original cost. The asset's cost base is indexed to the Consumer Price Index over the holding period, and the resulting "real" gain is taxed at the holder's marginal rate. The second — the 30 per cent minimum tax — applies a floor: where a taxpayer's marginal rate at the time of sale would otherwise tax a gain below 30 per cent, the gain is taxed at 30 per cent instead.

The changes apply to "all CGT assets, including pre-1985 CGT assets, held by individuals, trusts and partnerships."¹⁰

What's genuinely new

Cost base indexation is not a new idea — a similar method operated in Australia before the 50 per cent discount replaced it. The substantive new mechanism is the 30 per cent minimum tax. No precedent exists in Australian capital gains tax history for a minimum rate on net gains. Where a taxpayer's other income for the year is low — parental leave, sabbatical, study years, between-jobs periods — the minimum tax overrides the marginal rate and lifts the effective rate on the gain to at least 30 per cent. The worked examples in the next section show how this lands in practice.

The examples below show how the proposed changes interact with realistic cohort scenarios. Each example uses 5 per cent per annum nominal capital growth on shares — broadly consistent with Treasury's own assumptions⁶ — and 2.5 per cent per annum CPI. Marginal tax rates are the current FY2024-25 schedule⁷; future tax changes may shift them.

A young father builds a deposit — taxed harder on the same gain

Steven, 29, works full-time and earns $75,000. With a young family and the property ladder out of reach on his salary alone, he spends his evenings learning the share market in the hope it might fast-track a deposit. After months of research, he commits $30,000 — his after-tax savings, money he has already laboured for and already paid tax on — to a speculative small-cap medical-AI company. He buys in January 2028, entirely under the new regime. Thirteen months later, the company has done well. He sells the full holding for $120,000 — a 300 per cent return on his stake.

The new regime more than doubles Steven's tax bill on the same gain — $13,500 becomes $28,799. Removing the 50 per cent discount exposes the full $90,000 to his marginal rates, with the upper portion sitting in the 37 per cent bracket on top of his $75,000 salary. Indexation gives almost no relief on a short hold — barely any CPI has accrued in thirteen months. The 50 per cent discount, by contrast, applied the moment an asset crossed the twelve-month line, regardless of how briefly it was held after that. The extra $15,299 in tax is money that would have gone toward Steven's deposit.

A parental-leave realisation: the 30 per cent minimum tax bites

Emma, 34, takes twelve months of parental leave on Australian Government Parental Leave Pay (around $23,000 for the year), down from her usual income of just over $100,000. During the leave year she sells a $50,000 holding in an ASX 200 ETF purchased in January 2028 — entirely under the new regime, since the asset was acquired after the 1 July 2027 commencement. At 5 per cent annual growth, her holding has grown to $70,355 after seven years. Her marginal rate during the sale year is 16 per cent.

The effective tax rate on the gain roughly doubles, from 8.0 per cent to 16.1 per cent. The 30 per cent minimum tax catches Emma because her other income for the year — Parental Leave Pay — sits below the threshold. This is what the minimum tax is built to do. It catches realisations made during low-income years, including the parental leave, sabbatical, study, and between-jobs years that are characteristic of the working-age investing cohort.

A successful founder past the small business concession thresholds

Priya, 39, founded a profitable health-tech business in 2018 with $200,000 of contributed capital. By July 2030, a strategic acquirer offers $5 million for her 100 per cent stake. The business sits above the small business CGT concession thresholds (a turnover above $2 million or net assets above $6 million), so none of the four concessions apply.¹¹ Her marginal rate is 47 per cent. An ATO-supported valuation places the business at $3,000,000 on 1 July 2027.

The new regime produces a tax bill $361,584 higher — a 32 per cent increase. The four small business CGT concessions remain preserved by the reform, but they are only available where the business sits below the thresholds. Founders who build successful businesses past those thresholds — by definition, businesses generating greater economic activity, employing more Australians, paying more company tax — face the full new regime with no concession adjustment.

What the examples show

The proposed changes hit hardest in the situations the current system was designed to reward: short-held speculative wins building toward a first home, long-held assets sold in low-income years, and successful businesses past the small-business concession thresholds. These are not edge cases. The young father using share-market gains to build a deposit, the parent selling shares during parental leave, the founder who has crossed the small-business threshold — these are the people the system rewarded for taking on risk, and the people the new regime taxes more on the same gain.

For generations, Australians have built their futures by taking risks the tax system rewarded — saving from after-tax wages to invest, putting years into a business that might not work, having a go when there were no guarantees. The 2026/27 budget makes all three less worth the trouble. It is a tax on aspiration.

At the 2025 federal election, Australians were told the 50 per cent capital gains tax discount would not change. The 2026/27 budget changes it. This section sets out the dated record of what was said before the election, alongside what is being delivered after it.

The pre-budget record

In September 2024, after Nine newspapers reported that Treasury had been asked to examine changes to negative gearing and capital gains tax concessions, the Prime Minister responded on Sydney radio 2GB that he had "no plans" to change negative gearing rules and had not discussed detailed proposals with "anyone".⁸ In the same week, the Treasurer fielded the same question in Brisbane.

"We've got a housing policy and that [changes to negative gearing] is not in it."

— Treasurer Jim Chalmers, Brisbane press conference, September 2024.⁹

In April 2025, during the federal election campaign, the Prime Minister was asked directly whether he could rule out changes to the two settings if re-elected.

Q: Can you just be really clear — can you rule out any changes to negative gearing and capital gains tax settings if re-elected?

A: Yes. How hard is it? For the 50th time.

— Prime Minister Anthony Albanese, election campaign press response, 9 April 2025.¹²

Three months after the May 2025 election, in August 2025, the same position was restated in response to calls from unions and welfare groups for housing tax reform at a productivity roundtable.

"The only tax policy we're implementing is the one we took to the election."

— Prime Minister Anthony Albanese, productivity roundtable, August 2025.¹³

What the 2026/27 budget delivered

On 12 May 2026, the Treasurer delivered the 2026/27 federal budget. The budget proposes replacing the 50 per cent capital gains tax discount with cost-base indexation, adding a new 30 per cent minimum tax rate on net capital gains, and limiting negative gearing on established residential property to investors who acquired their properties before 7:30pm AEST on 12 May 2026.¹⁴ Both changes are scheduled to commence on 1 July 2027.

Across at least eighteen months — September 2024 through August 2025 — the Prime Minister and Treasurer explicitly ruled out changes to the capital gains tax discount and negative gearing. Within twelve months of being re-elected on that position, both have been put forward. This is a broken promise on policy that thousands of Australian households built their financial plans around.